The FTSE 100‘s two Asia-focused banks had already been hit hard by the slowdown in Chinese growth before plummeting oil prices started depressing the entire index.
The overall result has been a plunge to a new 52-week low for Standard Chartered (LSE: STAN) on 16 December, of 883.9p. That puts shareholders on a loss of 31% over the past year, with the bulk of the drop coming in the past three months.
Internal problems
Standard Chartered has problems of its own, of course, with its South Korean operations performing badly. It’s really not clear if the current board has a proper grip on the problems, and I can’t help feeling there’ll need to be a management shakeup of some sort before confidence will return.
Still, despite its woes, Standard Chartered is returning to favour amongst City analysts, whose forecasts have been steadying in recent months. The current consensus of 105p earnings per share (EPS) for this year followed by 112p next puts the shares on miserly P/E multiples of 8.6 and 8 for the two years, and the share price fall has left the forecast (and twice-covered) dividends indicating yields of 5.8% and 5.9%.
There’s clearly still a lot of fear built into the Standard Chartered share price.
A better choice?
Over at HSBC Holdings (LSE: HSBA), the punters are more bullish. Though there’s a narrow net Buy rating out for Standard Chartered, there’s a very upbeat Strong Buy contingent at HSBC.
HSBC’s share price hasn’t fallen as far, with a relatively modest drop of 7% over 12 months to 594p, and although it came very close this week the share price hasn’t quite retreated to its 52-week low from the summer.
The fall does still leave HSBC shares on a P/E for December 2014 of 10.7, with 10.1 on the cards for 2015, and those are higher ratings than its regional rival — but they’re still low compared to the long-term FTSE average of around 14.
Value looks good
At around 1.7 times, HSBC’s dividend cover isn’t quite as robust as Standard Chartered’s, but we’d still see yields of 5.4% and 5.7% for this year and next should forecasts come to pass. And HSBC’s valuation is rivalling Barclays‘ for apparent cheapness — Barclays has better growth forecast, but HSBC compensates with bigger dividends.
In the current climate there are still risks with these two banks, but they’re both looking oversold to me.
