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Despite some operational problems, a focus on fast-growing developing regions means Standard Chartered‘s (LSE:STAN) shares have provided solid returns over the last decade.
At £11.56 per share, the FTSE 100 bank has risen 20.3% in value from the 961.3p it traded at 10 years ago. It’s an ascent that would have turned a £10,000 lump sum investment back then into a cool £12,028 today.
The overall return improves further too, when adding in dividends over the last decade. Since mid-2015, dividends from the business have totalled 109.7p per share. As a consequence, a £10k investment in the bank back then would have produced a total shareholder return of £13,169, or 31.7%.
That’s not bad, but it’s hardly a stunning result. To put that in perspective, the broader Footsie‘s delivered a return of 82.9% in that timeframe.
Fellow emerging market bank HSBC has also delivered better returns over that time. With capital gains and dividends combined, StanChart’s Asian rival’s total returns stand just above 100%.
As I alluded to above, the bank’s suffered a number of performance-denting setbacks between 2015 and 2020. Compliance issues resulted in severe reputational damage and heavy financial penalties. It also had to heavily restructure to improve performance and beef up the balance sheet.
But with these issues now in the distant past, could Standard Chartered shares deliver better returns from now on?
The bear case
Like any bank, the company’s highly sensitive to broader economic conditions. During downturns, profits can slump as demand for financial services declines. At the same time, loan impairments can shoot through the roof.
This is a significant danger for the FTSE company as the key Chinese economy splutters, causing wider problems across its Asia Pacific region. Standard Chartered sources around three-quarters of revenue from customers in this territory.
Worryingly for the country’s banks, China’s property sector continues to soften as well. StanChart’s been no stranger to substantial real estate-related writedowns in recent years.
Established banks like this also face intense competition from digital banks. According to Statista, net interest income among digital-only competitors will grow at an annualised rate of 9.36% between 2025 and 2029.
The bull case
Having said that, Standard Chartered’s enjoying its own successes in the digital realm. Its Mox and Trust platforms (in Hong Kong and Singapore, respectively) have enjoyed strong take-up following their launches in recent years. And the bank has significant resources to continue building its presence in this key growth segment.
What’s more, while Asian banks may suffer some discomfort in the near term, the long-term outlook for the continent remains extremely bright. As with StanChart’s African and Middle East markets, there’s scope for substantial profits growth as personal wealth levels climb and populations steadily increase.
Today, the stock trades on a forward price-to-earnings (P/E) ratio of 8.2 times. It also trades on a sub-1 price-to-earnings growth (PEG) ratio of 0.6.
Such readings fail to reflect Standard Chartered’s enormous growth potential, in my view. I think it’s a top FTSE 100 share to consider right now.
