Investment View: One slightly sick trading statement does not make StanChart a 'sell'

Should you be standing with Standard Chartered after last week's less than stellar trading update? The market tells its own story. The shares have been on the skids since it was issued. In fact they've been trending down for a while.

Standard Chartered nearly hit £18 in the middle of March, about the time I said keep buying. In hindsight that wasn't the cleverest recommendation I have made, but there were good reasons for it: a relatively restrained valuation and its positioning in lots of rapidly growing markets.

It now looks as if those who sold made the correct call after the bank admitted that recent trading had been less than stunning in its first quarter.

This is a bank from which you don't expect to see bumps in the road. Of course, what we don't have is any numbers to see what has been going on. Standard Chartered is unusual in not putting out any numbers at all with its quarterly updates.

So investors are left to interpret comments from the management, which said operating profits would be "slightly down" when compared to the first quarter of 2012 and that "momentum slowed" after a strong January.

When you don't put any numbers out for people to judge, they'll think the worst. Other banks have learnt this lesson. Sadly, StanChart has not.

All the same, one thing to take to the bank is that it still expects to meet forecasts for full-year pre-tax profits. That ought to provide some comfort: management would look very, very stupid saying that if the difficult trading in places such as South Korea and Singapore persists through the rest of the year.

Analysts have noted growing competition from other foreign banks, but if StanChart is as confident as it sounds, and its comments on the future outlook were more optimistic, then the shares could look quite cheap by the end of the year. The bank is, after all, signalling a rapid return to "trend levels", which means income growth of 10 per cent. Not too shabby.

This is something quite a few people in the analyst and broking communities have picked up on. They see recent share price falls as a buying opportunity. So do I.

Bailing on one of the world's best-run banks, which managed to turn in increases in profits right through the financial crisis (it's produced a record every year for the last 10), would seem on the face of one slightly sick trading statement to be an over-reaction.

I personally took note of the application for licences in Angola and Mozambique, which emerged on Friday. That wouldn't seem to be earth-shattering news. But these are economies which are growing very rapidly. In fact, sub-Saharan Africa as a whole could easily become the next "hot" economic region within a decade or two. It's true that its history doesn't inspire much confidence, but combine a resource boom with an emerging middle class and, crucially, improving governance at the political level, albeit in places which desperately need that, and it could surprise us all.

StanChart is no Barclays, already an established giant on the continent, but it has proved time and again that it is good at emerging markets. So watch this space. On 10 times earnings, yielding 3.6 per cent, the bank is cheaper than, say, HSBC, 11.5 times implying a 4.6 per cent yield.

HSBC is due to update on strategy later this week, and we can expect more cost cuts and more sales of non-core and subscale businesses. Capital is being deployed in areas of growth, such as so called "emerging markets", and UK mortgages.

But as Ian Gordon, an analyst at Investec notes, it's generating so much capital it is struggling to find a use for it. If only all banks were like that.

If you've a decent slug of cash, HSBC is where you'd want to hold it on deposit. Standard Chartered is a risk, given that there are people out there shorting it right now amid worries about loan qualities. All the same, Standard Chartered is where you'd want to invest in terms of shares. HSBC is a solid hold, but StanChart is a strong buy.

Start your day with The Independent, sign up for daily news emails
Life and Style
Mary Beard received abuse after speaking positively on 'Question Time' about immigrant workers: 'When people say ridiculous, untrue and hurtful things, then I think you should call them out'
tech
Life and Style
Most mail-order brides are thought to come from Thailand, the Philippines and Romania
life
News
i100
Life and Style
tech
Voices
Margaret Thatcher, with her director of publicity Sir Gordon Reece, who helped her and the Tory Party to victory in 1979
voicesThe subject is being celebrated by the V&A museum, triggering some happy memories for former PR man DJ Taylor
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions