Standard Chartered (LSE: STAN) is one of the most misunderstood names in the FTSE 100, in my view. Its global footprint and emerging‑market (EM) focus should be competitive strengths. Yet for years they fuelled market concerns about volatility, regulatory risk, and geopolitical exposure.
Following a deep restructuring, capital strengthening, and strategic refocusing, the bank outgrew this narrative. But the share price does not appear to have caught up with this reality. So how much of a bargain does the bank look right now?
Ghosts of the past
Before Bill Winters became CEO in 2015, Standard Chartered’s EM operations exposed it to geopolitical tension and recurring compliance failures. US-China relations worsened, Chinese growth slowed, and several EM currencies became highly volatile. Sanctions risks in certain markets added further pressure and damaged confidence in the bank’s controls.
However, Winters strengthened sanctions systems, enhanced regulatory monitoring, raised capital, improved core equity ratios, and reduced weaker exposures. He then pushed the bank into refocusing on fee-based rather than interest-based business, so reshaping the earnings-growth profile.
The upshot is that today’s Standard Chartered bears little resemblance to the institution that once drew market caution. Some risks remain, especially those linked to China’s relationship with the US.
Even so, consensus analysts’ forecasts indicate the bank’s earnings (profits) will grow 7.8% a year to end-2028. And it is this that drives any company’s share price over the long term.
Changes reflected in results
Its H1 2025 results, released on 31 July, reflected this business shift. The fee-based Wealth Solutions, Global Markets, and Global Banking divisions each recorded double-digit income growth. These powered a 26% year-on-year rise in underlying pre-tax profit to $4.383bn (£3.27bn), well above analysts’ $3.83bn consensus forecast.
The previous full-year 2024 results showed the same pattern as underlying pre-tax profit jumped 20% to $6.8bn. Wealth Solutions delivered a record performance, with income up 29% and net new money rising 61% to $44bn. Global Markets and Global Banking also recorded strong 15% income growth.
How undervalued is it?
In my experience as a former investment bank trader, discounted cash flow (DCF) analysis is the optimal way to ascertain a share’s true worth.
It estimates a company’s ‘fair value’ by projecting its future cash flows and then ‘discounting’ them back to today. The more uncertain those earnings are, the higher the return investors demand and the greater the discount applied.
Some analysts’ DCF modelling is more bearish than mine, and some more bullish, depending on the inputs used. However, based on my DCF assumptions — including an 8.4% discount rate — Standard Chartered is 32% at its current £18.70 price.
Therefore, its fair value could secretly be close to £27.50 a share.
My investment view
I have long wanted to buy Standard Chartered shares, but my portfolio’s risk/reward balance will still not quite allow it. I already own two bank stocks — NatWest and HSBC — so owning another would unsettle that equilibrium.
However, I believe the market still is not pricing in the bank that has emerged under Winters. Given this, and the strong earnings growth expected by analysts, I think the shares merit serious consideration from other investors.
