US consumer-finance companies face the prospects of higher customer defaults and slower growth as the Trump administration's "hardline view on tariffs drives up recession risks," Morgan Stanley said Monday in a report.
"Unless we see a dramatic de-escalation in trade talks, a multitude of headwinds may emerge, pressuring credit and growth fundamentals for the sector, which could lead to meaningful consensus estimate revisions," the report said. "The single-biggest risk is if souring business sentiment shelves hiring plans, driving a larger increase in unemployment."
Morgan Stanley cut 2026 estimates for per-share earnings for companies in consumer lending by 4% to 34%, and projections "could move even lower from here," according to the report.
The industry view was downgraded to cautious from attractive by Morgan Stanley.
Amid recession risks that "put low-income consumers/discretionary spend at risk," Morgan Stanley downgraded Synchrony Financial (SYF) to equal weight from overweight, and the price target was slashed to $44 from $82. Bread Financial (BFH) was downgraded to underweight from overweight, and the price target fell to $33 from $76
UWM (UWMC) was upgraded to overweight from equal weight as "optionality to lower interest rates" may benefit volumes on refinancing mortgages. The price target rose to $6.50 from $6.
Price: 43.83, Change: +0.02, Percent Change: +0.06
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