10.6 Reasons Why Standard Chartered PLC Could Be A Shrewd Investment

In this article I am looking at why shares in Standard Chartered (LSE: STAN) could be considered a snip at the current time.

A bargain banking stock

Enduring concerns over the health of emerging market economies has severely dented Standard Chartered’s share price in recent months. This weakness has left the bank dealing at levels which I consider terrific value given the solid long-term growth levers of these geographies, and the bank was recently changing hands on a P/E rating of 10.6 for 2014.

This figure comfortably demolishes a forward average of 14.6 for the complete banking sector and marginally ahead of the bargain benchmark of 10 times or below. And the bank’s readout slips below this threshold to 9.7 next year.

Mounting financial woes in emerging regions has weighed heavily on the previously-untainted bank, one of the few financial staninstitutions to sail comfortably through 2008/2009 financial crisis. And City forecasters expect Standard Chartered’s current travails to represent nothing more than a hiccup, with stunning growth of 27% and 9% forecast for 2014 and 2015 correspondingly.

The bank’s critical markets in Asia are currently crimping the bottom line for a multitude of reasons. Just this month Standard Chartered noted that although income was up marginally during January-March at constant exchange rates, the effect of significant weakening in a number of emerging currencies, including the Indian rupee and Indonesian rupiah, drove group revenues lower.

The business also continues to witness ongoing troubles in Korea, and announced that it had incurred a further $110m worth of lost turnover here alone during the first quarter. Standard Chartered was also forced to swallow a £1bn impairment last year and faces the increasing wrath of tightening regulations in the country.

However, investors should not lose sight in the fantastic progress the bank is making in other lucrative geographies. In Hong Kong, for example — comfortably the institution’s single biggest market and responsible for 40% of profits — Standard Chartered saw revenue and operating profit surge 11% and 16% respectively last year, and noted that strong momentum had carried over into the first quarter. The business is also making strong headway in India and across Africa.

The bank has also announced severe restructuring in order to bolster performance in these regions, and merged its Consumer Banking and Wholesale Banking arms last month to cut costs and enhance its focus on specific consumer segments.

Although the company’s near-term outlook remains uncertain, I believe that these measures — combined with the effect of rising populations and low product penetration across many markets — makes the bank a potentially-explosive long term stock pick, particularly at current price levels.

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