Morgan Stanley ups North American Consumer Finance view, changes 3 ratings

Morgan Stanley analysts Betsy Graseck and Jeffrey Adelson have upgraded the firm’s North American Consumer Finance industry view to In-Line from Cautious, citing slowing inflation, an end to Fed hikes that will ease pressure on low/mid-income consumers and consumer credit being set to move past peak deterioration. The firm, which expects delinquency deterioration to slow, adds that “consensus has come our way and is no longer too optimistic.” However, the firm adds that “it’s too early to buy the group” as bear case risks remain in place. In that context, Morgan Stanley upgraded Capital One (COF) to Equal Weight from Underweight with a price target of $120, up from $87, and upgraded Ally Financial (ALLY) to Equal Weight from Underweight with a price target of $31, up from $23. However, the firm also downgraded Bread Financial (BFH) to Underweight from Equal Weight with a price target of $25, down from $31, arguing that the company is most at risk from the CFPB’s card late-fee rule, which the firm expects to be finalized by January of 2024.