The recent rush of FTSE 100 interim results is starting to slow a little, but we still have a few important ones coming our way — including Standard Chartered (LSE: STAN), which is due to report on its first half on Wednesday 6 August.
Shares in the Asia-focused bank have slumped this year, along with those of HSBC Holdings whose geographic focus is similar. Despite a small recent recovery, Standard Chartered shares are down 17% over the past 12 months, to 1,218p. The reason is clear — it’s all about fears of a Chinese showdown. But what are the analysts saying?
Forecasts
They’re actually forecasting a 14% rise in earnings per share (EPS) for the year ending December 2014, following on from a 17% drop recorded in 2013. On top of that, there’s a further 9% suggested for 2015.
Dividends look to be heading up, too, with a yield of 4.2% forecast for this year, rising to 4.4% next. And with the shares on a forward P/E of under 11, dropping to 10 for 2015, many will see that as a bargain.
But those forecasts are already out of date.
From Standard Chartered itself, in May’s first-quarter update, chief executive Peter Sands told us that the bank is facing a “somewhat challenging external environment” but said that “Our performance so far this year is in line with our expectations.“
The bank’s first-quarter operating profit was “down by a high single digit percentage“, but we were reassured that that was in line with expectations. We also heard that “Our balance sheet remains in excellent shape, highly liquid, well diversified and strongly capitalised“.
Profit warning
But then, on 26 June, we got a surprise profit warning, telling of “a disappointing first half, with difficult trading conditions, particularly in financial markets” and predicting a “mid single digit percentage” fall in group income for the first half of the year with loan impairment rising.
Operating profit is going to be down by around 20%.
With a potential credit crisis looming in China as debt levels continue to soar, Standard Chartered has been de-risking some of its loan portfolio, and there seems to be a general agreement that there are going to be some defaults in the region. That will affect the bank’s bottom line, so we should look for further information on that front in the upcoming results.
At least, one thing we are unlikely to see announced is the board shakeup that has been rumoured of late. On 23 July, Standard Chartered issued a firm denial, saying that “No succession planning is taking place as a result of recent investor pressure“.