Saturday, February 27, 2016

Analysis of Standard Chartered


Standard Chartered, a UK bank


ISIN GB0004082847 | WKN 859123

Business: An UK head-quartered international bank. They are standing on three pillars: Personal Banking (savings, accounts, mortgage, loans, insurance etc.), Private Banking (focused on wealth management) and the final pillar is Business Banking (transactions, financial markets, corporate finance, renminbi services as well as Islamic Banking). It should be mentioned that 69% of revenue comes from Asia of which 33% is directly in connection to Greater China.

Active: 67 countries world wide. 

P/E: -8.9 (P/E5: 6.8)


contrarian values of P/E, P/B, ROE as well as dividend for Standard Chartered

The P/E of Standard Chartered is awful due to the loss and is currently at -8.9 (P/E5 is at 6.8 though) but the P/B is looking excellent with 0.4. Still for Graham we get a very clear no go on this one. Earnings to sales as well as ROE becomes useless due to the loss but the book to debt ratio is at 0.08 which is low but will still end up among the "better" banks.
In the last five years they have had an yearly awful revenue growth rate of -2.8% which then gives us a motivated P/E of 8 to 10 which means, at least compared to P/E5, that is is slightly undervalued by the market today.
During 2015 they only paid out part of the dividend due to the poor performance which still became 2.4% but the share priced have dropped dramatically during the last year especially. No promises were given regarding dividends payment in 2016 but looking at the annual report for 2015 and considering their outlook my guess would be no dividend payment during 2016 and until they are back on their feet again.

Conclusion: Graham says no to Standard Chartered and I end up saying yes to it knowing that it will take years to turn it around. The P/E5 is good but in a down going spiral and actually the only good thing is the P/B that is excellent. The new CEO did like they often do and took a major write down on their assets as well as taking some serious costs for implementing his new strategy. 

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