 has reported a larger-than-expected increase in profits in the first half of the year.){kind=link}
Major banks each have Price-to-Book ratio below one
Standard Chartered bank (LON:STAN) has reported a larger-than-expected increase in profits in the first half of the year, resumed interim dividend payments and confirmed a $250 million share buyback.
Thanks to an improvement in bad loans and the recovery from the coronavirus pandemic, Standard Chartered saw its H1 pre-tax profits rise by 57% to $2.56bn.
Analysts had made initial forecasts of $2.23bn.
Standard Chartered’s results confirm the trends shown over the past week by Barclays, Lloyds, NatWest and HSBC.
This is despite the in geographic and business mixes between the big five FTSE 100 lenders, says AJ Bell Investment Director Russ Mould.
However, the markets are not reflecting the seemingly bright outlook painted by the recent run of results.
“Investors are clearly unconvinced that the banks are out of the woods, as the shares of all five trade well below their official, stated net asset – or book – value per share,” Mould said.
This suggests that markets are either unsure on the banks’ ability to generate sustainable double-digit returns on equity, or they think the net asset values are too optimistic. Otherwise, it would mean the banks are very undervalued.
Standard Chartered has the lowest Price-to-Book ratio at 0.47, while Lloyds, at 0.83, has the highest.
The Price-to-Book ratio is calculated by dividing the company’s stock price per share by its book value per share.
A price to book ratio of less than one suggests that the market is valuing the company at less than the total value of its assets.
| 2021E | Q2 2021 | 2021E | 2021E | |
| P/E | Price/book | Dividend yield | Dividend cover | |
| Standard Chartered | 9.3 x | 0.47 x | 3.2% | 3.32 x |
| Barclays | 6.8 x | 0.63 x | 3.2% | 4.53 x |
| HBSC | 12.4 x | 0.71 x | 4.1% | 1.95 x |
| NatWest Group | 14.6 x | 0.77 x | 4.9% | 1.40 x |
| Lloyds | 7.7 x | 0.83 x | 3.8% | 3.43 x |
Standard Chartered’s profits were up sharply – thanks in the main to lower loan impairments or even their reversal – while net interest margins showed signs of stabilisation and loan growth showed some encouraging signs of momentum. Standard Chartered also declared an interim dividend and a second share buyback scheme.
“Similar trends were evident at Barclays, Lloyds, NatWest and HSBC, as all drew some benefit from the post-lockdown economic upturn, a return to some degree of consumer and business confidence and the absence of any fresh interest rate cuts from central banks,” said Mould.