LONDON: At any point in the past half-decade or so, Standard Chartered shareholders would probably have welcomed an all-cash takeover as a blessed salvation. The bank struggled with high costs and low returns, leading to a bombed-out valuation. But that’s changing, which could make life trickier for possible bidders like First Abu Dhabi Bank.
The bank run by Bill Winters on Thursday reported an 8% return on tangible equity (ROTE) for 2022, after stripping out restructuring costs and other one-offs. That’s the best result the former JPMorgan (JPM.N) executive has reported since taking charge in 2015. This year, he reckons the bank will churn out a near-10% return, rising to more than 11% in 2024.
Investors, admittedly, are still sceptical. Despite a boost from takeover speculation, StanChart shares trade at roughly two-thirds of its expected tangible book value at the end of 2023, implying that future returns will be closer to the bad old days. That seems unfair. Interest rates are rising and China, a key market, has loosened pandemic restrictions. Winters’ targeted returns assume annual revenue growth of between 8% and 10%, less than the 16% increase in the bank’s top line in 2022, after stripping out currency fluctuations.
CONTEXT NEWS
Standard Chartered on Feb. 16 said it generated $16.3 billion of revenue in 2022, up 10% from 2021. Excluding the effects of foreign-exchange fluctuations the increase was 16%.
The bank’s costs increased by 4% to $10.7 billion, which was a 9% rise in constant-currency terms.
StanChart earned an 8% return on tangible equity (ROTE), excluding restructuring expenses and a writedown of goodwill on the bank’s balance sheet. Chief Executive Bill Winters said he expected to hit a ROTE of almost 10% in 2023 and more than 11% next year.
StanChart shares were up 3.5% to 755 pence as of 0838 GMT on Feb. 16.
First Abu Dhabi Bank, the United Arab Emirates’ biggest lender, on Feb. 10 said it was not evaluating an offer for Standard Chartered, the second time it quashed reports of a deal.
News of the potential offer first came on Jan. 5, when FAB said it had considered a bid for London-listed Standard Chartered but was no longer doing so.
