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05-Feb-2018
Standard Chartered and HSBC to benefit from superior grow...
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Berenberg upgraded Standard Chartered and lifted its target price on HSBC Berenberg said
Standard Chartered’s actions to improve asset quality are complete
Standard Chartered PLC ( LON:STAN ) and HSBC Holdings PLC ( LON:HSBA ) are
uniquely able to service low-risk global corporations and benefit from growth in emerging
economies, according to Berenberg .
“We believe these banks will remain in a minority of banks with a strong risk focus but,
increasingly, will benefit from superior growth,” Berenberg said in a note to investors.
Berenberg raised its rating on Standard Chartered to ‘buy’ from ‘hold’ and lifted its target
price to 920p from 700p.
The bank’s “differentiated network” and focus on large multinationals allows it to profit from
the persistent drivers of trade and investment such as greater activity between emerging
economies and China’s Belt and Road initiative, Berenberg said.
'Risk-focused growth now possible' for StanChart
The investment bank said Standard Chartered’s actions to improve asset quality are
complete and the loss rates in the Bank of England ’s stress tests are comparable with
HSBC in key regions and below UK banks’ global average.
“This provides more than just stability. Managers can now focus on growing the core
business and client relationships will suffer less from decisions to end or reprice business.
Risk-focused growth is now possible,” it said.
It added that it believes 5% annual revenue growth is obtainable and that it is among the
25% of banks in its coverage that trade below tangible book value, which is “unwarranted”
given that it is the only risk-focused lender offering meaningful growth.
HSBC fully-valued, says Berenberg
On HSBC, Berenberg said the bank is a “long-term winner” but appears fully-valued. It
repeated a ‘hold’ rating on the stock but raised its target price to 680p from 600p.
“We take comfort in HSBC’s risk focus and expect this to continue. We do, however, expect
HSBC’s new management to tilt the strategy towards greater growth,” Berenberg said.
“HSBC’s mix of lower risk, moderate growth and capital returns are appealing but are also
well recognised.”
Berenberg expects HSBC to report revenue growth of 3% per year between 2017 and 2020,
in part thanks to rising interest rates.
Both HSBC and Standard Chartered should benefit from higher US interest rates with the
consensus expectation for a further three hikes of 25bp during 2018, it added.
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