Goldman upgrades Standard Chartered to 'buy'

The stock currently trades close to record-low valuations, despite a near-decade-high return on tangible equity of 11% next year, and offering a 10% total capital return yield, Goldman said.

Meanwhile, StanChart is set to show a "rare out-performance relative to its bank peers over the next two years", according to Goldman.

Analysts expect the bank to deliver a double-digit compound annual growth rate (CAGR) in earnings per share (EPS) and a 2.7 percentage-point improvement in return on equity (ROE), compared with low single-digit EPS CAGR and declining ROE at peer banks.

Goldman said that improvements in EPS and ROE will be driven by four factors: an unwind of loss-making hedges put-on by the group during late 2021, starting in February 24; a better outlook for non-funds income; a new chief financial officer to be appointed next year who could focus on the outsized corporate office function relative to its peers; and the possibility for continued buyback with capital now at the top-end of the target range.

Third-quarter results from StanChart last month came in about 10% below consensus forecasts on a pre-tax profit level. "We expect 4Q23 results delivery to be cleaner, in-line with expectations, and to be further supported by a c.US$750mn buy-back announcement. The stock tends to react to earnings and can rise into a potential buy-back," Goldman said.

Goldman cut its target price for the shares from 879p to 868p.

The stock was up 0.8% at 665.2p by 1008 GMT.