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.’
How much does it cost to buy UK shares with IG?
There are three ways to ‘buy’ UK shares with IG: spread betting, trading CFDs or buying physical shares. The cost will depend on which method you choose. The table below illustrates how the costs to get exposure to £10,000 of Lloyds stock, which is equivalent to 16,000 shares (quoted at 62.5p a share).
Remember, spread bets and CFDs are derivatives, which come with higher risk and reward than investing.
Cost to get exposure to Lloyds stock
|Spread betting||CFD trading||Share dealing|
|Action||Buy £160 per point||Buy 16,000 share CFDs||Buy 16,000 shares|
|Capital required to open||£2000||£2000||£10,000|
Note: Amounts do not include overnight funding charges and taxes. Spread bets are not subject to tax. CFDs are free from stamp duty, but subject to capital gains tax. Share dealing is subject to both stamp duty and capital gains tax.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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