Goldman Sachs lowers target on StanChart, reiterates buy

Analysts at Goldman Sachs lowered their target price on shares of StanChart due to their concerns that revenue growth would be slower-than-expected.

However, the broker pointed to a "stable" trend for impairments and "solid" capital position as "key" positives.

Impairments came in only slightly ahead of the company compiled consensus, analysts Martin Leitgeb and Nick Baker said in a research note sent to clients, although they remained "elevated".

Nonetheless, the trend did not deteriorate further and they put store in management´s indications that the provisions taken during the fourth quarter of 2015 should suffice if the price of a barrel of crude oil remained at approximately $30 throughout 2016.

At 12.6% the lender´s core Tier-1 equity was "solid", Leitgeb and Baker added, despite higher impairment costs in the quarter.

Furthermore, the lender had guided towards a CET 1 ratio trending back towards 13% once StanChart had exited its liquidation portfolio.

On the other hand, revenues continued to drop, and at a worsening rate, to an annualised pace of $13.4bn from $14.7bn in the third quarter and versus $18.2bn in 2014.

Visibility on StanChart´s ability to reach its $17bn target for 2018 would also be slow in coming, Citi said, as it would take time for the bank to reprice approximately 17% of its risk weighted assets.

The weaker revenue progression was the main factor behind Goldman´s decision to lower its earnings estimates.

Goldman Sachs lowered its 12-month target price from 790p to 720p but remained at 'buy', highlighting how StanChart stock was at 0.45 times its price-to-tangible book value for the last 12 months and offered an estimated return on tangible equity of 9% for 2018.