Standard Chartered Fall in Profits Could be Worse, say Analysts

Standard Chartered faces a near-term increase in credit costs as commodity prices sink and profits are down 22%, but analysts are happy to retain their fair value estimate

Erin Davis 29 April, 2015 | 2:26PM
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We were glad that Standard Chartered’s (STAN) first-quarter profit before tax of $1.5 billion, down 22% from the year-ago quarter, was not worse, and we plan to maintain our fair value estimate for the narrow-moat bank.

While the narrow-moat bank’s brief earnings release hints that revenue pressures may be a stronger headwind than we’d projected, the news was brighter on other fronts. Loan impairments of $476 million were up 80% from the year-ago quarter but were down from the prior two quarters and were in line with our projections. We’ll be very interested to see if this reflects under-provisioning or flat growth in non-performing loans when the bank releases its more detailed mid-year results.

Progress on cost inflation, a major issue for Standard Chartered in the past, is progressing slightly faster than we’d expected as well. Operating expenses of $2.5 billion were up 1% from the year-ago quarter, but down 3% excluding regulatory and compliance costs; we’d expected costs to increase more sharply, despite the bank’s efforts to control them.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Standard Chartered PLC434.70 GBP0.00Rating

About Author

Erin Davis  is a senior banking analyst for Morningstar.