ii view: Asian play Standard Chartered in buoyant mood

First-half results 30 June

• Operating income up 11% to $10 billion 
• Reported pre-tax profit up 5% to $3.5 billion
• Capital cushion, or CET1 ratio, rising to 14.6% from 13.9%
• Interim dividend up 50% to 9 US cents per share 
• New $1.5 billion share buyback programme

Chief executive Bill Winters said: “We produced a strong set of results for the first half of the year, demonstrating the value of our franchise as a cross-border corporate and investment bank and a leading wealth manager for affluent clients. 

“We are upgrading our guidance for income growth, which we now expect to be above 7% in 2024, and we are announcing our largest-ever share buyback of $1.5 billion. This brings our total shareholder distributions announced since full-year 2023 results to $2.7 billion.”

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ii round-up:

Headquartered in the UK, Standard Chartered (LSE:STAN) operates across 50-plus countries, primarily in Asia, Africa, and the Middle East. 

The FTSE 100 company operates across two divisions. Corporate, Commercial & Institutional Banking generates most sales at just over three-fifths, with Consumer, Private & Business Banking accounting for most of the balance. 

For a round-up of these latest results announced on 30 July, please click here.

ii view:

Tracing its history back to 1853, Standard Chartered is today an international bank employing over 80,000 people. Asia accounted for its biggest chunk of sales in 2023 at 70%, followed by the Middle East and Africa at 16%, the combined Europe and Americas 9%, and other countries the balance. 

For investors, exposure to China and Hong Kong is not without risk, given strained relations between the West and China with Taiwan remaining a focal point. Events in the Middle East have resulted in the bank previously closing representative offices in Jordan and Lebanon. Industry costs such as wages remain elevated, while a forecast dividend yield of around 3% contrasts with yields of over 5% at Lloyds Banking Group (LSE:LLOY), NatWest Group (LSE:NWG) and HSBC Holdings (LSE:HSBA). 

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More favourably, more than four-fifths of income derive from expected geographical growth regions such as Asia and Africa. A focus on affluent clients has seen the bank’s wealth business attract $23 billion of net new money, meaning it is on track to hit its three-year target of $80 billion. Costs continue to be attacked, while an upping of the dividend and new share buyback programme cannot be overlooked. 

For now, and despite continued risks, a consensus analyst estimate of fair value sat at over 900p per share is likely to keep existing shareholders at least loyal. 

Positives: 

• Both business type and geographical diversity
• Previous takeover approach

Negatives:

• Concerns for China’s economy
• Geopolitical tensions

The average rating of stock market analysts:

Strong hold