Citi cuts target on StanChart, points out correlation with oil price

Analysts at Citi on Wednesday lowered their target price on the shares of Asia-focused and commodity-exposed lender StanChart.

The broker described the lender´s valuation at 0.5 times estimated 2016 price-to-tangible book value as "low" in the context of global banks.

Despite that, they saw limited catalysts for the share price in the near-term until there was more visibility on its asset quality, both company specific and systemic, as well as on revenues.

"We expect the 2H15 restructuring and ongoing uncertain Asian/EM macro environment to create revenue pressure in 2H15-16," analysts Ronit Ghose, Yafei Tian, Andrew Coombs and Rahul Bajaj said in a research note sent to clients.

Citi´s European banks team also pointed out that StanChart was a proxy for emerging market and commodities exposure, singling out the high correlation between its stock price and that of crude oil.

"STAN’s commodity exposure at 3Q15 is circa 100% of 2015E tangible book," they said.

StanChart shares were kept at 'neutral' and the target price for the London-listed shares lowered from 615p to 465p, while that on its Hong Kong-listed ones was reduced from HK$72 to HK$52.

As of 14:35 StanChart was trading down by 2.82% to 420.15p. The price of its stock had more than halved since the start of 2015 versus an approximately 27% retreat in the European banking sector during the same period.