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Feb. 25, 2021, 10:38 a.m. EST

Standard Chartered slumps as analysts question returns target

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By Steve Goldstein

Shares of Standard Chartered slumped as much as 6% on Thursday, reeling after the Asian focused, U.K.-based bank reported a surge in credit provisions.

Standard Chartered /zigman2/quotes/200125072/delayed UK:STAN +0.10% /zigman2/quotes/202369078/delayed HK:2888 +0.91% shares dropped as the bank forecast flat income growth for 2021 after a 2% drop at constant currencies in 2020. Standard Chartered also said credit provisions spiked to $2.3 billion, a rise of $1.4 billion. Analysts on the company’s conference call were struggling to understand how the bank could achieve its goal of a return on tangible equity of at least 7% by 2023, rising to 10% in the medium term.

Manus Costello, an analyst at Autonomous Research, pointed out Germany’s Commerzbank /zigman2/quotes/207286669/delayed XE:CBK -1.59% has a similar target — a return on tangible equity of 6.5% to 7% in 2024 — but with tougher local markets.

Bill Winters, the chief executive of Standard Chartered, replied the bank can grow enough to meet its target.

“We’ve evidenced over the past several years that we can generate this growth,” said Winters, according to a FactSet-compiled transcript of the analyst call. “We’ve evidenced we can do it in a controlled way both in terms of expenses and capital. We demonstrated that we can turn around in big markets and do that in a fundamental and sustainable way. And we reposition the bank fundamentally around these strategic pillars, including having a strong digital operation and repositioning our capabilities in the growth markets.”

Nicholas Hyett, an analyst at Hargreaves Lansdown, wasn’t so sure. “Combine steady income growth with Standard Chartered’s 10% return on equity target and a commitment to return surplus capital to shareholders and the result would be an attractive and growing dividend,” he said. “That’s been the promise for some years though, and so far it remains just a promise.”

Other banks were trading higher, including HSBC Holdings /zigman2/quotes/203901799/delayed UK:HSBA +0.50% , buoyed by the rising gap between short- and long-term bond yields.

Diversified miner Anglo American /zigman2/quotes/201381512/delayed UK:AAL -0.76% rose 5%, after reporting a smaller-than-forecast drop in underlying profit.

The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.27% rose 0.4% in late-afternoon trade.

/zigman2/quotes/200125072/delayed
UK : U.K.: London
590.00 p
+0.60 +0.10%
Volume: 4.51M
Nov. 25, 2022 4:35p
P/E Ratio
8.26
Dividend Yield
1.79%
Market Cap
£17.06 billion
Rev. per Employee
£209,170
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/zigman2/quotes/202369078/delayed
HK : Hong Kong
$ 55.50
+0.50 +0.91%
Volume: 348,622
Nov. 25, 2022 4:08p
P/E Ratio
7.93
Dividend Yield
N/A
Market Cap
$161.48 billion
Rev. per Employee
$2.07M
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/zigman2/quotes/207286669/delayed
XE : Germany: Xetra
8.03
-0.13 -1.59%
Volume: 5.00M
Nov. 25, 2022 6:30p
P/E Ratio
7.27
Dividend Yield
0.00%
Market Cap
€10.06 billion
Rev. per Employee
€296,183
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/zigman2/quotes/203901799/delayed
UK : U.K.: London
491.95 p
+2.45 +0.50%
Volume: 10.65M
Nov. 25, 2022 4:35p
P/E Ratio
10.49
Dividend Yield
4.54%
Market Cap
£98.23 billion
Rev. per Employee
£246,020
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/zigman2/quotes/201381512/delayed
UK : U.K.: London
3,204.00 p
-24.50 -0.76%
Volume: 1.54M
Nov. 25, 2022 4:35p
P/E Ratio
7.45
Dividend Yield
6.18%
Market Cap
£42.86 billion
Rev. per Employee
£446,346
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/zigman2/quotes/210598409/delayed
UK : FTSE UK
7,486.67
+20.07 +0.27%
Volume: 445,496
Nov. 25, 2022 4:57p
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