ii view: Standard Chartered's regional focus is getting results

Third-quarter results to 30 September

• Operating income up 5% to $5.1 billion 
• Net profit up 10% to $1.03 billion
• Capital cushion, or CET1 ratio of 14.2%, down from 14.3% in H1
• Tangible net asset value per share of $16.84, up from $15.09 a year ago
• $413 million spent of a $1.3 billion share buyback programme announced late July

Guidance:

• Now expects full-year income growth at the upper end of a 5% to 7% range from a previous low-end forecast

Chief executive Bill Winters said:

“Progress is broad-based, but our sharper strategic focus on servicing our clients' cross-border and affluent banking needs is paying off, with strong double-digit growth in Wealth Solutions and Global Banking, alongside good momentum in our Global Markets flow business."

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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 Corporate and Investment banking division, servicing company customers, generated 56% of operating income during this latest quarter. 

The Wealth and Retailing division, helping personal or retail customers, accounted for a further 43% of income.

Finally, the Ventures division, funding innovative new financial business models through technology partnerships, made up a balance of 1%.

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

ii view:

With a history dating back to 1853, Standard Chartered today employs around 80,000 people. Geographically, Hong Kong generated most sales in 2024 at almost a quarter. That was followed by Singapore at 13%, and China, India and the USA all at around 6%. The UK came in at under 2%.

For investors, exposure to Hong Kong and China is not without risk given now more strained relations between the West and China and with Taiwan remaining a focal point. A forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap.  Events in the Middle East have resulted in the bank previously closing representative offices in Jordan and Lebanon, while predicted interest rates cuts could see interest income reduce.

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More favourably, likely China residents diversifying to invest via Hong Kong now sees ongoing new clients (200,000 year-to-date) for the group’s Wealth and Retailing division, pushing divisional profits up by close to a quarter during this latest period. A diversity of business types exists, including investment banking, exited by many UK headquartered peers following the financial crisis of 2008. Management initiatives to simplify and cut costs continue, while balance sheet strength sees a CET1 ratio above 12%.

In all, while the share price is trading close to a record high, there's lots to like in these quarterly results and the valuation appears not to be excessive. Despite only a modest dividend yield of around 2%, a concentration on higher economic growth regions looks to offer grounds for continued investor interest.   

Positives: 

• Both business type and geographical diversity
• Previous takeover approach

Negatives:

• Concerns for China’s economy
• Global geopolitical tensions

The average rating of stock market analysts:

Strong hold