FINANCIALS: STANLN: Confident Conf Call To Underpin Spreads

Standard Chartered (STANLN: A3/BBB+/A) conf call delivered a confident message with China CRE no worse and indications of good revenue and return momentum are being taken positively by equity markets. Our sense remains these results are, even with the new buyback, spread positive.

• China and CRE exposures: mgmt noted some of the higher tier cities are showing signs of stabilisation but that moves are generally still negative. Around 90% of problem areas are already fully provisioned, so limited direct credit impact, but the halo effect on confidence, investment and growth is still an issue. However, new “moderate” stimuli are being introduced but, we feel, this is going to be a good while to see a real recovery. At least the message is stable from 1Q24 and no worse.
• Revenue potential: much as guidance has been upgraded, the analyst community clearly felt it was still somewhat conservative, something with mgmt didn’t violently disagree with, it seems. So, a good factor there.
• Return trajectory: return guidance was beaten across 1H24 but mgmt was clear that second halves are seasonally slower but did indicate that the longer term potential for the firm is perhaps higher than current 12% guidance.