SCBFY - Standard Chartered: Compelling At 0.6x Tangible Book Value

2024-04-06 08:00:14 ET

Summary

• Asia and emerging market-focused Standard Chartered has underwhelmed since I opened on it last year, underperforming more profitable peers like DBS Group and HSBC.
• Thanks to higher interest rates and benign credit quality, the bank has finally booked a double-digit return on tangible equity.
• At 0.6x tangible book value, the market seems to be baking in a return to the single-digit return on tangible equity it was making pre-2023.
• While management's medium-term goal of a 12% RoTE may be punchy, Standard Chartered can materially undershoot this and still deliver good returns for investors.

"Not pretty, but reasonably cheap" was basically the essence of my investment case when I opened on Asia-focused bank Standard Chartered ( OTCPK:SCBFY )( OTCPK:SCBFF ) with a Buy rating last year . More specifically, while this bank was/is structurally less profitable than certain peers, a then-valuation of 0.7x tangible book value did not require miracles in terms of profitability, offering investors re-rating potential if the bank could hit management's double-digit return on tangible equity ("RoTE") target....

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