Surprised at statement that these were double this price not so long ago - it was about 5 years. Since then they have fallen massively, and the evaluation has changed considerably. Five/six years ago they were being tipped as a big gainer as the Far Eastern economies grew rapidly. In fact they fell by about 75%. They are now delivering what was suggested back then but from a far lower base. No doubt further to go
My doubing of price rationale is based admittedlyvery superficially on averaging 2013 and 2014 ptp and eps which were £3.8m and 92p so a pre tax return on equity of 10% and a p/e of 8.2. If STAN can get back to that level of profitability and I think revenue could rise much faster than costs then given the growth areas they operate in I would reckon a p/e of 16 not unreasonable, mind you that is best case. The premium to book value would be c30% which would not be outrageous. So I see a doubling as not impossible but of course looking very optimistic. However, banks can be viewed as a geared warrant on the economy.
Competition from state owned banks and disruptive fintech agreed both negatives but big incumbents have advantages and should be able to adapt.
Brokers mostly saying hold or underperform on the stock at present, a bull point. As a contrarian, I feel more comfortable holding stocks which have disappointed provided there are grounds for thinking they may be on the mend or at least things are unlikely to get worse. In this case, a discount to book value of a third looks wrong to me and offers downside protection.
My largest holding but less than 10% of the portfolio so not a massive bet.
"The shares were double this price not so long ago, I suspect if the bank continues its progress and the outstanding regulatory issues are not disastrous, and I don't see why they should be, then twice this price is more than possible before too long. My current largest holding so please note I am talking my book and of course WDIK and DYOR."
- Any rationale/analysis whatsoever to justify them doubling?
- Massive competition from state owned or backed enterprises in the juiciest EMs!
- FinTech is massively disrupting barriers to entry in this sector.
- That said a small-proportionate-to-portfolio investment may make sense at 750ish.
- Disc. Stan was once my largest holding, I eventually took my losses on-the-chin and sold out completely. I do feel happier not holding this business........
Nothing posted here since November, perhaps no interest, but I reckon FWLIW that the shares c750p might be a decent bet. Operationally, the bank seems to be improving steadily, see the recent IMS, and becoming a lower risk business, and the market valuation is at a discount to 2017 reported net worth. As a basically profitable business in growth areas of the world this looks cheap to me, although there are some more fines to be levied. However, the capital position now looks strong enough to absorb likely fines. Another bull point is that, per the HL website, brokers' analysts are unenthusiastic at present.
The shares were double this price not so long ago, I suspect if the bank continues its progress and the outstanding regulatory issues are not disastrous, and I don't see why they should be, then twice this price is more than possible before too long. My current largest holding so please note I am talking my book and of course WDIK and DYOR.
Agree with your assessment, encouraging progress in impairments and I like the strategy of growing in a lower risk manner and the focus on affluent/wealthy private customers which should be good margin as well as lower risk.
If you annualise Q3 profit that makes c£2.5bn which looks quite good against a m/cap of £23bn given this is still in recovery mode and most important a bank earning $ revenue in mostly growth regions.
I reckon but WDIK/DYOR today's fall from 750p to 706p is a chance to get on board or in my case add.
Agree with the sentiments expresses. IIRC my 1st purchase of StanChart was back in 2011 at the Lofty Price of £17.52. The businesses is still very much a work in progress. At some point though things may turn and it may be a Dividend paying business with a more visible future. If nothing else, for the UK based Investor, StanChart is a good-hedge against GBP weakness/volatility given most revenues are USD denominated. As mentioned previously <£6.50 would make StanChart an interesting (re)starting point for me.
Read over the weekend the bank have significant losses arising from loans supposedly backed by diamonds.
First i've heard about this although to be fair i've not been keeping up to date with this dog of a company which i first invested in after it was ramped by Motley Fool when £20 a share.
"I guess the drop is because no dividend was proposed at this stage,"
- I totally agree!
"because otherwise the results appear ok to me."
- "OK" means the business has shrunk in both size and risk? This is a business that Bill Winters is Still having to downsize,
"I'm in this for growth over the medium to long term, having recently bought in, so not disappointed about the dividend."
- Where are you planning on getting this "growth" from? StanChart is a shrinking and de-risking business. IMHO the only SP growth may come from a takeover, the sector is constrained by too-big-to-fail constituents and therefore consolidation isn't modish.
"I'd rather they keep building the Tier 1 ratio and profits for reinvestment."
- The higher the T1 the lower the profitability in the sector. StanChart isn't a growing business. it's jettisoning "assets" to de-risk.
Background : I held SC from 12 Jan 2011 to 15 Dec 2016 and have spent Hours reading and thinking about the business. In the 5+ years of my holding I succeeded in losing 44% of my capital. This business is, at best, a Trading Stock. As things stand, a long term Investor in SC is paying for the exuberance of a previous era. At <£6.50 though I may take a speculate "punt". Better businesses exist than this to invest in for the longer term!!
For the record, I currently hold a 21 stock portfolio, viz: - AZN - 2%, BP - 5%, BATS - 4%, BLND - 4%, CCH - 2%, DGE - 7%, G4S - 4%, GSK - 5%, HSBA - 6%, IMB - 5%, INCH - 6%, IHG - 2%, JLT - 5%, RB - 2%, REL - 5%, RR - 5%, RDSB - 7%, SN - 5%, ULVR - 8%, VOD - 5% & WPP - 8%. All, thus far, paying Dividends and none going through the sort of restructuring I'd be paying for as a longer term holder of StanChart!!
I guess the drop is because no dividend was proposed at this stage, because otherwise the results appear ok to me. I'm in this for growth over the medium to long term, having recently bought in, so not disappointed about the dividend. I'd rather they keep building the Tier 1 ratio and profits for reinvestment.
"Standard Chartered nearing end of relief rallyLSE:STAN:Standard Chartered has taken a battering in recent years. I last covered it on 22 May when I entitled the article: 'STAN is riding my waves' and I could just as well use the same title ..."
"Goldman Sachs stuck to a 'buy' recommendation on StanChart and 'sell' on Lloyds and Barclays after adjusting its earnings estimates for the sector to reflect recent market developments and ahead of the release of the Financial Policy Committee's Financial Stability Report on 27 June.
StanChart continued to be the UK-listed lender most exposed to the interest rate cycle in the US, Goldman explained.
Furthermore, it enjoyed a "strong" capital position which may allow for the resumption of dividends as soon as with its next set of interims.
Lloyds on the other hand was most at risk from heightened competition in the domestic UK mortgage market.
"We believe that current valuation levels do not reflect future margin headwinds."
Continued capital building at Barclays meanwhile was expected to drive a more muted outlook for dividend and profitability.
Regarding the upcoming release of the FSR, Goldman reminded clients that the FPC had already flagged an increase in lenders' counter-cyclical capital buffers.
Nonetheless, the expected increase from 0.0% to 0.5% was likely to be muted, Goldman said, as the Bank of England was expected to remove overlapping aspects of Pillar 2."
"STAN is riding my wavesThis share LSE:STAN:Standard Chartered has been one of my favourites since I started writing COTW because it has traced out lovely textbook Elliott waves, trendlines/tramlines and Fibonacci retracements. In fact, it has ..."
A buy they reckon, citing $3 billion of profit for the full year, recovery in full swing and 8 % return on equity. The story they say is "compelling". It's been a long old miserable time for holders but if growth continues in S.C. markets we might once again see a price a good deal north of here
"Traders acted quickly when LSE:STAN:Standard Chartered released its first-quarter results Wednesday. Made public at 9.30am, the shares had risen over 5% to 764p within half-an-hour and, after a brief blip, have resumed their recovery rally.Fair ..."
"First quarter financial performance highlights
· Income of $3.6 billion was up 8 per cent year-on-year or 4 per cent excluding prior year Principal Finance losses
· Expenses of $2.4 billion were well controlled and consistent with the run-rate seen in 2016 as a whole
· Loan impairment of $198 million was particularly low, down 58 per cent year-on-year
· Profit before tax of $1.0 billion was up 94 per cent year-on-year or 26 per cent excluding Principal Finance
· After restructuring charges of $55 million, statutory profit before tax was $1.0 billion (Q1 2016: $0.5 billion)
Resilient balance sheet and strong capital
· Net loans and advances to customers were up 5 per cent from the end of the year to $270 billion
· Customer accounts were up 5 per cent in the quarter to $398 billion
· The advances-to-deposits ratio was 67.8 per cent at the end of the quarter
· The Group already meets its expected minimum requirement for own funds and eligible liabilities (MREL) for 2022
· Common Equity Tier 1 ratio of 13.8 per cent was up 20 basis points since the end of 2016
· The Group issued $1 billion of Additional Tier 1 capital in January 2017"
"FTSE zooms higher post Macron winI last covered the combination of the @GB:UKX:FTSE 100 and LSE:STAN:Standard Chartered last November so I thought I would repeat the formula today. First, the FTSE has lost over 300 points since making the ..."
"Bill Winters must like a challenge. The bank he walked into was in a bad way, with loan losses in vertical take-off and income swirling down the plug hole. When emerging markets submerge, a business like Standard Chartered will always feel the pain, especially when they had raised their risk appetite during the bull years. It's down to Mr Winters and his team to sort out the mess. A year and a half in and it's still a struggle.
Plans to shed riskier assets, cut operating costs and rebuild capital make perfect sense in the circumstances, and the bank is making good progress. But this is all a far cry from the image of Standard Chartered as the "growth bank" that investors had just a few years ago.
The new strategy is a big change of direction. Gone is the approach of getting in close, with an open chequebook, to the key industrial families of S.E. Asia in an attempt to become their primary commercial and investment banking partner. Instead, Standard Chartered is focusing more on establishing strong private banking relationships with the wealthier citizens of the emerging markets.
Done well, private banking is a great business. Ask the Swiss. It offers potentially steady returns with limited risk, lending tends to be well secured, because the clients are rich. Whether Mr Winters can pull it off remains to be seen, but he has the network and the brand necessary to make a go of it.
In the long run, Standard Chartered's emerging market bias could be a huge positive. But right now the bank faces what could be a lengthy turnaround process. If it can hit the 10% Return on Equity target, and pay out half of earnings as a dividend, an attractive dividend may be on offer one day. Right now though, a 10% ROE looks as far away as ever. "
Important message from the Financial Conduct Authority:
Posting inside information that is not public knowledge, or information that is false or misleading, may constitute market abuse.
This could lead to an unlimited fine and up to seven years in prison.
If you have any information, concerns or queries about market abuse, click here.
The content of the messages posted represents the opinions of the author, and does not represent the opinions of Interactive Investor Trading Limited or its affiliates and has not been approved or issued by Interactive Investor Trading Limited.
You should be aware that the other participants of the above discussion group are strangers to you and may make statements which may be misleading, deceptive or wrong.
Please remember that the value of investments or income from them may go down as well as up and that the past performance of an investment is not a guide to its performance in the future.
The discussion boards on this site are intended to be an information sharing forum and is not intended to address your particular requirements.
Whilst information provided on them can help with your investment research you need to consider carefully whether you should make (or refraining from making) investment or other decisions based on what you see without doing further research on investments you are interested in.
Participating in this forum cannot be a substitute for obtaining advice from an appropriate expert independent adviser who takes into account your circumstances and specific investment needs in selected investments that are appropriate for you.