Daily Management Review

UBS Maintains Its Forecasts On Standard Chartered


04/22/2016


The Standard Chartered recovers “emerging markets-focused bank”.



Following the “emerging markets-focused bank” recovery, the UBS demotes Standard Chartered “to 'sell'” which earlier maintained a “neutral” stance. The recovery was made for more than forty percent in comparison to its lows from the month of February. Likewise, any peers consider Standard Chartered to be standing at a “hefty premium”.
"With many funds short or underweight at the start of the year, commodity prices regaining some poise, EM equities rallying and EM funds seeing a return to inflows, a rally is directionally easy to rationalise."
 
Moreover, UBS clarifies that the rally took place in a scenario wherein sixty percent fall was recorded in agreement of a profit forecast for this current year, while thirty percent decline is also in the line for the next year. So far, USB maintains the said forecast for it still perceives “a great businesses within StanChart”, especially within its “transaction banking, financial markets and bits of retail”.
 
However, the Swiss bank’s forecast predicts a loss in the current year:
"...the headwinds of de-risking, deleveraging, and flat and low yield curves will combine with elevated loan losses to make life particularly difficult near term [...and...] leaving the 8% ROE target for 2018 out of reach".
 
Digitallook reports:
“Moreover, at 14.4 times 2017 forecast earnings per share, the FTSE 100 bank trades at a material premium to scale banks it competes with, ranging from a 26% premium to Hong Kong banks, 34% to Singapore's, 56% to the Europeans, and 200% to the Chinese”.
"Considering the fears investors harboured about EM in general and China in particular only a short while ago, we think this is too optimistic."
 
References:
http://www.digitallook.com/







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