Standard Chartered downgraded to sell from hold at Investec Securities
Standard Chartered’s rating on Friday was downgraded to ‘sell’ from ‘hold’ at Investec Securities as the scale and pace of the stock’s absolute and relative share price recovery “has finally tipped us over the edge.”
Banks
3,895.51
17:09 19/04/24
FTSE 100
7,895.85
16:59 19/04/24
FTSE 350
4,341.08
17:09 19/04/24
FTSE All-Share
4,296.41
17:08 19/04/24
Standard Chartered
666.80p
16:40 19/04/24
The broker noted that year-to-date, the stock has materially outperformed the FTSE 100 banks sector, but, it is the “strength of the market’s implicit endorsement of management change and a material strategic repositioning of the group as at odds with the scale of negative impact on expected financial performance.”
It added that although Standard Chartered can and should choose to avoid a capital raise, “we are not confident that it will remain resolute.”
As such, the broker reduced its target price on the stock to 970p from 1000p. “We think the existing management team delivered their part of the bargain at 2014 results, reaffirming their belief in an ongoing ‘repositioning’, consistent with running the group with a common equity tier 1 capital ratio of 11-12%, albeit at a significant further cost to revenues,” said Investec.
“However, we fear that new management may yet choose to strengthen capital more significantly and more quickly, with, we think, adverse consequences for the group’s sustainable return on equity in the medium term,” added the broker.