The Standard Chartered share price leaps on FY dividend and buyback news. Time to buy?

An 8% jump for a UK-listed bank on 2023 results? That’s what just happened to the Standard Chartered share price. Is there more to come?

| 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.

Image source: Standard Chartered plc

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 (LSE: STAN) made news with a £1bn share buyback on 23 February, and the share price jumped 8% in early trading.

That beats the response to Lloyds Banking Group, which revealed a buyback twice the size a day earlier.

Still, Standard Chartered isn’t exposed to the same risks as the UK’s retail banks as it focuses on global corporate finance. That seems to show in the five-year price chart, where a 7% rise isn’t bad for the sector. Will FY 2023 results lead to a sustained share price run? I think they might.

Impairment

The bank’s impairment update drew my attention. Credit impairment dropped substantially on the previous quarter, down $232m to $62m. And that, to me, is more evidence that the inflation and interest rate squeeze that’s hurting the banks is coming to an end.

In addition to the buyback, the board has upped the dividend by 50%, to 27 cents (21.3p) per share. That’s a 3.5% yield based on the previous day’s closing share price.

It’s not the biggest in the bank sector. But it’s above forecasts, and it will have contributed to the share price rise on the day.

FY 2023

These new shareholder returns are possible, in the words of CEO Bill Winters, due to “strong results in 2023, continuing to demonstrate the value of our franchise and delivering our financial objective of a 10% RoTE [Return on Tangible Equity] for the year.”

The year brought in a 10% rise in operating income, to $17.4bn. And the bank’s full-year credit impairment charge of $528m is down $308m on the previous year.

In another comparison, Standard Chartered’s RoTE figure of 10.1% is some way behind Lloyds’ 13%. But the market seemed to like it better.

Outlook

The global nature of the company shows in its latest outlook statement. The bank said: “Whilst we expect global growth to stay below potential at 2.9% in 2024, as high interest rates put a drag on consumers, as well as investment spending, Asia is likely to be the fastest-growing region continuing to drive global growth, expanding by 4.9%. Easing inflation is likely to allow major central banks to start cutting rates in the second half of 2024, with a focus on supporting softening economic activity.

Hmm, interesting that the board seems to think we won’t see interest rate cuts until the second half of the year. That could put a further drag on the UK’s domestic banks, if it’s right.

Valuation

I’m wary of putting too much faith in strong Asian growth in 2024. China is still a big unknown. And some commentators think its economic mess could be a fair bit worse than most people expect.

Saying that, I do think the current valuation pitches the Standard Chartered share price too low.

Forecasts put the price-to-earnings (P/E) ratio down at 4.5 by 2025. And even bearing in mind the possibility of a worsening in the world economy, that makes the stock one to consider buying in my book.

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.

Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc and Standard Chartered Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

Forget Lloyds’ cheap share price! I’d rather consider this FTSE 100 bargain share

Lloyds' share price might appear too cheap to miss at first glance. But this FTSE-listed share could be a better…

Read more »

Market Movers

Down 6% today, is the BT share price gearing up for a larger fall?

Jon Smith points out why the BT share price has tumbled today, but flags up why the reasoning behind the…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

This FTSE 100 stock is down 25% from its 52-week high. Should I buy?

Analysts think the price-to-earnings ratio of this FTSE 100 stock could fall by half in the next two years if…

Read more »

Investing Articles

£10,000 invested in Nvidia stock just two weeks ago is already worth…

Nvidia stock's been making big losses and big gains so far in 2025, at least on paper. But long-term valuation…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Here’s why Lloyds shares have dipped sharply

Lloyds shares got a boost recently when the Treasury petitoned the Supreme Court to go easy on the car loan…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

A £10,000 investment in BAE Systems shares 5 years ago is now worth…

BAE Systems' shares have lifted off since the start of the decade. But can the FTSE 100 defence giant continue…

Read more »

Dividend Shares

£8,000 invested in high-yield dividend stocks could make this amount of passive income

Jon Smith explains how dividend shares with yields in excess of 8% can be used carefully in order to build…

Read more »

Investing Articles

£5,000 invested in Tesco shares 2 years ago is now worth…

Over the last two years, Tesco shares have provided investors with gains of around 30% per year when dividends are…

Read more »