Image source: Standard Chartered plc
Standard Chartered (LSE:STAN) is the FTSE 100’s smallest bank but still has a market-cap close to £30bn. However, at 3pm Friday (15 August), its share price started to fall. By close of business, it had tanked 7.6% and was 8.9% lower than when it reached a 52-week high two days earlier.
Let’s take a closer look at what was a strange week it’s been for the stock.
Bad news
The late Friday slump coincided with the publication of a letter from a US politician to the Justice Department requesting that an investigation be carried out into alleged violations of sanctions. The bank has yet to comment.
It’s not the first time such allegations have been made. Note 23 to the group’s 2025 half-year results provides a detailed summary of ongoing legal action including four lawsuits brought on behalf of 200 shareholders. These allege £1.56bn of losses arising from “untrue and/or misleading statements and/or omissions in information published… in its rights issue prospectuses of 2008, 2010 and 2015 and/or public statements regarding the group’s historic sanctions, money laundering and financial crime compliance issues”.
The bank denies “any and all liability” and says it will “contest claimants’ alleged losses”. Consequently, no provision has been made in its accounts for any potential liability.
Good news
Some of the usual shareholder pain arising from such a significant drop will no doubt have been eased by the fact that the share price has been on a strong rally lately. Since August 2024, it’s risen over 70%.
Indeed, it set a new 52-week high on 13 August.
In 2024, the bank reported earnings per share of 168.1p. Analysts’ consensus is for this to increase by 56% over the next three years — 200.4p (2025), 225.6p (2026) and 263.3p (2027).
There are also other reasons to consider buying the stock. According to data from the London Stock Exchange, it has the second-lowest price-to-earnings ratio of all the FTSE 100’s banks (beaten only by HSBC) and the lowest price-to-book ratio. Admittedly, it doesn’t fare too well when it comes to dividends. But the pullback in the share price has increased the stock’s yield a little — to 2.3%.
Final thoughts
Banks’ earnings can be volatile as they act as a barometer for the wider economy. And the sector’s highly competitive.
However, the bank has a wide geographic footprint. Net loans and advances to customers in Singapore (21.2%), Hong Kong (19.3%) and China (7%) make up nearly half of its portfolio. But it also has exposure to the US (13.3%), UK (12.6%) and other markets (26.6%). This means it’s not overly exposed to one particular economy or territory.
At 30 June, it had $914bn of assets, including $80bn of cash. Even if it lost all of its pending lawsuits, it’s unlikely there would be a significant impact on its financial position.
And most global businesses face multiple lawsuits. I’m not arguing they should be ignored. But it’s important to remember they’re fairly common and can run for several years, even decades. In fact, Standard Chartered’s accounts disclose matters going back to 2008.
On balance, as long as they’re conscious of the risks, I think it’s one for long-term investors to consider.
