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07 Sep 2021 | 10:52

Berenberg says StanChart 'undervalued'

(Sharecast News) - Analysts at Berenberg reiterated their 'buy' stance on shares of StanChart, telling clients that low global interests were masking volume growth and hence the shares had become undervalued. The low interest rate environment had contributed to a 6% year-on-year decline in StanChart's revenues over the front half of 2021, despite positive volume growth of about 5.0%.

In parallel, StanChart's costs had been broadly flat and Berenberg expected the lender's continued investments would support low cost inflation.

Indeed, "with these affects having now fed through, Standard Chartered is experiencing net interest margin stability that we expect to continue - with scope for expansion as liquidity is optimised (particularly if yields rise)," the analysts added.

The analysts estimated that the lender could now grow its revenues by 9.0% over the back half of 2021 and by 5.0-6.0% beyond that.

Furthermore, with a common equity tier one ratio of 14.1% - above management's 13.0-14.0% target range - and a capital-light business model, Berenberg said StanChart could continue to support "attractive" capital returns of approximately 8.0% annually.

Berenberg also kept its target price for StanChart's shares at 630.0p, which valued the lender at 0.7 times its tangible book value, against the 0.5 times TBV they were changing hands on now.
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