Charles Stanley downgrades StanChart to 'hold'

29th Oct 2014 11:23

Broker Charles Stanley has lowered its recommendation on shares of Standard Chartered to 'hold'.That follows the "stark" reversal by management on its outlook for underlying profits in the second half of the year. Just a few months ago it had been saying that momentum was ahead of that seen in the second half of 2013."With this latest disappointment, management have a lot to do to convince the market that these initiatives are not just further promises of "jam tomorrow," it said.In a more positive vein, analyst Minal Shah pointed out the fact that management has ruled out the need for an equity issue, while also acknowledging the importance of the dividend to shareholders.Furthermore, the shares are now trading at just one times historical book value, and offer a yield above 5%, in comparison to 1.3 times for HSBC, which has a similar yield.That may mean that Tuesday's dislocation, on the heels of a weak quarter for "lumpy" corporate impairments, may offer a "good" entry point for a switch trade, Shah explained."However, with an apparent sea-change in operating momentum and a subdued outlook, we err on the side of caution and downgrade our recommendation to hold," the analyst concluded.