The top picks of Morgan Stanley bank analyst Betsy Graseck are looking undervalued as 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 companies released fourth-quarter results , she said. “Our most preferred stocks RF, WFC & JPM have largely been left out of the current market rally and look undervalued for their asset sensitivity and skew to quality,” Graseck said. Graseck is among the analysts who have generally urged caution on banks because loan losses are expected to rise this year as the economy slows or even enters a recession. But bank stocks have caught a bid in early 2023, along with 2022’s other beaten-down sectors, with the KBW Bank Index up 11.5% so far. .BKX YTD mountain 24-company KBW Bank Index Investors’ attention will likely shift from 2023 guidance to how the companies perform on net interest income and provisions for loan losses, she said. Her three top picks could rise a median 24%, about 4% more than other large cap banks in her coverage in a base-case scenario, she said. —CNBC’s Michael Bloom contributed to this report.