Broker snap: StanChart guidance still better than consensus, assures Nomura

13th Nov 2013 09:24

Nomura has maintained its 'buy' rating and 1,810p target price for emerging markets-focused bank Standard Chartered saying that the company's medium-term guidance is still better than consensus estimates despite a reduction in targets this week.The company said on Monday at an investor day that it now expects "high single-digit" growth in income over the next couple of years, compared with previous forecasts for "double-digit" growth. Nevertheless, Nomura pointed out that consensus forecasts are pointing to just 6.1% revenue growth next year.On a positive note, StanChart also guided to "positive" cost-income 'jaws', better than the previous "neutral" forecast, and maintained guidance for "double-digit" EPS growth. It added that earnings growth would also be ahead of risk-weighted asset (RWA) growth.Consensus forecasts for 2014 are showing just 0.4% positive jaws, 4.8% EPS growth and RWA growth of 9%. "Thus, management guidance suggests upside on every aspect," the broker said.The broker explained that StanChart's inability to grow earnings per share in 2013 and concerns over asset quality have been depressing the stock price as of late."There still appears to be scepticism in the market that it is not out of the woods yet as far as Asian concerns go. We believe this will remain the case until STAN can convincingly show sequential growth, which we expect from 1Q14."Read-across from Asian peers will be equally important in this context. STAN remains a stock owned predominantly in the West, and is therefore the West's sentiment beacon on the East. With growth prospects for Asia turning for the positive, we believe STAN is well positioned at reasonable valuation."Despite the positive comments, the stock was trading down 3.6% at 1,432p on Wednesday morning.BC