Has Standard Chartered PLC Bottomed Out?

After a year of going nowhere but down, Standard Chartered (LSE: STAN) share price seems to have found support. Indeed, since March of this year, Standard’s share price has not fallen much below 1,200p. But have the bank’s shares really bottomed out?

Priced inStandard Chartered

Standard has been subject to wave after wave of bad news this year. It would appear as if investors have now factored most of this bad news into the company’s valuation.

For example, in the past seven days Standard has been fined $300m for lapses in anti-money laundering controls, and now faces lawsuits from clients. However, the company’s share price has hardly moved.

A lack of reaction from investors is surprising, as Standard is now facing restrictions on its dollar-clearing business. These restrictions are likely to impact the bank’s international operations and reputation with customers.

What’s more, as part of the fine levied on the bank, regulators have demanded that Standard shut down the accounts of thousands of high-risk customers within the Gulf States. Management has warned that as a result of these demands, the bank could become the subject of lawsuits for “material and moral” damage. It’s estimated that up to 8,000 client accounts could be closed.

Further, investors seem to have factored Standard’s exposure to the Chinese property market into the company’s valuation. China’s property market has been labelled as a “major risk” to Asian economic stability by City analysts. 

Not all bad news

Still, while Standard is suffering within some markets, the bank continues to grow in others. In particular, during the first half of this year Standard’s revenue rose 6.6%, as growth in Hong Kong and India mitigated declines in Korea, Singapore and China. Strong growth was also reported across the bank’s corporate banking arm, where operating profit climbed nearly 10% to $3.2bn.

Moreover, Standard’s core tier 1 ratio (financial cushion) stood at 10.5% at the end of the second quarter. And the recently the bank has moved to reassure investors over the sustainability of its dividend.

Management has stated that the bank’s hefty dividend payout, which currently translates into a yield of 4.3% at present levels, is here to stay. Historically, most shareholders have chosen to take their payout in script form, reducing the pressure on the bank’s cash flow. 

Hold back

There’s no denying that Standard is facing multiple headwinds. Unfortunately, with so many headwinds buffeting the bank, I don’t believe that Standard’s shares have bottomed out. Indeed, further declines could be on the cards if China’s property bubble bursts.

That being said, Standard’s dividend payout looks safe for the time being. So, for long-term income investors the bank could be attractive, although as always, I strongly recommend you do you’re own research before you make a trading decision.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of Standard Chartered. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.