StanChart slides as Jefferies cuts target price, lowers guidance

Standard Chartered’s shares fell on Wednesday after Jefferies cut its target price to 330p from 400p and reiterated an ‘underperform’ rating on the Asia-focused bank.

Jefferies said it has reduced its revenue expectations for 2016-2018 by 9.5% on “both idiosyncratic and macro induced headwinds” amid a slowdown in China. The broker also lowered its guidance on earnings per share during the period by 48% on average.

“Downward revisions to gross domestic product (GDP) in various countries and last week's weak Hong Kong GDP growth print (+0.8% year-on-year versus expectations for 1.5%) further confirms our view that there will be little recovery in Standard Chartered’s revenue base over the next two years,” according to Jefferies analysts.

“If anything, there is potentially further downside risk given the idiosyncratic headwinds of STAN's de-risking as well as our view that credit expansion (measured as private sector credit/GDP) has topped out in Stan's key markets.”

Jefferies now sees revenue reaching $13.96bn in 2016, down from a previous estimate of $15.57bn. EPS is forecast to come in at $0.23 for the year, compared to the prior forecast of $0.15.

Looking further ahead, revenue estimates for 2017 were cut to $14.03bn from $15.51bn and 2018 was slashed to $14.19bn from $15.54bn. Guidance on EPS for fiscal years 2017 and 2018 was $0.34 and $0.49, respectively, down from previous estimates of $0.69 and $0.80.

In April, Standard Chartered's chief executive Bill Winters said he expected erratic swings in global markets to continue at least for the rest of the year. His remarks came as the bank reported a 64% fall in pre-tax profit to $539m in the first quarter although losses on bad loans dropped 1% to $471m and its common equity Tier 1 capital ratio rose to 13.1% from 12.6% the same quarter a year ago.