Like many other companies in the wake of the financial crisis, Asia-focused banking company Standard Chartered (LSE: STAN) is bearing down on costs and looking closely at the way it does things in order to squeeze out inefficiencies.
The firm has shifted its organisation structure around so much that it needs to restate segmental information for its half-year and full-year results for 2013 in order to aid historic comparisons.
Shaking it up
Standard Chartered now has three new client segment groups labeled as Corporate and Institutional Clients, Commercial and Private Banking Clients, and Retail Clients; it services its markets under five global product groups, which it calls Financial Markets, Corporate Finance, Transaction Banking, Wealth Products and Retail Products. Just reading that list of categories gives investors some impression of the nature of Standard Chartered’s operations.
The company is active in eight geographic regions, which it now pins down and accounts for as Greater China, The Association of Southeast Asian countries (ASEAN), North East Asia, South Asia, the Middle East, North Africa and Pakistan, Africa, Europe and the Americas.
The directors reckon these changes represent components of a programme of management actions that support the execution of a refreshed and sharpened strategy to deliver the growth and to adapt to changes in the regulatory and market environment. It’s always good to see a company’s management keeping on its toes and adapting to change in order to survive and thrive.
Focused on high-growth markets
UK-headquartered Standard Chartered seems different to the other London-listed banks. The firm sticks out for its growth potential, and recent share-price weakness seems to have softened the valuation making the shares look attractive. That could be down to the well-reported jitters many companies have been experiencing in emerging markets. Standard Chartered is committed to up-and-coming markets and last year earned about 82% of its operating profit from Asia and 10% from Africa.
If you want a play on fast-growing regions — which, long term, still seem driven by encouraging underlying fundamentals — it’s probably worth considering Standard Chartered. The firm reckons that by 2030, Asia will add more than 2.2 billion people to the world’s middle class, raising its share of the global total to 66 per cent. The potential seems huge, and Standard Chartered has a long tradition in the region, suggesting a potentially safe and experienced pair of metaphorical hands.
Valuation
At today’s share price of 1341p the forward P/E multiple sits at just under 10, with City analysts predicting a 9% earnings’ uplift in 2015. If you take the plunge on Standard Chartered now you’ll get a 4.2% forward dividend yield expected to be covered comfortably more than 2.4 times by forward earnings.
