Despite promising billions of new shareholder returns, Standard Chartered PLC’s (LSE:STAN) share price dipped in morning trading as it missed expectations on profits and earnings per share.
The bank’s share price was at 533p by early afternoon, a 3.61% fall on the day, as underlying profit before taxes of US$3.89mln missed the consensus estimate of $4.30mln.
READ: Standard Chartered promises US$5bn of shareholder returns over next three years
Stanchart’s chairman Dr José Viñals said: “While the pandemic brought about considerable challenges and, as a result, the turnaround is taking longer than previously anticipated, it is clear to us that the refreshed strategic priorities we set out at the start of 2021 are right.”
The bank’s exposure to Asian markets kept it slightly more resilient during the height of COVID, but urged caution amid uneven recovery in some markets, including Hong Kong.
Earnings per share (EPS) of 61.3p missed consensus targets of 76.3p, while the group's CET1 ratio, an efficiency measure, was 14.1% against consensus of 14.3%.
StanChart said it would begin a share buyback programme of $750mln, with a proposed final dividend of US$0.09 a share, together totalling just over US$1bn, as part of a total of US$5bn of shareholder returns over three years.
The bank was optimistic that rate hikes this year would bolster its net interest margin, with falling rates through 2021 having driven a more than US$2bn reduction in net interest income.
With Viñals saying the board is buoyed by prospects for “accelerated change” in global business ecosystem, the existing target return on tangible equity (RoTE) of 10% by 2024 was maintained, with interest rate rises expected to add 3% towards that target.
Although this target was originally meant to be a 10% return on equity target in 2016, before pivoting to a slightly easier 10% ROTE target three years later, some analysts were happy enough.
Gary Greenwood of Shore Capital leaned into the positives of StanChart’s release, upgrading the bank to a ‘buy’ outlook for a price target of 680p, citing future capital returns and RoTE targets.
“At yesterday’s closing price of 549p, Standard Chartered trades on a trailing P/TNAV (price to tangible net asset value) 0.58x which suggests there is still significant upside potential if the group can deliver on management’s new RoTE target of 10% by FY24F,” said Greenwood.
As analyst Sophie Lund-Yates at Hargreaves Lansdown noted, there was scope for a bigger buyback than the board announced, which may have led to investor disappointment.