Berenberg reiterates 'buy' on StanChart as bank's strategy gains momentum

Standard's revenue growth moved above its 5-7% medium-term guidance during the first quarter, rising by 10% when adjusted for extraordinaries, something the broker said demonstrated the value of StanChart's unique global network and suggested that its renewed external focus was succeeding in deepening client relationships, despite the bank's continued efforts at de-risking.

In particular, Berenberg also expects to see strong transaction banking revenues from Standard of 10% annually, stoking its top-line growth.

While near-term cost pressures had risen, the broker was adamant that Standard could extract "material long-term cost efficiencies".

Discussing the recent revelation by the lender that its fiscal year 2018 costs may exceed levels seen last year, creating a modest near-term headwind, analysts at Berenberg noted that, "considering longer-term tailwinds from the bank levy and potentially lower regulatory costs, we believe inflationary pressure can be meaningfully offset."

Berenberg reiterated its 'buy' rating and 920p price target on Standard, stating it believed the bank's capital strength could comfortably support a dividend payout of around 50%.

Its target price implied a one times' tangible book value valuation for the stock, versus 0.8 at present and 1.3 over at rival HSBC, a discount they labelled as "too great, considering Standard’s superior growth potential and comparable risk focus."