Standard Chartered PLC (LSE:STAN) is set to show a rare outperformance relative to its bank peers over the next two years, according to Goldman Sachs (NYSE:GS).
The US investment bank expects Standard Chartered to print a double-digit EPS compound annual growth rate (CAGR) and show around a 2.7 percentage point return on equity (ROE) improvement versus a low single-digit EPS CAGR and declining ROE at peer banks.
Upgrading to 'buy' from 'neutral', Goldman pointed out the stock trades at close to record-low valuations compared to a near decade-high ROTE of 11% next year.
It has set a price target of 868p, down slightly from 879p, implying 38% potential upside on top of the 3% dividend yield.
Goldman believes there could be several catalysts for the stock.
Firstlly, the closure of the sale of its global aviation finance leasing business could give the market confidence in a buyback announcement at the financial year 2023 results, while decent fourth-quarter results would bring back the focus to 2024 targets.
Goldman also thinks the new group CFO could tighten or improve cost guidance while the return of fund management income and loan growth next year should instill confidence in the bank’s revenue growth outlook.
Goldman estimated that capital at the top-end of the target range, and slow balance sheet growth ahead, could translate into continued buybacks which would reduce share count at 6% p.a.