What You Were Selling Last Week: Standard Chartered PLC

Standard CharteredOne of Warren Buffett’s famous investing sayings is “be fearful when others are greedy and greedy only when others are fearful”. Or, in other words, sell when others are buying and buy when they’re selling.

But we might expect Foolish investors to know that, and looking at what Fools have been selling recently might well provide us with some ideas for investments that may be past their prime

So, in this series of articles, we’re going to look at what customers of The Motley Fool ShareDealing Service were selling last week, and what might have made them decide to do so.

Torrid time 

Standard Chartered (LSE: STAN) has had a pretty torrid time of late. After being a stock market success story for years, and emerging from the credit-crunch seemingly far less scathed than some other banks, the Asia-focused bank has fallen from grace over the past year, with its share price tumbling 16% whilst the FTSE 100 has risen over 6%.

For one thing, it wasn’t as unaffected by the credit-crunch as was thought. Loan impairments soared by a third last last, up to $1.61bn from 2012’s £1.2bn. And, according to The Times, Standard Chartered has been busy reclassifying loans to some Asian clients as high risk, raising the spectre of further provision for impairments to come.

Secondly, the bank has been hit by fines from regulators. In 2012 it was fined $667m by New York State’s Department of Financial Services (DFS), for breaching US money-laundering sanctions against Iran. And Standard Chartered’s reputation wasn’t enhanced when Chairman Sir John Peace had to make a very public back-peddle from describing the offences as “clerical errors” rather than “wilful acts”.  

Unfortunately, that hasn’t been the end of it — last month the bank was fined a further $300m by the DFS for failing to meet the requirements of  the 2012 settlement, because it hasn’t properly addressed problems with its anti-money laundering procedures. And on top of the fine, Standard Chartered will now have its compliance operations monitored for a further two years and is barred from opening dollar-clearing accounts for new customers at its New York branch without the DFS’s approval.

Lack of cheer

And last month’s half-year results didn’t bring any cheer, either — not that anyone following the bank had really expected them to. Profit dived 20%, falling to $3.3bn, with a 5% fall in operating income. Normalised earnings per share (EPS) were a hefty 21% lower, at 96.5 cents, and the dividend was left unchanged.

Of course, Standard Chartered could well turn things around. Hopefully it will deal with its compliance issues to the regulator’s satisfaction and avoid further sanctions. Maybe there aren’t too many more bad debts lurking in its loans book.

And many of its other problems are the usual cyclical market and economic ones that affect all banks. Despite the current slow-down in China’s rate of growth, Standard Chartered’s Asia-focus means that it’s well-placed to capitalise on China’s long-term transition to a consumption-based economy. 


So there’s an argument that now — when its share price is severely depressed — might be just the right time to buy Standard Chartered, treating it as long-term recovery play.

But enough people last week remained unconvinced by Standard Chartered’s prospects, and they put the bank in the number 1 spot in our latest “Top 10 Sells” list* — and they put it there by some margin over the number 2 position.

And, of course, no matter what anyone else was doing last week, only you can decide whether Standard Chartered is currently a buy, sell or just a hold tight. 

Tricky business

Working out whether a bank is worth investing in can be a tricky business, so, to help you conduct your own analysis, our experts here at The Motley Fool have put together a special report entitled "The Motley Fool's Guide To Banking".

This exclusive wealth report provides six key 'City insider' valuation metrics for each bank traded in London and gives a run-down of the whole industry.

Get your FREE copy now -- there's no further obligation.

Jon Wallis 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.

* based on aggregate data from The Motley Fool ShareDealing Service.