CICC: Raised Standard Chartered Group (02888) target price by 3.3% to HK$263 to maintain “outperform the industry” rating, 3Q26 performance was better than expected

The Zhitong Finance App learned that CICC released a research report saying that Standard Chartered Group (02888)'s results for the third quarter of 2026 were better than the bank's and market expectations, mainly due to better-than-expected non-interest revenue and credit cost performance. The bank raised the company's 2026 and 2027 net profit forecast to parent common shareholders by 7.6%/12.5% to US$556.4 billion, and raised the target price by 3.3% to HK$263 to maintain the “outperforming industry” rating. The company's current projected net market ratio (P/B) for 2026 and 2027 is 1.3 times and 1.2 times, respectively. The bank's target price is 1.6 times and 1.5 times the projected P/B for 2026 and 2027, respectively, which has 20% upside compared to the current stock price.

CICC's main views are as follows:

Results for the third quarter of 2026 were better than expected

Standard Chartered Group announced results for the third quarter of 2026: adjusted revenue of US$5.8 billion, up 13% year on year; profit before tax of US$2.3 billion, up 27% year on year; net profit to mother of common stock of US$1.5 billion, up 46% year on year. The performance was better than expected by the bank and the market, mainly due to better-than-expected non-interest income and credit costs.

The company raised its 2026 net interest income guidelines

In the third quarter of 2026, the company's net interest income increased by 8.4% year-on-year, in line with this forecast. Affected by rising interest rates, the company raised the 2026 net interest income growth rate guide to 4% from the previous low number of units. Considering deposit competition factors, the bank still expects the company's net interest income to grow by a low number of units in the future.

The scale of credit is growing rapidly

In the third quarter of 2026, the company's net customer loans increased 10.6% year on year and 5.3% month on month. Specifically, WRB loans mainly come from wealth mortgages and mortgage loans, with India's FCNR plan contributing about half of the increase; CIB loans mainly come from global banking and trade finance. Average interest-bearing assets increased 4% year over year, compounded by factors such as an increase in the number of days per quarter and rising interest rates, which together supported the increase in net interest income.

Interest spreads remained flat month-on-month

In the third quarter of 2026, the company's adjusted net interest spread was 2.03%, an increase of 9 basis points over the previous year. The rise in market interest rates during the quarter favored net interest spreads, but this was partly offset by deposit regularization, and CASA's share of deposits fell 1.3 percentage points month-on-month to 57%.

Non-interest income continues to grow

In the third quarter of 2026, the company's non-interest revenue was US$3.826 billion, up 18.6% year on year, exceeding the bank's and market's agreed expectations.

Investment in wealth management continues to be realized

In the third quarter of 2026, the company's wealth business revenue was US$1.1 billion, an increase of 26% over the previous year. Among them, the revenue from the consignment business and banking insurance increased by 28% and 18% respectively, and the growth continued to be impressive. The quarterly net increase in wealth management scale was 19.5 billion US dollars, and 76,000 new wealthy customers were added. The bank believes that Standard Chartered's growth this quarter was mainly due to a more balanced and diverse regional and product structure, as well as continued investment in account managers and platform construction to support customer acquisition.

Cross-border demand supports growth momentum for public business

In the third quarter, the company's global financial market revenue increased 20% year on year. Among them, the traffic business increased 21% year on year, mainly due to the increase in customer demand for foreign exchange, commodities and credit transactions; the revenue of trading banks and global banks increased 8% and 7% year on year, respectively. The bank believes that global trade and supply chain adjustments will continue to bring demand for cross-border settlement, financing and risk management, and that the company's network layout and customer-centered product design in core regions will continue to support business growth.

The increase in operating costs is in line with expectations, and the reduction in the effective tax rate supports the increase in net profit

In the third quarter of 2026, the company's operating costs increased 8.5% year on year, and the cost revenue ratio decreased 2.5 percentage points year on year to 59%. The company indicates a cost-to-revenue ratio of around 60% in 2026, which will drop further to 57% in 2027. In the same period, the effective tax rate fell 4.8 percentage points to 21.7% year on year, mainly due to the increase in profit share in low-tax regions such as Hong Kong and Singapore.

Credit costs were only 12 basis points, and there were no new risk points in the third quarter

In the third quarter of 2026, the company's credit costs were annualized by only 12 basis points in a single quarter, which was better than expected, mainly due to improved CIB portfolio ratings and net repayment. Middle East-related provisions increased by US$34 million this quarter, totaling US$268 million from the beginning of the year to date.

Capital levels remain stable, and shareholder return expectations remain unchanged

At the end of the third quarter of 2026, the company's common stock Tier 1 capital adequacy ratio (CET1) fell 0.31 percentage points month-on-month to 13.8%, and is still within the target range of 13% to 14%. Among them, the impact of the $1 billion repurchase announced by the company in July on CET1 was about 0.38 percent. The company expects RWA to be around US$275 billion in early 2027 due to the increase in operational risk weighted assets (RWA) in the fourth quarter and the implementation of Basel 3.1 in the UK. The bank believes that Standard Chartered's ability to generate capital is good and can support business growth and the current level of shareholder returns.

The company raised its 2026 guidelines and maintained positive medium- to long-term guidance

The company raised the 2026 revenue growth rate guideline from 5%-7% to higher than this range, adjusted the net interest income growth rate guide to 4% from the previous low number of units, adjusted the annual cost-revenue ratio guide to 60%, and the annual average return on tangible shareholders' equity (ROte) guide was raised from 12% to about 14%. At the same time, the company maintained its mid-term targets of higher than 15% for RoTE in 2028 and around 18% for RoTE in 2030, and reaffirmed that the compound annual growth rate of earnings per share (EPS) from 2026 to 2028 will reach 16%-19% (high teens). According to the bank's calculation, Standard Chartered predicts a comprehensive shareholder return of about 7% for dividends and repurchases in 2027.

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