Standard Chartered PLC Is Down 10% In 2014… Should You Buy?

Shares in Standard Chartered PLC (LON: STAN) have disappointed in 2014. But are they now worth buying?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Standard Chartered

It’s been a hugely disappointing year for Standard Chartered (LSE: STAN), with the Asia-focused bank delivering half-year profits that were 20% down year-on-year and seeing its share price fall by 10% since the turn of the year. It appears, therefore, that the bank is not worth adding to your portfolio. However, could this actually be the right time to buy, with the share price fall now meaning that shares offer great value? Indeed, could Standard Chartered make a positive contribution to your portfolio moving forward?

Looking Ahead

Clearly, first-half results from Standard Chartered were a huge disappointment. However, the future could be much brighter for the bank than the past. That’s because it is extremely well placed to benefit from the continued development of emerging economies in the Far East, notably China.

Indeed, the Chinese economy continues to transition from a capital expenditure-led economy to a consumer-led economy. This opens up a huge opportunity for Standard Chartered, since demand for business and personal loans is likely to increase at a rapid rate in future, with banks that provide such loans being in a highly lucrative position.

However, even though long-term potential is significant, Standard Chartered is all set to bounce back strongly as soon as next year. Its bottom line is forecast to grow by an impressive 8%, which shows that the profit warning released earlier this year could turn out to be a temporary blip for the business.

Weak Sentiment

Sentiment has been notably weak for Standard Chartered in 2014. The $300 million fine that was recently agreed seemed to weigh heavily on the company’s share price. However, sentiment can quickly change. For example, sector peer, RBS (LSE: RBS), experienced extremely weak sentiment throughout 2011 and the first half of 2012, when its share price declined by as much as 52%.

However, since then its share price has risen by 69% despite the bank not yet delivering a full-year of annual profit since the credit crunch started. This shows that sentiment can be extremely fickle: RBS was hugely unloved for a long time and yet is viewed as being an ‘up and coming’ bank today (albeit with a number of legacy issues that it needs to resolve). So, while Standard Chartered’s share price performance has been disappointing during 2014, it could be an ideal opportunity to buy a slice of the bank in anticipation of an improvement in sentiment moving forward.

Valuation

Shares in Standard Chartered are priced to sell. For instance, they trade on a price to earnings (P/E) ratio of just 11.2 and, when the forecast earnings growth rate is taken into account, they have a price to earnings growth (PEG) ratio of 1.0 – which is very appealing. So, with profitability set to improve next year and sentiment at a low ebb, now could be a great time to buy a slice of Standard Chartered – especially if you’re a long term investor.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Royal Bank of Scotland Group. The Motley Fool UK owns shares of Standard Chartered. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »