Standard Chartered (LSE:STAN) shares have bounced all over the place in recent months. In January, I suggested that the developing economies-focused bank was undervalued. It went on to deliver some impressive results and pushed higher before Trump’s tariffs took global markets by surprise. Let’s take a closer look.
Business continues to perform
The bank delivered a standout first quarter, beating profit expectations with pre-tax profit rising to $2.1bn, up from $1.9bn a year earlier. This represented a 13% increase. Earnings per share (EPS) jumped 19% year-on-year, and diluted EPS climbed even higher at 21%.
This performance was underpinned by double-digit income growth in its Wealth Solutions (up 28%), Global Markets (up 14%), and Global Banking (up 17%) divisions. The wealth management arm in particular, saw a boom as clients sought advice and products amid market unrest and global volatility.
Moreover, operating income reached $5.4bn, a 12% year-on-year increase when excluding exceptional items. Importantly, non-interest income, driven by wealth management and investment products, was a key growth engine. This offset modest growth in net interest income.
Strong results have been compounded by a rewarding share buyback policy. The company announced a $1.5bn buyback in February, thanks to strong 2024 earnings. Management remains committed to returning at least $8bn to shareholders between 2024 and 2026.
Fundamentally sound, but risk builds
Standard Chartered’s a fundamentally strong business. The bank’s CET1 capital ratio — a crucial metric for assessing the financial health and stability of banks — stood at 13.8% at the end of March, a slight dip from 14.2% at year-end, mainly reflecting the buyback.
Management’s also set its sights on reducing costs. The ‘Fit for Growth‘ programme launched in 2024 is expected to deliver $1.5bn in savings over three years. This focus on operational efficiency aims to support margins and maintain competitiveness, especially as the bank continues to invest in high-growth markets across Asia, Africa, and the Middle East.
This is important, but every now and then, life gives you lemons. The imposition of new US trade tariffs and retaliatory measures from China have heightened global economic and geopolitical uncertainty. Although the most recent tariffs narrowly missed the Q1 reporting period, Standard Chartered’s Asia-focused business model makes it particularly sensitive to escalating trade tensions.
This compounds growing credit impairment charges, which rose 24% to $219m. This reflected higher delinquencies in retail and digital lending portfolios and increased provisions for potential losses amid the uncertain environment.
The bottom line
Despite the challenges, investors may still find value in Standard Chartered’s earnings forecast. The company’s currently trading at 8.6 times forward earnings, and this is expected to fall to 5.9 times by 2027. That’s remarkably attractive. This is complemented by a 2.9% forward dividend that rises to 3.5% by 2027.
The issue, of course, is geopolitics and global economic growth. Currently, guidance for 2025 and 2026 remains unchanged, with management targeting a return on tangible equity approaching 13% by 2026 and maintaining confidence in the bank’s ability to deliver sustainable value. However, US trade policy could change this.
Personally, I’m keeping a very close eye on this stock. It could be a bargain, or a disaster.
