With my eye on the UK’s high street banks, I haven’t paid much attention to the Standard Chartered (LSE: STAN) share price.
But it’s up close to 50% in the past 12 months. And Q3 results posted on Wednesday (30 October) gave it a 3.5% boost.
Strong quarter
“We have delivered a strong performance in the third quarter with profit before tax up 41%, driven by a record quarter in Wealth Solutions and strong growth in our Global Markets business.“
That’s how CEO Bill Winters opened the update, after the international bank posted an 11% rise in operating income to $4.9bn (up 12% at constant currency).
Net interest income also rose 9% at constant currency to $2.6bn. The company said it was partly due to some short-term hedging. But it does make me take note, at a time when UK retail banks are under a potential squeeze from falling interest rates.
Portfolio boost?
Is Standard Chartered a good one to consider to diversify my bank holdings while still investing in what I see as a strong financial sector?
Considering the firm’s mostly engaged in multinational corporate banking and financial markets, I think it could. It might make a good complement to a holding in retail-focused Lloyds Banking Group, for example.
On the liquidity front, things look fine. The bank reported a common equity tier 1 (CET1) ratio of 14.2%, above its target range. It includes the effect of the ongoing share buyback, worth $1.5bn.
And we’re looking at a solid Return on Tangible Equity (RoTE) of 10.8%.
What’s it worth?
Standard Chartered doesn’t offer the same kind of dividend yields we can get from other banks, with a forecast for a modest 2.7% this year.
We are looking at price-to-earnings (P/E) valuations down with the rest of the sector though. The P/E ratio for the current year’s a shade under eight. That could fall as low as 5.6 if the strong earnings growth predicted through to 2026 comes good. And the dividend yield could rise to 3.5% at the same time.
The board lifted its full-year guidance, indicating an operating income rise towards 10%. Outlook for 2025 and 2026 is up a bit too. So those cheery forecasts might need to be raised a bit more.
There are risks
The headline valuation makes the Standard Chartered share price look too low to me. But we do face a number of financial sector risks right now that will directly impact this stock.
Interest rates look set to fall around the developed world, and that could still have a negative effect on the bank’s margins. And I’d say it’s also a very uncertain time to be pinning our hopes on international banking. East-West relations are far from warm and economic protectionism’s rearing its ugly head.
Yet on the whole, I think this could turn out to be a good time for me to add some Standard Chartered shares to my sector holdings, and it’s on my shortlist. I think the risk factor should ease over the long term.
