"Big Banks" UBS: Standard Chartered's wealth business becomes a growth engine, target price raised to 229.2 yuan

UBS published a report indicating that Standard Chartered (02888.HK) had a pre-provision operating profit in the fourth quarter of last year that was 11% or USD 182 million below expectations, despite net interest income exceeding expectations by 8%. However, the bank has warned investors not to view this outperformance as the norm. The shortfall in pre-provision profit was approximately two-thirds due to one-time items in operating expenses, while the remaining one-third was attributed to inventory losses in trading, both of which will not affect future earnings per share forecasts.

The bank raised its earnings per share forecast for Standard Chartered by 5% to 6%, primarily driven by higher revenues. Net interest income benefited from an increase in net interest margin and deposit volume, while non-interest income was driven by wealth management business. Data shows that Standard Chartered's assets under management and wealth-related deposits grew by 25% and 18% respectively last year, and the bank believes that strong growth will continue.

UBS predicts that Standard Chartered's earnings per share will grow at an annual rate of 13% until the fiscal year 2028, and as the business portfolio shifts towards wealth management, the bank believes that the stock price has not yet reflected that Standard Chartered has transformed into a bank with growth premiums and high returns.

UBS reiterated its "Buy" recommendation for Standard Chartered, raising the target price from HKD 225.1 to HKD 229.2, based on a comprehensive valuation approach