21 February 2025
If you are covering Standard Chartered’s 2024 results, please find comments below from Will Howlett, financials analyst at Quilter Cheviot:
"Standard Chartered's results for 2024 are somewhat mixed due to several one-off items, including a software write-off, a restructuring charge and a reclassification related to deposit insurance. However, we see strength in the key areas.
“Revenues have exceeded expectations across the board, with underlying pre-provision profits around 10% ahead of consensus. Lower loan losses have also contributed to a stronger bottom line. The capital return is ahead of expectations, with the dividend being raised. Since the 2023 results, the total capital return has reached $4.9 billion, putting the bank well on track to meet its target of at least $8 billion over 2024-2026.
“In the fourth quarter, revenues increased by 21%, while operating expenses rose by 16%, leading to operational leverage. Loan losses of $130 million benefited from releases in the Corporate & Institutional Banking (CIB) segment, although there was an increase in unsecured loan losses in the Wealth & Retail Banking (WRB) segment due to higher interest rates.
“The bank has largely reiterated its medium-term guidance of 5-7% annual growth rate for 2023-2026 and is tracking towards the upper end of this range. Standard Chartered trades at 0.8x tangible book value with a return on tangible equity (RoTE) of approximately 11% in 2025 and 12% in 2026 based on consensus forecasts. We see upside potential given the target of approaching 13% in 2026 and further progress thereafter.
“Our positive view on Standard Chartered reflects its strong loan growth potential from its Asian footprint, where GDP growth rates are structurally higher. Net interest income is also supported by the 'higher for longer' interest rate narrative. Profitability has been improving, with the bank targeting a return on tangible equity of 10% this year, increasing steadily to 12% in 2026. We believe this is not fully reflected in the current valuation, with shares trading at 0.6x tangible book value as of May 2024.
“Capital return continues to be a focus, with Standard Chartered targeting at least $5 billion over the next three years, equivalent to at least 22% of the market cap. Share buybacks are particularly accretive given the shares are trading at a steep discount to book value.
“Additionally, the restructuring of executive team remuneration is more aligned with shareholders' interests, which is a positive development."
