Standard Chartered on Track to Deliver Robust FY Results, Secures Buy Rating

Standard Chartered, the retail and commercial banking giant is on track to deliver another strong performance for the FY 2011. Ahead of preliminary earnings on February 29, 2012 it secured buy rating from all top brokerage houses such as Nomura Securities, Investec Bank and Seymour Pierce.

The group's income growth remains resilient and well diversified, underpinned by high levels of activity across its businesses. It has continued to invest to support future earnings momentum; the credit situation remains relatively benign across its footprint. It continues to focus on the basics of banking, on maintaining a very strong balance sheet, as well as on the continued disciplined implementation of its plan. Its consistent performance and balance sheet resilience have been recognised by both the market and rating agencies. Standard Chartered has now been upgraded by rating agencies since the beginning of the financial crisis. The growth forecasts of its markets in Asia, Africa and the Middle East remain intact despite the increasing uncertainty in the West.

For the FY 2011, the group's client income within wholesale banking and consumer banking is expected to grow at around double-digit rate. The overall, net interest margins are anticipated to increase slightly on the level seen for the FY 2010. Asset margins have continued to see some pressure in the second half of the year. Liability margins have risen moderately in the same period, although it sees increasing competition in a number of markets. Risk weighted asset growth is broadly in line with previous guidance.

Standard Chartered continues to self-fund risk weighted asset growth, pre-impairment profit is also anticipated to increase at a double digit rate over 2010. It also expects double-digit growth in pre-tax profit for the group. The effective tax rate for the group for full year 2011 is expected to be around 29 per cent.

Last year the group acquired Gryphon Partners Advisory and Gryphon Partners Canada. Gryphon Partners is a corporate advisory firm focused on the mining and metals sector, with professionals based in Australia and Canada. The group has also signed an agreement to acquire GE Money Pte Ltd, a specialist in auto and personal loans in Singapore.

Brokers' Views:

- Nomura Securities gives Buy rating on the stock with a target price of $29.62 per share
- Seymour Pierce assigns Hold/Buy rating on the stock with a target price of $21.87 per share
- Investec Bank (UK) recommends Buy rating on the stock with a target price of $28.56 per share
- Daniel Stewart recommends Buy rating on the stock with a target price of $30.12 per share.

Earnings Outlook:

- Nomura Securities expects the group to report revenues of $17,656.00 million for FY 2011 and $19,048.00 million for FY 2012 respectively with pre-tax profits (pre-except) of $7,027.00 million and $7,394.00 million. EPS is estimated at $2.04 and $2.21 for the same periods.
- Investec Bank (UK) predicts the company to post revenues of $17,622.00 million for FY 2011 and $19,490.00 million for FY 2012 respectively with pre-tax profits (pre-except) of $6,934.00 million and $7,510.00 million. Earnings per share (pre-expect) for the same periods are projected at $1.97 and $2.01 with DPS of 76 cents and 84 cents.
- Seymour Pierce has projected the group's full year pre-tax profit (pre-expect) at $17,668.20 million for FY 2011 and $18,568.70 million for FY 2012 respectively with pre-tax profits (pre-except) of $6,635.50 million and $6,244.70 million. Profit earnings per share for the same periods are projected at $2.16 and $2.07.

Below is a summary of sector comparisons in terms of price earnings, earnings per share, dividend per share, dividend yields, return on equity and price-to-book ratio. The table explains how the company is performing against its peers/competitors in the sector.The table below represents top eight companies based on market capitalisation.