With my eye on the UK’s high street banks, I haven’t paid much attention to the Standard Chartered (LSE: STAN) share price.
But it’s up close to 50% in the past 12 months. And Q3 results posted on Wednesday (30 October) gave it a 3.5% boost.
Strong quarter
“We have delivered a strong performance in the third quarter with profit before tax up 41%, driven by a record quarter in Wealth Solutions and strong growth in our Global Markets business.“
That’s how CEO Bill Winters opened the update, after the international bank posted an 11% rise in operating income to $4.9bn (up 12% at constant currency).
Net interest income also rose 9% at constant currency to $2.6bn. The company said it was partly due to some short-term hedging. But it does make me take note, at a time when UK retail banks are under a potential squeeze from falling interest rates.
Portfolio boost?
Is Standard Chartered a good one to consider to diversify my bank holdings while still investing in what I see as a strong financial sector?
Considering the firm’s mostly engaged in multinational corporate banking and financial markets, I think it could. It might make a good complement to a holding in retail-focused Lloyds Banking Group, for example.
On the liquidity front, things look fine. The bank reported a common equity tier 1 (CET1) ratio of 14.2%, above its target range. It includes the effect of the ongoing share buyback, worth $1.5bn.
And we’re looking at a solid Return on Tangible Equity (RoTE) of 10.8%.
What’s it worth?
Standard Chartered doesn’t offer the same kind of dividend yields we can get from other banks, with a forecast for a modest 2.7% this year.
We are looking at price-to-earnings (P/E) valuations down with the rest of the sector though. The P/E ratio for the current year’s a shade under eight. That could fall as low as 5.6 if the strong earnings growth predicted through to 2026 comes good. And the dividend yield could rise to 3.5% at the same time.
The board lifted its full-year guidance, indicating an operating income rise towards 10%. Outlook for 2025 and 2026 is up a bit too. So those cheery forecasts might need to be raised a bit more.
There are risks
The headline valuation makes the Standard Chartered share price look too low to me. But we do face a number of financial sector risks right now that will directly impact this stock.
Interest rates look set to fall around the developed world, and that could still have a negative effect on the bank’s margins. And I’d say it’s also a very uncertain time to be pinning our hopes on international banking. East-West relations are far from warm and economic protectionism’s rearing its ugly head.
Yet on the whole, I think this could turn out to be a good time for me to add some Standard Chartered shares to my sector holdings, and it’s on my shortlist. I think the risk factor should ease over the long term.
The post As Q3 results give the Standard Chartered share price a boost, should I buy? appeared first on The Motley Fool UK.
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Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc and Standard Chartered Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
