Standard Chartered Q4 preview: Where next for the Standard Chartered share price?
Joshua Warner February 15, 2022 3:00 PM
Standard Chartered shares have been rising as investors expect higher interest rates and an improving economic outlook to boost profits in 2022.
When will Standard Chartered report Q4 earnings?
Standard Chartered is scheduled to release its fourth quarter and full year earnings on the morning of Thursday February 17.
Standard Chartered FY preview
The Big Four UK banks – Lloyds, Barclays, NatWest and HSBC - are set to report earnings this week and next and expectations are high as markets prepare for higher interest rates and digest an improving economic picture as the world continues to bounce back from the pandemic. Analysts believe they will together report profits of £34 billion in 2021, with the more UK-focused ones set to book their highest earnings for decades.
You can read our round-up preview ahead of earnings from the Big Four here.
But the fifth player listed in London, Standard Chartered, will be the first to publish its annual results this week. It does not have a retail banking arm in the UK and the vast bulk of its profits come from a wide-range of activities in Asia, supplemented by its businesses in Africa and the Middle East. This means the bank has greater exposure to emerging and developing markets than most of its rivals that operate more in developed economies.
The bank’s primary performance measure is its return on tangible equity, and this should come in between 7% to 8% as it did after improving in the third quarter.
Analysts forecast topline income will rise 0.5% in 2021 to $14.8 billion and that its net interest margin will fall to 1.19% in 2021 from 1.31% in 2020.
However, a tighter margin should be countered by the amount of credit impairments falling to just $177 million in the year compared to the hefty $2.3 billion provision booked in 2020 at the height of the pandemic, as banks continue to unwind the sums put aside as the economic outlook continues to improve. There is a chance this could provide a bigger boost than forecast depending on how confident Standard Chartered is feeling about the global economy in 2022.
As a result, earnings per share at the bottom-line is forecast to more than double to $0.82 in 2021 from $0.36 in 2021.
One area of particular interest for investors is how Standard Chartered plans to address rising costs. Total operating costs are forecast to rise 2.5% in 2021 to $10.4 billion and its cost to income ratio (also known as jaws) is set to widen. Total operating costs are expected to rise by another $336 million in 2022 following a $248 million rise this year.
With this in mind, investors will need reassuring the bank can grow revenue at a faster rate if costs are set to continue rising, with analysts currently forecasting the bank can grow topline income by 6% in 2022 to $15.7 billion – some $889 million more than what is pencilled-in for 2021. That is in the middle of the bank’s 5% to 7% target range. EPS is forecast to grow 4.8% in 2022 to $0.85.
The bank has utilised both dividends and buybacks this year and Standard Chartered has said it will provide an update on its capital allocation plans when it releases results, which will be pivotal in deciding how markets react to the update. The bank’s balance sheet has improved this year and its CET 1 ratio, which measures the strength of the bank, should remain comfortably above its minimum target at around 14% in 2021. Still, analysts believe there is limited room for Standard Chartered to grow shareholder returns, particularly through buybacks, unless it commits to getting a tighter grip over costs.
Where next for the Standard Chartered share price?
Standard Chartered shares have been rising in an uptrend since December and buyers managed to push the stock up to its highest level since the pandemic began at 573.6p last week before sellers re-entered the market and started applying some pressure.
The current uptrend remains intact and supported by the bullish RSI and the fact the both the 50-day and 100-day smas recently moved back above the longer-term 200-day sma. The stock will need to break past that post-pandemic high before it can target the 597p level of support seen back in August 2019. Above there, the stock can start aiming to recover above pre-pandemic levels.
On the flip side, the recent loss of momentum in the uptrend is supported by the fact 10-day average trading volumes have dropped to under 1.4 million shares daily from over 1.6 million on the 20, 30 and 100-day averages. If the stock breaks out of the current uptrend then we could see it decline toward the 485p level of support seen last month, roughly in-line with the 50-day sma. Below there opens the door to the 100-day sma at 475p and then the 200-day at 470p.
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