26% Growth At Standard Chartered PLC!

Growth forecasts for banks tend to be unexciting affairs, don’t you think? A few percent here, a bit more in dividends there, but generally pretty plodding.

Well, that’s certainly not the case with Standard Chartered (LSE: STAN), which has a 26% leap in earnings per share (EPS) forecast for the year ending December 2014. That does come after 2013 results that showed a 17% fall, but with a further 10% growth in EPS predicted for 2015, the City’s analysts are clearly expecting good things from the bank.


stanThe big fear for a bank like Standard Chartered, which earns the bulk of its profits in the Asia-Pacific region, is China. Chinese growth has been massive in recent years, but the country is experiencing something of a credit boom and property prices are overheating a little — and we’ve seen what the double-whammy of those two booms coming to an end did in the West!

Still, some of that fear does seem to be factored into the Standard Chartered forecasts, as the consensus for 2014 has dropped significantly over the past 12 months. A year ago, the crystal ball was showing a shadowy figure of 173p in EPS, but as its come into crisper focus it has fallen to the current 127p.

And we have a fairly wide range of individual forecasts, too — but that’s not surprising, as it is pretty much impossible to quantify any possible threat from China right now.

The pundits are split

What about dividends? Forecasts there have been scaled back over the past year, too, slipping from a mooted 66.3p to the latest suggestion of 52.9p. But on today’s share price of 1,304p, that would still represent a well-covered yield of 4.1% — and it’s an attractive proposition.

But it all comes back to this Chinese uncertainty, and the question is splitting the recommendations we’re getting from the experts. We have 12 out of 29 forecasters putting a Strong Buy label on Standard Chartered, but at the same time five of their City colleagues are moved to a Strong Sell recommendation — and opinions are rarely as polarised as that.

How are you with risk?

What should we make of it? The so-called consensus isn’t actually much of a consensus with such a split in recommendations, but the one thing it does confirm is that Standard Chartered could be a bit of a risky investment right now. If you prefer safe investments, you might be as well to steer clear, but if you like a bit of a gamble…

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Alan does not own any shares in Standard Chartered. The Motley Fool owns shares in Standard Chartered.