Standard Chartered put out its interim management statement yesterday and, while almost any European bank would be overjoyed to post SC’s numbers, it didn’t quite meet expectations. Revenue growth slowed, casting doubts on whether the bank would be able to meet its targets for the year.
Nomura analysts aren’t convinced that SC can meet the targets set, but are keen to point out that the bank is still doing very well given the climate:
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“We are modestly reducing our estimates with these figures and regard the full-year targets as demanding, without a recovering environment in the second half. Nevertheless, we would argue that this is not surprising and that very few companies, let alone banks, are without downgrade risk. In our view, the time when the shares needed upgrades to sustain them is long gone.”
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While SC has stated that it is confident that it can meet its financial objectives for the year, Nomura thinks this would require a positive environment in the second half of the year that seems to be unlikely at this stage:
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“The company has indicated it is ‘on course to deliver on its financial objectives’ for the full year. These include double-digit growth in EPS and revenue, with broadly flat operating leverage. On the call, management indicated it remained comfortable with full-year consensus PBT expectations of cUSD7.46bn. However, with a USD70m gain in the H1 figures and the UK bank levy (USD165m in 2011) to be charged in H2, this would imply underlying PBT would need to be virtually flat in H2 in a likely weaker operating environment and with higher investment spend. We regard this as optimistic and are moderating our expectations slightly by 2.8%."
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The emerging markets-focused bank is a bellwether for the prospects of developing economies so the projected slowdown in its earnings underscores the risks on the global landscape. What's more, SC has found its share price lagging somewhat compared to Asian peers, possibly down to its eurozone exposure and impending financial regulation:
