The Standard Chartered (LSE: STAN) share price spiked up 5% in early trading Friday morning (21 February), as 2024 full-year results beat expectations. It was already up 90% over the past 12 months in the long-awaited FTSE 100 bank sector recovery.
Standard Chartered mainly offers offers international corporate banking, wealth management and financial services. And that helped isolate it from the UK’s retail banking pressures of the past few years. It shows.
Capital returns
The year brought net interest income of $10.4bn, ahead of the bank’s $10.25bn target. That helped boost underlying operating income for the year by 13%, leading to a 20% boost to underlying profit before tax (up 18% on statutory reporting). It’s been a year of rising profits at a time when the UK’s retail banks are reporting falls.
Standard Chartered’s return on tangible equity (RoTE) is a bit behind some high street names, at 11.7%. That’s a key measure for valuing bank shares, though it’s expected to be “approaching 13% in 2026 and to progress thereafter.” Liquidity looks strong with a CET1 ratio expected to remain “dynamically within the full 13-14% target range” in the coming years.
If that makes it sound like there’s cash to hand out, there is. The bank lifted its full-year dividend by 37% to 37 cents per share (29.2p at current rates). That’s a 2.6% yield on the previous close, and ahead of analysts’ expectations.
And not missing out on the trend for banks to repurchase their own shares, the board has launched at $1.5bn share buyback. It’s part of a “plan to return at least $8bn to shareholders cumulative 2024 to 2026,” along with continuing dividend increases.
Global focus
Standard Chartered’s focus on Asia, Africa and the Middle East is paying off, as its wealth management business is booming. CEO Bill Winters told us: “Growth in our footprint markets across Asia, Africa and the Middle East, is set to outpace global growth.” With the outlook for Western economies still looking cloudy, that bodes well for the bank’s aims in the next few years.
It does, however, bring emerging-markets risk. It exposes investors to political uncertainty and potential for major economic challenges. I know the West isn’t exactly painting a picture of stability on those scores right now. But over the long term, developing world risk has been greater. Stocks dependent on emerging markets, including a fair few investment trusts, have had volatile histories.
Temptation
Saying that, I’ve always liked the potential from this kind of investment. We have to balance the risk with the reward.
The relatively low dividend yield does count against it for me. That 2.6% doesn’t come close to the 4.9% at NatWest Group or 4.6% from Lloyds Banking Group. But the range of bank yields is narrowing.
I already have enough exposure to banks and financial sector stocks. Otherwise I could easily be tempted to buy even after the price rise. I think investors who want to balance domestic with global finance risks could do well to consider Standard Chartered.
