The banking sector has taken a hammering during the Covid-19 lockdown, and buying a depressed bank now might be a good move. Most eyes are on the UK’s retail banks, and they’ve been hit very hard.
Lloyds Banking Group shares, for example, have fallen 40% since the FTSE 100 crash kicked in. Barclays has set aside £2.1bn to cover bad debts and says the figure could rise to £4.5bn. Despite that, Barclays shares are picking up, even though they’re also down around the same 40% overall in the crisis.
If you invested in a challenger bank, you could be hurting even more, as their balance sheet resilience is under pressure. Virgin Money shares are down 55%. And Metro Bank, which has been suffering for some time, has endured a similar fall.
The best bank?
Compared to those, a 35% share price fall looks positively buoyant for a bank. And the Standard Chartered (LSE: STAN) share price has done just that over the Covid timescale.
Standard Chartered targets emerging markets, offering banking and financial services focused on Asia, Africa and the Middle East. In that, it’s similar to HSBC Holdings, which is also largely immune to the UK’s domestic problems. But it can’t escape the global pandemic.
Standard released first-quarter figures Wednesday. It’s for the period ended 31 March, so there’s a further month of coronavirus damage not included. But, still, a 13% rise in operating income (15% at constant currency) seems encouraging.
Covid hit
Covid-19 hit the bank’s profits though. Standard recorded a pre-tax profit of $1.2bn, down 12% from the same quarter a year ago. But that’s a lot better than analysts had expected, with a consensus estimate of around $830m.
And if you think of a bank as a cold-hearted money-grubber, chief executive Bill Winters suggests otherwise. He said: “We have launched a $50 million global fund with donations from colleagues and the bank to provide assistance to those affected by Covid-19 and related economic impacts and have committed up to $1 billion of financing, offered at cost, for companies that are providing goods and services to help in the fight against the pandemic.“
The biggest damage comes from bad debts, and that’s really not surprising in the light of the global virus lockdowns. Credit impairments are put at $956m. That’s a big leap, but only because a year ago the bank boasted a very low figure of $78m. And it’s significantly below Barclays, for example.
NMC Health
And the bad debt figure isn’t all down to the pandemic. No, Standard Chartered was exposed to the collapse of NMC Health. NMC Health had $4bn in undisclosed debt, in a FTSE 100 accounting scandal we surely won’t have heard the last of.
Where does that put Standard Chartered as an investment? On a list of attractive buying opportunities, I’d say. And the markets seem to agree, as the shares picked up around 3% on Wednesday morning.