Shares in Standard Chartered have been downgraded, following a hit from tariff complications.
Standard Chartered's Shares Slapped with a Downgrade 🚀
Analysts from UBS ain't pullin' any punches when it comes to Standard Chartered's stock. After a rough patch for the lender amidst geopolitical turmoil, they've knocked down the target share price to 1,215p from 1,310p, but still keep a "Buy" rating.
Shares took a tumble, droppin' 0.6% on Wednesday, settlin' at 1,049p. With President Trump's 'Liberation Day' levies, Standard Chartered's shares plummeted a wicked 20% over five days.
The bank's close ties to Asian economies, which Trump ruled with the steepest tariffs, sent the stock into a nosedive. Standard Chartered plays a significant role in catering to the growing middle class in countries like India, China, and Indonesia, offerin' a range of retail services including savings and checking accounts.
The lender notched up a pre-tax profit of $2.1bn (£1.6bn) for the first quarter, just barely avoidin' Trump's tariff onslaught. The wealth management arm saw a 28% surge in operating income, while global banking grew by 17% compared to Q1 of 2024.
Steady but Concerned Investors
UBS analysts projected a 44% increase in earnings per share by 2027, but they also warned that investors might opt for more stability in the short term due to a worsenin' macro environment.
"The market-heavy nature of the first quarter earnings beat and uncertainty around tariff-related headlines will, we think, keep some investors on the sidelines for now," the analysts said. They noted that the earnings call was heavily focused on trade, suggerin' a cautious approach among investors.
But, they believe that Standard Chartered has more diversification and better growth potential than its current valuation suggests, with downside risks partially mitigated by a hefty cost-cutting program and payout plans that offer distributed yields of 10-12%.
However, they pointed to net interest income (NII) as an area of uncertainty. The lender's first-quarter NII matched expectations at $2.8m, but dropped 6% quarter over quarter. The firm's net interest margin — a key measure of a bank's lending profitability — contracted by 9 basis points to 2.12%.
Analysts blamed "headwinds from falling rates and margin compression" for the declines. Hop on for the rollercoaster of Standard Chartered's financial journey as it navigates these challenges! 🎢💰
Given the UBS downgrade of Standard Chartered's shares and the potential for investors to favor stability in the short term due to economic uncertainties, personal-finance advisors may suggest a cautious approach for investing in the banking sector, particularly in Standard Chartered. The investors' concern is partly due to the bank's declining net interest income (NII) and contracting net interest margin, which has raised questions about the bank's lending profitability. However, analysts believe that Standard Chartered's diversification and growth potential, as well as its payout plans offering distributed yields, may present opportunities for long-term finance and business investments, despite the short-term challenges the bank is facing in the finance industry.
