Standard Chartered ends bank results season in style

It’s been an earnings season to remember for the UK banks, and this Far East-focused lender has delivered. City writer Graeme Evans explains why the shares are doing so well.

30th October 2024 12:43

Graeme Evans from interactive investor

A nine-year high for Standard Chartered (LSE:STAN) shares today ensured the banking results season finished in style after earlier forecast-beating figures by HSBC Holdings (LSE:HSBA), Barclays (LSE:BARC) and NatWest Group (LSE:NWG).

The Asia, Africa and Middle East-focused lender and wealth manager accompanied its results with a promise to return $8 billion to shareholders between 2024 and 2026.

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That’s a big upgrade on earlier guidance of at least $5 billion, with Standard also highlighting progress in the key industry benchmark of return on tangible equity from the current 10% to 13% in 2026. It had previously forecast a figure of 12%.

Shares rose 24.8p to 901.2p on the back of this morning’s upgrades, representing a 30% advance since early August and 45% for the past year. They were 520p in October 2022.

Analysts at Jefferies believe there’s room for further upside based on their target price of 1,270p. They said the quarter’s profit haul had beaten consensus forecasts by 21%, driven by a record performance in wealth management and strong growth in financial markets.

Third-quarter operating income rose 11% to $4.9 billion, leading the company to issue new forecasts for growth across this year of about 10% and 5%-7% on a compound basis across 2023-26. Underlying profits rose 41% to $1.8 billion in the three months.

The bullish outlook comes as chief executive Bill Winters implements steps to simplify the business and to focus on achieving higher-quality growth.
He has pledged to double investment in the “consistently fast-growing and high-returning” wealth management business, as well as to refocus the mass retail business so it develops a pipeline of future affluent and international banking clients.

In the corporate and investment banking business, Standard is looking to target larger global clients who rely on the bank’s cross-border capabilities.

The moves are likely to mean the sale of some smaller businesses where the strategic rationale is not sufficiently compelling, enabling Standard to focus its resources on the cross-border needs of its investment banking and wealth clients.

The strong performance by Standard Chartered mirrors yesterday’s robust third-quarter results by HSBC after its profit haul beat City forecasts by 12%.

HSBC highlighted robust trading in FX, equity and debt markets and increased client activity for its wealth division, although it chose to leave 2024 guidance unchanged. Shares rose 3% yesterday as HSBC also pledged to buy back up another $3 billion of its stock.

In other banking sector results, NatWest beat the City consensus by 14% thanks to its profits figure of £1.7 billion. It also sweetened return on equity guidance to above 15% from 14% previously. Barclays came in 13% ahead of City forecasts at £2.2 billion, driven by better than expected performances on income and costs.

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