Standard Chartered Earnings: We Don't Fully Buy Into Rosy Guidance, but Shares Still Cheap

We raise our fair value estimate for no-moat Standard Chartered to HKD 83/GBX 830 per share from HKD 77.50/GBX 820. The rise in our valuation mainly reflects a higher net interest margin assumption and expected share buybacks through 2026 that reduce the share base by around 4.3%-4.9% per year. Management is targeting returns on tangible equity of 12%, but given the current economic outlook, we think maintaining estimated ROTE around 10% is more likely. Nonetheless, StanChart's share price remains attractive. Our fair value estimate prices StanChart at just a 2024 price/book of 0.6 and price/earnings of 8.6. We think the current share price more than reflects the group's lower-than-peer ROTE and limited capital flexibility. By comparison, banks like HSBC and DBS are expected to achieve ROTEs in the midteens to high teens, with common equity Tier 1 ratios in the midteens.