Goldman Sachs hikes target price for Standard Chartered

Goldman Sachs said it saw 28% potential return from buying Standard Chartered shares as it the most levered to rising US rates and is likely to restart paying a dividend soon.

Reiterating its 'buy' rating, Goldman hiked its price target to 1,000p on the shares from the prior 890p, versus their 780.2p closing price from Wednesday.

With three rate rises predicted from the US Federal Reserve in 2017, the investment bank said StanChart's circa 45% of ‘rate sensitive’ assets in USD/HKD, limited sterling exposure and a low base effect on earnings made it the most leveraged to rising rates.

As for the comeback of the dividend, the FTSE 100 bank "could", as part of its 24 February year-end trading update, provide an update on its capital return policy and potentially also on its business plan.

This optimism on the dividend is based on Goldman analysts estimate that StanChart's CET1 ratio will be at 13.7% for the current financial year, 70 basis points or roughly 6% of its market cap, ahead of its 12-13% target.

As such the current valuation "allows for an attractive dividend yield" of 5-8% further out.

Finally, the valuation was said to be "attractive", with analysts increasing estimates, mainly to reflect expectations of further rate hikes in the US, while also highlighting possible risks such as a worsening macroeconomic trends and slower progress on cost cutting.