Morgan Stanley Upgrades Commerce Bancshares (CBSH) to Equalweight, 'we see the risk-reward skew as more neutral'

Morgan Stanley analyst Manan Gosalia upgraded Commerce Bancshares (NASDAQ: CBSH) from Underweight to Equalweight with a price target of $49.00 (from $48.00).

The analyst comments "In the last 4 months, CBSH has underperformed the median bank in our coverage by 700bps (down by 2% versus up 5%), as better-than-feared deposit trends drove a recovery in the rest of the group. With CBSH’s relative valuation having normalized to a ~5x premium (14x our 2024E EPS versus 9x for peers, in line with its 5-year average), we see the risk-reward skew as more neutral. Commerce’s more granular deposit base (99% of deposit accounts under $250k) makes us more confident in their NII outlook in a higher-for longer rate environment, and we are modeling a 39% peak cumulative interest bearing beta, versus 50-60% for most peers. Where could we be wrong? If the probability of a soft landing with gradual rate cuts in 2024 increases, we would expect a rebound in the rest of the group as the outlook for NII and NCOs improves. CBSH likely underperforms in this 'risk on' environment given their defensive positioning and premium valuation."

For an analyst ratings summary and ratings history on Commerce Bancshares click here. For more ratings news on Commerce Bancshares click here.

Shares of Commerce Bancshares closed at $46.98 yesterday.

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