Broker snap: StanChart is 'motoring away', says Nomura

30th Oct 2012 10:30

Emerging markets lender Standard Chartered's third-quarter results were broadly in line with expectations, according to Nomura, but 'a touch below if we are nit picking'.Nevertheless, the broker has maintained its 'buy' rating and 1,600p target price for the shares, saying that the business is "motoring away as expected".Income growth was said to be at "high single digit, maintaining the trajectory seen in the first half of 2012", which compared with 8.5% growth at the interim stage. Meanwhile, operating profit growth is at a "mid-single digit" rate or "double digit" excluding the New York State Department of Financial Services settlement."We believe excluding the realisation gains would make underlying PBT [profit before tax] in line with our expectations (income growth of 8%, PBT growth of 8.5%) and broadly in line with consensus (a touch lower if we are nit picking, income growth of c9%, PBT growth of c9%)," the broker said."However, this is despite a c3% FX headwind on income at the group level, in our view, which could very well turn into tailwind in the coming quarters. The group has shown that it retains cost flexibility, and we think this should help it beat PBT expectations, which have now come down for 2012-13, even if income does not."Nomura says that StanChart is trading at around 1.6 times 2012 tangible book value and 11 times 2012 earnings."As long as prospects of Asian economies are better than Europe, banks exposed to those prospects will continue to outperform over the longer term, and as such retain our 'buy' rating on STAN (and HSBC). "In the very near term, though, a lack of positive earnings momentum may weigh on the stock, but we expect by full-year stage, STAN can beat lowered consensus expectations, particularly with its cost flexibility."Shares were down 2.37% at 1,462p in mid-morning trade.BC