Lender's Troubled Waters: UBS Downgrades Standard Chartered Shares
Shares of Standard Chartered have been lowered following a Tariff knockback.
Pointing fingers at a tumultuous period for the lender, UBS analysts served up a sliced-down target share price for Standard Chartered, standing at 1,215p from a previous 1,310p, yet still clinging to the 'Buy' rating. The stock stared down a 0.6% decline on Wednesday, resting at 1,049p.
Their decision came hot on the heels of President Trump's 'Liberation Day' levies, which sent Standard Chartered's shares spiraling 20% over five days. The FTSE 100 titan's connections to Asian economies that were encumbered with the steepest tariffs stirred up the financial storm.
Standard Chartered caters to the growing middle class in nations such as India, China, and Indonesia, providing a mix of retail services such as savings and checking accounts. The bank managed to report a pre-tax profit of $2.1bn (£1.6bn) for the first quarter, only narrowly missing Trump's tariff onslaught.
Boosting the profit were a 28% surge in the wealth management arm's operating income and a 17% growth in global banking compared to the first quarter of 2024.
UBS analysts predict a 44% growth in earnings per share by 2027. However, they foresee investors seeking refuge in the short-term amidst a wavering macro environment.
"The market-heavy nature of the first quarter earnings beat and uncertainty around tariff-related headlines will, we think, keep some investors on the sidelines for now," UBS analysts said.
However, they also pointed out that Standard Chartered is more diversified and carries better growth potential than its current valuation suggests, with downside risks being partially mitigated by a significant cost-cutting program and payout plans that promise 10-12% distributed yields.
But, they also highlighted the net interest income (NII) as a source of uncertainty.
Standard Chartered's first-quarter NII was in line with estimates at $2.8m, but it suffered a 6% decline quarter-over-quarter. The firm's net interest margin, a crucial indicator of a bank's lending profitability, contracted by 9 basis points to 2.12%.
Factors contributing to this decline include headwinds from reducing interest rates and margin compression, leaving banks struggling to sustain their previous net interest income growth rates.
Surviving the Margin Storm: Standard Chartered's Net Interest Income Outlook
Struggling against rising competition and falling rates, Standard Chartered reported a net interest income (NII) growth of 7% year-over-year in Q1 2025, reaching $2,796 million. This growth, despite broader industry headwinds, signifies the bank's resilience.
Beyond NII, Standard Chartered has witnessed a notable increase in non-interest income, partly offsetting these pressures. The bank's diversified revenue streams have proven instrumental in this recovery, particularly in wealth management and global markets, which benefit from market volatility and product innovation.
- The steepest tariffs afflicting Asian economies, including Indonesia, have stirred up a financial storm for Standard Chartered, a bank that caters to the growing middle class in nations such as India, China, and Indonesia.
- Despite the challenging macro environment and uncertainties about tariff-related headlines, UBS analysts predict a 44% growth in Standard Chartered's earnings per share by 2027, partially mitigating downside risks due to the bank's significant cost-cutting program and promising yield payout plans.
- In Q1 2025, Standard Chartered reported a net interest income (NII) growth of 7%, reaching $2,796 million, showcasing the bank's resilience amidst rising competition and falling rates.
- However, the net interest income (NII) remains a source of uncertainty for Standard Chartered, as the bank's first-quarter NII suffered a 6% decline quarter-over-quarter, and the net interest margin contracted by 9 basis points to 2.12%, due to headwinds from reducing interest rates and margin compression.
