Home Business NewsBusinessBanking Standard Chartered rounds out banks’ results with new buyback and dividend

Standard Chartered rounds out banks’ results with new buyback and dividend

by LLB Editor
3rd Aug 21 12:04 pm

Standard Chartered’s results confirm the trends shown over the past week by Barclays, Lloyds, NatWest and HSBC, despite the difference in geographic and business mixes between the big five FTSE lenders,says AJ Bell Investment Director Russ Mould.

“But investors are clearly unconvinced that the banks are out of the woods, as the shares of all five trade well below their official, stated net asset – or book – value per share.

“Either the markets are unsure whether the banks can genuinely make sustainable double-digit returns on equity (owing to regulatory pressure, competition from fintech rivals or the unpromising backdrop presented by a heavily indebted world), or they think the net asset value figures are too optimistic, or the banks are simply screamingly cheap.

  2021E Q2 2021 2021E 2021E
  P/E Price/book Dividend yield Dividend cover
Standard Chartered 9.3 x 0.47 x 3.2% 3.32 x
Barclays 6.8 x 0.63 x 3.2% 4.53 x
HBSC 12.4 x 0.71 x 4.1% 1.95 x
NatWest Group 14.6 x 0.77 x 4.9% 1.40 x
Lloyds 7.7 x 0.83 x 3.8% 3.43 x

Source: Company accounts, Marketscreener, consensus analysts’ forecasts

 “Standard Chartered’s profits were up sharply – thanks in the main to lower loan impairments or even their reversal – while net interest margins showed signs of stabilisation and loan growth showed some encouraging signs of momentum. Standard Chartered also declared an interim dividend and a second share buyback scheme.

“Similar trends were evident at Barclays, Lloyds, NatWest and HSBC, as all drew some benefit from the post-lockdown economic upturn, a return to some degree of consumer and business confidence and the absence of any fresh interest rate cuts from central banks.

“According to the website www.cbrates.com, there has been 34 rate rises and just seven cuts from central banks this year and most of the increases have been in emerging markets, where the prospect of inflation is being taken more seriously than it is in the West. That could conceivably offer a little succour to Standard Chartered and it helps to explain why CEO Bill Winters suggests net interest margins may finally be hitting bottom (along with the prospect of rate cuts into negative territory fading in the West).

  Net interest margin
  Q1 2020 Q2 Q3 Q4 Q1 2021 Q2
HSBC 1.54% 1.33% 1.20% 1.22% 1.21% 1.20%
Standard Chartered 1.52% 1.28% 1.23% 1.24% 1.22% 1.22%
NatWest 1.70% 1.67% 1.65% 1.66% 1.64% 1.61%
Lloyds 2.79% 2.40% 2.42% 2.46% 2.49% 2.51%
Barclays UK 2.91% 2.48% 2.51% 2.56% 2.54% 2.55%

Source: Company accounts

“Improved momentum in the loan book could also help. Standard Chartered was the only one of the five FTSE 100 banks to show faster growth in loans than deposits in Q2.

  Growth in loans and advances, year-on-year (%)
  Q1 2020 Q2 Q3 Q4 Q1 2021 Q2
HSBC 3.5% (0.3%) 2.3% 0.1% (0.0%) 4.0%
Standard Chartered 2.3% 4.8% 4.3% 4.9% 7.7% 7.8%
NatWest 14.7% 13.4% 10.7% 10.3% 2.1% 3.0%
Lloyds 0.5% (0.2%) (1.8%) 0.0% 0.2% 1.8%
Barclays UK 13.1% 4.6% (0.2%) 1.0% (7.6%) (1.8%)
             
  Growth in deposits, year-on-year (%)
  Q1 2020 Q2 Q3 Q4 Q1 2021 Q2
HSBC 6.2% 11.0% 14.2% 14.2% 14.5% 8.9%
Standard Chartered 11.8% 4.9% 7.6% 8.3% 4.6% 4.7%
NatWest 8.3% 12.9% 13.2% 16.9% 17.8% 14.4%
Lloyds 2.6% 5.5% 6.7% 9.5% 7.9% 7.5%
Barclays UK 14.1% 12.9% 17.6% 15.7% 6.0% 7.3%

Source: Company accounts

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