standard chartered

Standard Chartered Plc (LON:STAN) (LON:STAC) was rocked last week with allegations of a cover-up and its role in money laundering. Today, it led the FTSE 100 after having lost almost a quarter of its value since the story broke. The company is now trying to reach an early settlement with regulators.

What is the outlook on Standard Chartered PLC (LON:STAN) (LON:STAC) after this roller-coaster ride ends? This week we analyze tandard Chartered Plc (LON:STAN) (LON:STAC), focusing today on its fundamentals. CapitalCube’s company analysis is always relative to peers; the peers we use for our analysis today are:

Stan-GB Peers for CapitalCube analysis
Standard Chartered (STAN-GB) Scores for Fundamental Analysis and Dividend Quality

Company numbers are TTM (trailing twelve months) or latest available. Share price data is previous day’s close unless otherwise stated.

Fundamental Analysis

Relative Valuation

P/B below peers
Standard Chartered PLC trades at a lower Price/Book multiple (1.2) than its peer median (1.7).

Operations Diagnostic

STAN-GB has relatively high profit margins while operating with median capital turns.

Valuation Drivers

The market expects STAN-GB to grow at about the same rate as the peers and to maintain the median returns it currently generates.

Earnings Leverage

Revenues FocusChanges in annual revenues (relative to peers) are better than the change in its earnings (relative to peers), implying the company is focused more on revenues.

Sustainability of Returns

STAN-GB’s return on equity currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.

Drivers of Margin

While the company’s lending operations do not seem to benefit from any relative pricing advantage its margins suggest relatively low operating costs.

Growth Expectations

While STAN-GB’s revenues in recent years have grown faster than the peer median, the market gives the stock a PE ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.

Capital Investment Strategy

The company is likely overinvesting in a business with only median returns.
Here is a closer look at two of the attributes mentioned above: Share Price Performance, Earnings Leverage, and Drivers of Margin. For similar analysis on other attributes please log-in.

Share Price Performance

Relative underperformance over the last year and the last month suggest a lagging position.

STAN-GB’s share price performance of -3.3% for the last 12 months is below its peer median. The 30-day trend in its share price performance of -8.5% is also below the peer median implying that the company’s stock performance is lagging its peers.
Stock price performance over the last month vs. last year charted with respect to peers for Standard Chartered PLC (STAN-GB)

Earnings Leverage

STAN-GB seems to be more focused on revenues.

The company has achieved better revenues growth than its chosen peers (year-on-year change in revenues of 8.4%) but its earnings growth performance has been below the median (change in annual reported earnings of 7.8% compared to the peer median of 10.2%). This suggests that, compared to its peers, the company is focused more on top-line revenues. STAN-GB is currently converting every 1% of change in revenue into 0.9% change in annual reported earnings.
Earnings Leverage Earnings Growth % vs. Revenue Growth % charted with respect to peers for Standard Chartered PLC (STAN-GB)

 

Drivers of Margin

STAN-GB’s pre-tax margin suggests relatively low operating costs.

The company’s net interest income (net interest income/total revenues) of 63.8% is around peer median suggesting that STAN-GB’s lending operations does not benefit from any differentiating pricing advantage. However, STAN-GB’s pre-tax margin is more than the peer median (40.8% compared to 30.5%) suggesting relatively low operating costs.
The company’s proportion of fee based income (i.e. non interest income/total revenues) of 36.2% is around peer median. However, STAN-GB’s proportion of overhead costs (i.e. non interest expense/total revenues) is less than peer median (18.1x compared to 60.2x) — suggesting relatively low fee-based overhead operations.
Drivers of Margin or Gross Margin% vs. Pre Tax Margin % charted with respect to Peers for Standard Chartered PLC (STAN-GB)

Company Profile

Standard Chartered Plc operates as an international banking and financial services company in the United Kingdom. It provides personal and business banking services such as loans and mortgages, insurance and investment. The company primarily operates in two segments: Consumer Banking and Wholesale Banking. The Consumer Banking segment offers consumer banking products and services, including savings and accounts, loans, mortgages, credit cards, investment advisory, foreign exchange trading, currency deposits, mutual funds and employee banking, as well as life, savings and retirement planning, health and medical, home, motor and travel insurance services. The Wholesale Banking segment provides transaction banking, including cash management, trade finance and securities services; financial market solutions to meet risk management, financing and investment needs; corporate finance services, such as corporate advisory and finance, project and export finance, structured trade finance and financing and structured finance solutions; and principal finance solutions. The company was founded on November 18, 1969 and is headquartered in London, the United Kingdom.

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