The highest picks of Morgan Stanley bank analyst Betsy Graseck are looking undervalued because the market rallies, she said Wednesday in a report. The shares of Graseck’s three overweight-rated banks, JPMorgan Chase , Wells Fargo and Regions Financial , have underperformed versus the S & P 500 since last month, when the businesses released fourth-quarter results , she said. “Our most preferred stocks RF, WFC & JPM have largely been ignored of the present market rally and look undervalued for his or her asset sensitivity and skew to quality,” Graseck said. Graseck is among the many analysts who’ve generally urged caution on banks, citing the expectation that loan losses will rise this yr because the economy slows and even enters a recession. But bank stocks have caught a bid in early 2023, together with 2022’s other beaten-down sectors, with the KBW Bank Index up 11.5% yr so far. .BKX YTD mountain 24-company KBW Bank Index Investors’ attention will likely shift from 2023 guidance to how the businesses perform on net interest income and provisions for loan losses, she said. Her three top picks could rise a median 24%, about 4% greater than other large-cap banks in her coverage in a base-case scenario, she said. — CNBC’s Michael Bloom contributed to this report.