Why I Love Standard Chartered PLC

There is a thin line between love and hate. But today, let’s focus on the love. Here are five reasons why I’m enamoured of Standard Chartered (LSE: STAN) (NASDAQOTH: SCBFF.US).

The profits keep coming

Earlier this year, Standard Chartered announced its 10th consecutive year of income and profit growth, a record it maintained throughout the banking crisis. This looks set to continue, with pre-tax profit hitting $4.90 billion in the first half of 2013, up from $3.94 billion one year earlier. That’s a steady rise of 4%. Here’s to the next 10 years.

Yet its share price has underperformed

Market worries over China and Asia have hit Standard Chartered’s share price, which is down 8% over six months, and 18% over three years. But China still has massive foreign currency reserves, and has just posted both 7.8% annual GDP growth and better than expected manufacturing data. Standard Chartered has also hit $1 billion of profits before tax in Hong Kong for the first time in a six-month reporting period. Recent falls could be a good buying opportunity.

It’s an emerging market bank, based in London

Standard Chartered has struggled in Korea, where it has suffered $1 billion worth of impairments, and Singapore, but it has still delivered double-digit growth in 17 of the 25 markets it operates in. Hong Kong, India and Africa are all driving profits. Despite “challenging” recent trading conditions, management says the fundamentals across Asia, Africa and the Middle East “remain good”. If they’re right, Standard Chartered is a good way to play these regions, from the safety of the FTSE 100. 

It is starting to look good value

After recent share price falls, Standard Chartered trades at 10.8 times earnings. That compares to a pricey 14.8 times earnings for HSBC, the other solid UK-listed bank with a major China presence. Standard Chartered’s earnings per share is set to fall 1% this year, which is disappointing, but is on course for an 11% rebound in 2014. You might consider buying now, before that is fully reflected in the price.

The yield ain’t bad, either

Trading on a 3.5% yield, Standard Chartered is bang on the FTSE 100 average. The dividend is nicely covered 2.7 times, and better still, management has a progressive policy, recently proposing a 6% hike to 28.80 cents per share. Investors in Barclays, Lloyds Banking and RBS can only dream of such a return. Standard Chartered publishes its Q3 interim results next week, when we will see if my love is reciprocated.

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> Harvey owns shares in RBS. The Motley Fool owns shares in Standard Chartered.