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Standard Chartered targets double-digit returns

The emerging markets-focused lender has issued a confident set of fresh financial targets
February 26, 2019

A $900m (£687m) provision for historic violations of US sanctions and FX trading issues may have weighed on statutory figures for Standard Chartered (STAN) during 2018, but even on an adjusted basis, a 28 per cent rise in pre-tax profits missed consensus expectations. That primarily reflected weaker income, which came in at the bottom-end of management’s 5-7 per cent target growth range.

IC TIP: Buy at 613.5p

However, the lender’s focus on premium banking customers – which contributed more than half of retail banking income – and growth in higher-returning financial markets business helped boost the underlying return on tangible equity to 5.1 per cent, from 3.9 per cent. However, that figure is still below the banking group’s cost of capital.

Despite chief executive Bill Winters citing slower global growth and “the rapid escalation of trade tensions between the US and China” as weighing on client sentiment during the second half of the year, that did not stop the board issuing a bullish set of fresh financial targets for 2021. That included a double-digit return on tangible equity, $700m in cost savings and plans to eliminate the drag of low-returning markets such as Indonesia and the UAE.

Analysts at Shore Capital expect adjusted net tangible assets of 1,284¢ a share at the December 2019 year-end, up from 1,168¢ at the end of 2018.

STANDARD CHARTERED (STAN)  
ORD PRICE:613.5pMARKET VALUE:£ 20.3bn
TOUCH:613.5-614.7p12-MONTH HIGH:864pLOW: 514p
DIVIDEND YIELD:2.6%PE RATIO:43
NET ASSET VALUE:1522¢LEVERAGE:15.1
Year to 31 DecTotal operating income ($bn)Pre-tax profit ($bn)Earnings per share (¢)Dividend per share (¢)
201418.34.2497.381.9
201515.3-1.52-91.913.7
201614.10.41-14.5nil
201714.42.4223.511
201814.82.5518.721
% change+3+5-20+91
Ex-div:07 Mar   
Payment:16 May   
£1=$1.31