Standard Chartered PLC expected to benefit more than HSBC PLC as Asia leads

As emerging markets begin to outperform, () will be the better bet than PLC (), said analysts at JPMorgan.

“With economic growth likely to rebound faster in Asia/across EM versus the UK, we see upside potential from loan growth and lower impairments,” the analysts said, raising their fourth-quarter earnings per share estimates materially for both banks, but with more limited 1-3% upgrades for 2021-2022.

Although there is expected to be continued structural pressure from low rates, analysts at the US investment bank’s Cazenove arm in London, said near-term earnings should potentially benefit from lower provisioning for bad debts as Asia drives the global recovery.

JPMorgan has an overall positive view on the banking sector, but a preference for StanChart as it trades at 0.5 times tangible net asset value compared to HSBC’s 0.7 P/TNAV, with similar return on tangible equity metrics.

StanChart was reiterated at ‘overweight’ and HSBC at ‘underweight’, with share price targets of 580p and 400p respectively.

Even though the pair’s focus on Asia means they have not had it easier on the provisioning stakes, because of the Bank of England’s ongoing restrictions on dividends the two lenders can only offer a sub-3% dividend yield for 2020.

This is despite significant capital surplus at 23% of market cap of excess capital for StanChart and 16% for HSBC in the 2022 financial year on the bank’s current estimates.

Expecting both banks to refresh strategic targets at their upcoming full-year results, additional restructuring for HSBC is expected to depress its profitability in the near term.