Last year was a tricky one for the FTSE 100. The UK’s premier index was marred by volatility caused by macroeconomic and geopolitical issues. The former included rising interest rates and soaring inflation.
In the Bank of England’s most recent update, it did not increase the base rate. Plus, the government’s latest inflation figures show we may be over the worst of it. The FTSE could be on the cusp of rallying as the year moves on. Interest rates and inflation could yet go up, but I’m more bullish now than I was last year.
With a potential rally on my mind, the next time I have some investable cash, I’m going to add Standard Chartered (LSE: STAN) shares to my holdings. Here’s why!
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Global banking giant
Although it may not be a household name compared to other banking institutions, Standard is a multinational banking business with a presence in over 60 countries.
As I write, its shares are trading for 609p. At this time last year, they were trading for 701p, which is a 13% drop over a 12-month period.
It’s worth mentioning banking and financial services stocks were some of the worst hit by economic turbulence.
Why I’d buy Standard Chartered shares
Despite the malaise of 2023, at present, things are looking up, so now could be a great time to buy cheaper Standard shares with a view to gaining returns as well as capitalising on growth.
Speaking of growth, this is one of the main allures of Standard shares for me. I’m particularly excited by its exposure to high-growth territories, especially Asia. This specific region is set to experience massive growth in the coming years and Standard could see its performance and returns boosted due to its excellent position there.
Next, Standard’s fundamentals look enticing for me. The shares look cheap on a price-to-earnings ratio of close to six, well below the FTSE 100 average of 13. Furthermore, the stock trades on a price-to-book ratio of 0.5, also indicating value for money.
Finally, Standard shares would boost my passive income with a forward looking dividend yield of 3.5%. However, it’s worth remembering that dividends are never guaranteed.
Risks and final thoughts
One of the biggest issues in growth areas is volatility and geopolitical instability. These issues could dent Standard Chartered. A prime example of this is China’s recent poor economic performance. In fact, this has already hurt Standard as profit dipped by 2% in Q3 2023. I’ll keep an eye on this front closely.
Another risk I’ll mention is the bank’s patchy dividend record. Ideally, I like all my investments to pay a regular and consistent dividend. Standard has struggled with that recently due to economic volatility as well as the impact of the pandemic. Although I’m confident this won’t be a long-term issue, it’s noteworthy right now.
I’ve never been a short-term investor. So, although I’m conscious of short-term risks and issues, I look for stocks that will thrive in the longer term. I’m confident Standard Chartered fits the bill perfectly for me.
