Morgan Stanley Bank analyst Betsy Grasek’s top picks look undervalued due to the market rally, she said in a report Wednesday. Shares of Grasec’s three overweight-rated banks, JPMorgan Chase, Wells Fargo and Regions Financial, have underperformed the S&P 500 since last month, when the companies released fourth-quarter results, he said. “Our most favorite stocks RF, WFC and JPM have been largely excluded from the current market rally and appear skewed to their asset sensitivity and quality,” Grasek said. Grasek is among analysts who have generally urged banks to exercise caution, citing expectations that loan losses will grow this year as the economy slows or even enters recession. But shares of the bank have caught a bid for early 2023, along with other beaten-down sectors, with the KBW Bank index up 11.5% year to date. He said the BKX YTD Mountain 24-Company KBW Bank Index investors’ attention will likely turn from its 2023 guidance to how the companies perform on net interest income and provisions for loan losses. His three top picks could grow an average of 24%, about 4% more than other large-cap banks in their coverage in a base-case scenario, he said. — CNBC’s Michael Bloom contributed to this report.