Shares in Standard Chartered (LSE: STAN) are the second biggest riser in the FTSE 100 this morning after the emerging markets focused bank announced that it had secured $1.6bn in shipping finance deals.
The deals, which show that Standard is still a dominant force in emerging market finance, are with BW Gas, Reliance Group in India, and the National Shipping Company in Saudi Arabia. According to Nigel Anton, managing director and head of shipping finance at Standard, these deals are “by no means easy structures” but give the companies in question “optimal and innovative financing solutions”.
These finance solutions may not be that significant for Standard in the grand scheme of things, but they do show that confidence is starting to return to the lender.
As well as this positive trading data, the bank has also received upgrades from City analysts today. Analysts at Goldman Sachs and Bank of America have hiked their profit expectations for the bank by as much as 18% following better-than-expected trading over the past six months.
Rapid growth
Standard is slated to release earnings on February 24 and analysts are generally expecting an improved trading performance from the bank after several years of turbulence. Specifically, City analysts are forecasting a pre-tax profit of £1.1bn and earnings per share of 70.1p, up from a loss of £1.5bn last year.
For the year ending 31 December 2017, analysts are expecting earnings per share to grow by 133% to 40p and further growth is expected during 2018. Analysts have pencilled-in earnings per share growth of 53% indicating that Standard’s earnings per share will triple in the short space of three years.
A better buy?
Another financial firm that’s received an upgrade from City brokers this morning is Hargreaves Lansdown (LSE: HL). JP Morgan has raised its price target for the asset manager to 1,350p from 1,100p off the back of better-than-expected trading for asset managers across the market.
Unlike Standard, Hargreaves has recorded steady growth over the past five years and is more of a play on domestic savings and investing than emerging markets growth. With an ageing population, the market for financial savings products is growing at a steady mid-single-digit rate every year in the UK and Hargreaves has been able to capitalise on this.
City analysts are expecting the group to report earnings per share of 41p for the financial year ending 30 June 2017, nearly double the figure reported for 2012. Earnings growth of 14% is pencilled-in for the following fiscal year.
Too expensive?
Thanks to the company’s historic growth rate investors have placed a premium on Hargreaves’ shares. At the time of writing shares in the asset manager trade at a forward P/E of 31.3 and support a dividend yield of 2.9%. By comparison, shares in Standard Chartered currently trade at a 2017 forward PE of 20 and with earnings per share growth of over 100% expected this year, this valuation seems appropriate.
Overall then, considering the bank’s valuation and growth potential, it looks as if Standard Chartered is a better buy than Hargreaves Lansdown.
