The FTSE 100’s banking sector is dominated by domestic lenders, but Standard Chartered (LSE: STAN) offers something very different.
Its earnings are increasingly driven by fast-growing Asian and Middle Eastern wealth markets, with profits rising and capital returns accelerating.
That combination suggests the bank is moving into a new phase of growth, yet the market has not yet reflected this, in my view.
So, where should the shares be trading right now?
The engines powering growth
Ultimately, earnings (‘profits’) drive any company’s share price higher over the long run. A risk to Standard Chartered is any prolonged downturn in the global economy. This could hit its fee-based wealth market operations. Nonetheless, analysts forecast that its earnings will grow by an average 8.6% a year over the medium term at least.
This looks well-supported to me by its recent (24 February) full-year 2025 results. Operating income rose 6% year on year to $20.9bn (£15.5bn), underlining the strength of its cross-border and wealth-focused strategy.
Net interest income edged 1% higher to $11.2bn, as volume growth offset margin pressure from lower rates. Non-interest income increased 13% to $9.7bn, driven by a 24% surge in Wealth Solutions and double-digit gains in Global Banking and Global Markets.
Underlying profit before tax climbed 18% to $7.9bn, while return on tangible equity (ROTE) improved to 14.1%. Taken together, these highlight the bank’s strengthening profitability and the growing contribution from its affluent‑client franchise.
What’s the stock really worth?
Price and value are not the same thing in a stock. The former is whatever the market will pay at any point. The latter reflects the true worth of the underlying business, expressed as ‘fair value’ per share.
To gauge Standard Chartered’s ‘fair value’, I ran a discounted cash flow (DCF) analysis. This projects a company’s future cash flows and then discounts them back to today. It also reflects consensus analysts’ earnings growth forecasts for the bank.
Some analysts’ DCF modelling is more bearish than mine, depending on the inputs used. However, based on my DCF assumptions — including an 8.4% discount rate — Standard Chartered is 34% undervalued at its current £18.36 price.
Therefore, the fair value of the shares is £27.81 — considerably higher than today.
This gap between its current price and its fair value is crucial for the profits of long-term investors. This is because share prices can trade towards their fair value in the long run.
So the big gap between Standard Chartered’s price and its fair value suggests a potentially superb buying opportunity to consider today if those DCF assumptions hold.
My investment view
I already hold two banking sector stocks — HSBC and NatWest. So, owning another would disturb the risk-reward balance of my portfolio.
However, if I did not have this problem, I would buy Standard Chartered now. It is positioned strongly in a structurally advantageous franchise in the fastest-growing wealth markets in the world.
It has strong capital, rising ROTE, and a clear runway for multi-year growth in Wealth, Global Banking and Markets.
So, for other investors without my portfolio concerns, I think it well worth some attention.
