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Standard Chartered guides down

After an encouraging 2019, the emerging markets-focused lender expects a tougher time this year
February 27, 2020

On most key financial and strategic measures, Standard Chartered (STAN) had a strong 2019. Despite a rise in credit impairment and a 1 per cent increase in operating expenses, good momentum in most of the lender’s divisions meant underlying pre-tax profit improved 8 per cent to $4.2bn (£3.3bn).

IC TIP: Hold at 559p

Capital levels are also robust, with a common equity tier one ratio of 13.8 per cent near the top of the group’s target range. This, together with a 130 basis point rise in StanChart’s underlying return on tangible equity to 6.4 per cent, has sparked another $0.5bn block of share repurchases.

However, management is less confident that this momentum can be maintained, and now expects this year’s income growth to fall short of an ongoing 5 to 7 per cent target range. In turn, reaching a medium-term goal for a 10 per cent return on tangible equity is now likely to take longer than previously expected.

A litany of likely headwinds help to explain why. US interest rates are likely to fall this year and next, Hong Kong is in a full-blown recession, and global economic growth looks set to slow. Throw in the Covid-19 outbreak, and the backdrop could hardly be more challenging.

Consensus forecasts are for earnings of 89¢ per share in 2020, and $1.05 in 2021.

STANDARD CHARTERED (STAN)  
ORD PRICE:559pMARKET VALUE:£ 18bn
TOUCH:559-560p12-MONTH HIGH:743pLOW: 559p
DIVIDEND YIELD:3.7%PE RATIO:13
NET ASSET VALUE:1,573¢LEVERAGE15.8
Year to 31 DecTotal operating income ($bn)Pre-tax profit ($bn)Earnings per share (¢)Dividend per share (¢)
201515.3-1.52-91.913.7
201614.10.41-14.5nil
201714.42.4223.511
201814.82.5518.721
201915.43.7157.027
% change+4+46+205+29
Ex-div:05 Mar   
Payment:14 May   
£1=$1.29