Jefferies hikes StanChart price target, says pullback 'seems harsh'

Standard Chartered rallied on Friday after Jefferies lifted its price target on the ‘buy’ rated stock to 1,000p from 950p, as it said the share price pullback since March "seems harsh in context of favourable operating trends".

It noted that the shares are broadly flat year-to-date, having fallen 22% from the 52-week high reached on 6 March, taking the stock back to the levels which prevailed before news that First Abu Dhabi (FAB) acknowledged a possible offer for the bank. Jefferies said the pullback offers an opportunity for either scaling existing positions or new money.

Notably, it forecasts that StanChart’s return on tangible equity can improve by 400 basis points to 11% in 2024 as revenue grows and said it expects the company to generate positive operating leverage and extend share buybacks by a further $3bn.

Jefferies said the bottom line in its view is that shares of StanChart do not reflect the return potential of the company that its estimates imply.

"One potential near-term explanation, as investors re-assess thoughts on banks given the regional bank failures in the US, is that STAN's deposit base is more corporate weighted which could exhibit pressure given mix shift to term deposits and higher deposit betas," it said.