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05-Feb-2018
Berenberg upgrades StanChart to 'buy'
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Snippet :40
744.40 10:05 05/02/18
-0.77%
-5.80
806.40 10:05 05/02/18
-0.92%
-7.50
7,360.22 10:05 05/02/18
-1.12%
-83.21
4,089.96 10:05 05/02/18
-1.15%
-47.45
4,039.58 10:05 05/02/18
-1.15%
-47.14
Berenberg upgraded Standard Chartered to 'buy' from 'hold' and lifted the price target to
920p from 700p, and upped its price target on hold-rated HSBC Holdings to 680p from
600p.
It pointed out that StanChart is among the 25% of banks in its coverage trading below
tangible book value and within this, the only risk-focused bank offering meaningful growth. It
argued that this is unwarranted, hence the upgrade.
Berenberg said StanChart's unique network enables superior growth and risk management
versus peers. "This potential has recently been encumbered by actions to overcome legacy
issues. With this process now largely complete, relationship managers can focus on growing
the core business rather than exiting and renegotiating past business."
As a result, the bank reckons around 5% annual revenue growth is achievable between
2017 and 2020. This reflects higher rates, US dollar weakness and improved growth from
the network.
"Standard Chartered’s actions to improve asset quality are complete, in our view. The
bank’s loss rates in BOE stress tests are comparable with HSBC in key regions and are
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-focussed growth is now possible."
As far as HSBC is concerned, Berenberg said it remains among its short list of long-term
winners in the banking sector.
"We continue to take comfort in HSBC’s risk focus and do not expect this to falter. We do,
however, believe revenue prospects have improved. Aside from macro considerations, and
US interest rates in particular, we expect the incoming management to tilt the strategy
somewhat towards greater growth."
It said annual revenue growth of around 3% is achievable between 2017 and 2020, in part
reflecting rising interest rates.
At 1030 GMT, StanChart shares were down 0.9% to 806.80p and HSBC was down 0.9% to
744p.