Today I am outlining why Standard Chartered (LSE: STAN) could be considered an attractive addition to any stocks portfolio.
Plenty of bang for your buck
Despite the ongoing travails in emerging markets, not to mention the crippling effect of adverse currency movements on the bottom line, Standard Chartered is expected to record robust earnings growth in the near future — indeed, expansion to the tune of 8% and 10% are pencilled in for 2014 and 2015 respectively.
These figures leave the bank trading on a P/E multiple of 11.2 for this year — just above the value watermark of 10 times prospective earnings — and this drops to 10.2 for 2015. And Standard Chartered’s cheapness is underlined by its price to earnings to growth (PEG) readouts during the period, which falls from a reasonable 1.5 for 2014 to bang on the bargain threshold of 1 for next year.
But Standard Chartered is not only a splendidly priced pick for growth hunters. Although City analysts expect the company to keep the full-year dividend on hold around 86 US cents per share in 2014, a period of prolonged earnings strength is expected to underpin a solid forward step to 89 cents in 2015.
Such projections create lucrative yields of 4.2% for 2014 and 4.4% for 2015. By comparison the FTSE 100 boasts a forward average of 3.2%, while the complete banking sector carries a prospective mean of just 3%.
Asia Pacific to deliver spectacular gains
Of course, Standard Chartered remains at the mercy of patchy market appetite and wider macroeconomic difficulties in the developing regions of Asia.
The institution’s latest financial update showed pre-tax profit dive by a fifth during January-June, to $3.3bn, with operating income slipping 7% to $9.3bn. In particular, the company has seen client activity at its Financial Markets arm dry up during the past year, and income here rattled 28% lower during the period to $1.8bn.
The effect of tighter banking rules in emerging markets is likely to throw up more challenges in the years ahead. But for the most part, I believe that Standard Chartered’s extensive footprint to the rising populations of Asia Pacific — from where it sources around two-thirds of all profits — combined with a resurgence in investor sentiment should help to propel long-term growth.