Unique bank
Standard Chartered (LSE: STAN)(NASDAQOTH: SCBFF.US) is nothing like RBS, Barclays or Lloyds. The UK government is not a substantial shareholder. The bank has not been embroiled in the PPI or swap misselling scandals. It has not been charged with LIBOR or foreign exchange rigging. There is no apparent pipeline of costs and fines expected to hit the company.
With its focus on the Far East and emerging markets, Standard Chartered is also very different to the more global HSBC.
Standard Chartered fared better during the financial crisis. The bank was profitable and dividend paying throughout. By 2010, Standard Chartered was reporting earnings per share (EPS) and dividends ahead of pre-crisis levels.
Unlike the rest, Standard Chartered has continuity of leadership. Chief executive Peter Sands has been in the role since November 2006. No other big bank boss has been in their role as long.
Top track record
For 2007, Standard Chartered reported net profits of $2.8bn. By 2012, this figure had reached $4.9bn. Five years ago, dividends per share were $0.67. Standard Chartered has since increased this payout by more than 25%.
Valuation
Last year, Standard Chartered made EPS of $1.97 and paid a dividend of $0.84 per share. That’s a historic P/E of 12.1, and a yield of 3.5%.
For 2013, the bank is expected to report EPS of $2.19 and declare a dividend of $0.89 per share. Today, the shares trade on a 2013 P/E of 10.9, with the prospect of a 3.7% yield.
Considering the average FTSE 100 stock trades on a forward P/E of 14.6 and has historically yielded 2.8%, Standard Chartered is priced at a discount.
Verdict
The discount valuation seems unfair, given the obvious success and strength of the company. I shall be monitoring Standard Chartered shares much more closely in the future, with a view to picking some up if the valuation reaches bargain territory. The fact that I already have significant holdings in the sector would not deter me. Standard Chartered is such a distinct business that I would expect returns to be largely uncorrelated with the rest of the sector.