US midcap banks face risks to growth, earnings-per-share estimates, and loan activity amid uncertainty about the macroeconomic outlook heightened by tariffs and the escalating global trade war, according to a Morgan Stanley report from Monday.

Morgan Stanley downgraded the midcap bank group under its coverage to in-line from attractive and trimmed stock price targets by a median of 19% and EPS estimates between 4% and 8%, reflecting recession fears, higher credit losses, lower net interest margins, and reduced repricing benefit on maturing fixed-rate loans and securities.

The brokerage said it prefers banks with positive idiosyncratic drivers related to loan growth, net interest margin expansion, and capital return, as well as banks with higher levels of surplus capital and robust credit quality.

Morgan Stanley downgraded East West Bancorp (EWBC) to equalweight from overweight citing its exposure to affiliated clients in Asia.

The analysts also downgraded Comerica (CMA) to underweight from equalweight due to rising macro uncertainty while upgrading Commerce Bancshares (CBSH) to equalweight from underweight as they view it as a more defensive play in the current environment.

Price: 72.28, Change: -1.77, Percent Change: -2.38