Ahead of results later this week, emerging markets-focused lender Standard Chartered PLC (LON:STAN) fell today after JPMorgan Cazenove downgraded its rating for the stock because it thinks the risk/reward for the bank, and bigger peer HSBC Holdings PLC (LON:HSBA) now looks “less compelling”.
In early trading, shares in Standard Chartered were down 1.6%, or 12.6p at 760.4p.
In a note to clients, JPMorgan cut its stance on the FTSE 100-listed firm to ‘neutral’ from ‘overweight’.
They said “we see the investment case for StanChart as more geared to the delivery of earnings improvement, rather than the removal of capital concerns/dividends or M&A.
“We believe that under CEO Bill Winters, StanChart is pursuing a more sustainable LT recovery strategy, albeit one that will take time to deliver, also less cyclically geared.“
The analysts added: “After the 80% rally in StanChart and 54% rally in HSBC shares over the past year we view risk reward as less compelling on a 1 year view with the bull case requiring a 3 year horizon.”
JPMorgan retained a ‘neutral’ stance on HSBC, but raised its target price to 670p from 600p, helping shares edge up 0.7%, or 5.1p to 712.6p.
HSBC will release its full-year results tomorrow, with Standard Chartered’s due this Friday, February 24.
The analyst concluded: “Relative to US banks, these banks are imperfect plays on US rates as the rate hike cycle has to be perfectly timed to thread the needle between improving NIM (net interest margin)/revenue versus keeping EM asset quality resilient.“