Investec cuts StanChart to 'hold', says consensus remains far too high

Investec downgraded Standard Chartered to ‘hold’ from ‘buy’ with an unchanged target price of 820p.

It said the latest leg of Standard Chartered’s 26% eight-session surge appears to have been driven by market enthusiasm around media reports of plans to cut about 1,000 top staff.

“Although (if true) this may have potential to extend our own cost reduction forecasts, we caution that despite a raft of recent downgrades, consensus revenue/earnings forecasts remain far too high, in our view,” said the brokerage.

Investec noted that StanChart has an investor day scheduled for early December, during which new chief executive Bill Winters plans to outline his strategic vision, and to announce the bank’s capital decision.

“Sadly, we see it as both necessary and inevitable that management will signal material headcount reductions in order to rebase the group’s costs for a structurally weaker revenue outlook. Before then, a Q3 IMS is due on 3 November 2015 which will, we believe, primarily expose further extreme revenue pressures; we expect revenues to decline for a fifth straight quarter in Q3 2015e.”

Investec said it still regards the stock as slightly cheap but sees much clearer value elsewhere.

At 1305 BST, shares in the bank were down 1.6% to 774.30p.