Broker snap: Standard Chartered's weak stock an opportunity

8th May 2013 13:40

Standard Chartered's shares plunged Wednesday after the company reported a fall in operating profit in the first quarter. The British multinational banking and financial services company said it had a strong start to the year in January but momentum slowed later in the quarter as it was hit by impairment loans and pressures on margins, according to a trading update.The consumer banking and wholesale banking divisions both experienced a decline in operating profit.However, Investec recommended a 'buy' rating saying a weakness in the company's stock should be seen as an opportunity. "To start with the positives, fiscal year 2013 consensus of $8.2bn [versus $6.9bn in 2012] is reaffirmed, albeit this will implicitly be driven by a slower level of revenue growth, supported by tightly controlled costs, with upward normalisation of impairments confined to the consumer bank," the broker said."Despite extreme margin pressures (as evidenced in the HSBC 'buy' statement yesterday), April income growth appears to have been 10% year-on-year, with spread stabilisation and excellent client flows."RD