Standard Chartered shares under pressure ahead of Q1 results

The bank unveils its first quarter results next week, with investors likely to be disappointed after the lender suspended its buy-back programme and forecast weaker-than-expected income growth as a result of the Covid-19 crisis.

Standard Chartered will unveil its first quarter (Q1) 2020 results on Wednesday 29 April, with investors likely left disappointed by its latest earnings after the bank suspended its buy-back programme and forecast weaker-than-expected income growth as a result of the Covid-19 crisis.

The bank’s underlying momentum in the fourth quarter of 2019 continued in the opening weeks of 2020 but lower interest rates, slower global economic growth, a softer Hong Kong economy and the impact of the coronavirus is expected to drive income growth in 2020 below medium-term 5% - 7% target range.

‘These headwinds are expected to be transitory, but we now believe it will take longer to achieve our RoTE target of 10% than we previously envisaged,’ Standard Chartered said.

Challenging market conditions have hurt the bank’s earnings and dragged its share price lower in 2020, with the stock down 47% year-to-date and capable of trading lower in the weeks ahead.

Standard Chartered is trading at 378p a share as of 15:20 (GMT) on Wednesday.

Barclays maintain ‘underweight’ rating for Standard Chartered

Analysts at Barclays remain underwhelmed by Standard Chartered in 2020, reiterating its ‘underweight’ rating for the stock and lowering its price target to 425p per share.

Barclays justified its assessment of Standard Chartered by pointing to its earnings challenges for 2020 and beyond into next year, though conceded that it and fellow lender HSBC could both benefit from a ‘sentiment rebound if Asia emerges from Covid-19 earlier’.

Speaking more broadly about the impact of the coronavirus pandemic on UK banks, analysts at Barclays said that while ‘potential for losses is high’ it believes that bank shares ‘effectively price in a severe downturn’.

‘We estimate current valuations imply £70bn of aggregate losses for our UK banks, or 50% off domestic bank capital,’ Barclays said in a note.

‘We expect a combination of painful rate cuts and weak activity to drive pre provision profits down circa 20% year-on-year,’ Barclays added. 'Likely strong Q1 trading income could prove to be an aberration.’

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