Standard Chartered is a ‘hold’ for Share Centre, despite dividend cut

5th August 2015


As Standard Chartered reports interim results Ian Forrest, investment research analyst at The Share Centre, explains what they mean for investors…

Standard Chartered’s interim results were welcomed by the market today as the banking group revealed that its Tier 1 capital ratio had risen to 11.5% from 10.7%. Investors will see that that this indicates a higher level of security and stability within the company. Within the results, we can see that the challenging nature of current trading was underlined by an 8% fall in revenues, whilst pre-tax profits fell 44% in the six months to June. Those currently invested will be displeased with the interim dividend being cut by 50% to 14.4 cents. The bank has said that it expects the final dividend to be cut by a similar amount.

There has long been speculation about whether a rights issue would be required to boost the level of capital, but the bank said today no decision has yet been taken by new chief executive Bill Winters as part of the ongoing strategic review.

These results are a very mixed bag from Standard Chartered as they show a welcome rise in capital levels but rising bad loans and a big cut in the dividend. Major decisions, such as whether a rights issue will be required and where the bank will be domiciled in future, remain up in the air. These will hopefully be clarified as part of the strategic review due by the end of the year. For medium risk investors who believe in the longer-term attractions of growth in China, trust that the new CEO can make strides in turning the bank around and are not overly concerned about a dividend at present, the shares are still worth holding.

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