Exane BNP Paribas says dividend cut possible at StanChart

9th Mar 2015 15:56

Exane BNP Paribas has lifted its target price for Standard Chartered from 875p to 940p, but kept an 'underperform' rating saying that a dividend cut at the bank is now more likely than not.Ahead of a new chief executive officer (CEO) arriving in June, StanChart has set out a new strategy to drive the common equity tier-one ratio to 11-12%.Exane said that while the strategy has reduced the risk of a capital increase, it would take over three years to reach the top end of the range on the current dividend policy.Furthermore, the broker said actions to "de-risk" the group such as running off parts of the unsecured loan portfolio and reducing commodity exposure will likely keep StanChart's top line broadly flat until the end of 2017."We believe a key question for the new CEO will be whether a model built on growth can adapt and sustain several years of stagnation," Exane said."With falling profits leaving the payout looking abnormally high versus free cash flow, we think the chances of a dividend cut are now greater than 50%."StanChart was trading 2% higher at 1,044.6p before the end of trade on Monday.