Here’s Why Standard Chartered PLC May Double In Value

It may be a good time to add Standard Chartered PLC (LON:STAN) to your portfolio, argues this Fool.

| 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.

Time is running out for Peter Sands, CEO of Standard Chartered (LSE: STAN).

Unnerved investors are asking for changes but, even under new management, I think the bank’s shares would struggle to appreciate significantly next year — unless, that is, a change of leadership is combined with bold corporate action. 

So, how can the shares double in value over time? 

There are signs that Standard Chartered could surprise savvy investors in the long run: its shares are rather cheap, but its restructuring will likely take years to yield dividends, in my view. 

Standard Chartered On The Radar 

Standard Chartered’s shares trade at 900p; it’s easy to forget they changed hands at 1,800p in early 2013! The shares have lost more than 30% of value since the beginning of the year.

So, what has happened since?  

In no particular order: a) the bank has been accused of hiding $250bn worth of illegal transactions with Iranian banks; b) it has recently emerged it would face years of scrutiny by US prosecutors, which may lead to severe penalties; c) it has issued a string of profit warnings as the emerging market slowdown is posing more than one question to its business model; and d) the payout ratio has come under scrutiny.

There are signs, however, that the bank is doing something right. 

Positive Signs

It emerged on Tuesday that Standard had agreed the sale of its Hong Kong and Shenzhen consumer finance units, in a move that signals the bank’s intention to slim down. The bank has reportedly agreed to sell these assets for about $700 million.

Large disposals are the way forward. Proceeds can be used to shore up the the bank’s capital position, and will likely support the bank’s dividend policy, but may also be used to fund shareholder-friendly activity, in my view. 

Elsewhere, stress test results from the Bank of England, which were released on Tuesday, showed a “minimum stressed ratio” before the impact of strategic management actions at 7.1%, which rises to 8.1% once the impact of ‘strategic’ management actions is included. Investors were not impressed, but Standard ranked just behind HSBC in the UK banking world. 

Furthermore, Standard announced last week the formation of a “Board Financial Crime Risk Committee” (BFCRC), which will have board-level oversight of the bank’s financial crime compliance programme.

From 1 January, BFCRC will assume responsibility for procedures, systems and controls for anti-money laundering, sanctions compliance, and the prevention of bribery, corruption and tax crime.

Corporate governance is key when it comes to value creation at Standard, and shareholders know that. A price target of 1,800p is not incredibly high if growth in emerging market is restored and the bank gets its priorities right. 

Time’s running out, Mr Sands…

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.

Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

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

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

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

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »