Damo: Standard Chartered Group (02888)'s second-quarter results beat expectations and maintained a “gain” rating

The Zhitong Finance App learned that Morgan Stanley released a research report stating that it maintains the Standard Chartered Group (02888) “gain” rating, with a target price of HK$250. The bank pointed out that Standard Chartered's second-quarter profit before tax was 13% higher than market expectations. It mainly benefited from non-net interest income driving revenue growth. Even after recording a DVA loss of 7 million US dollars, it still did not hinder overall performance. Many product lines, such as wealth solutions and trading services, performed better than expected, with a net increase of US$15 billion in capital during the quarter, close to the bank's estimate of US$16 billion.

The company's operating expenses for the period were 2% lower than the bank's and market forecasts, mainly due to the one-time impact of the South Korean equity-linked securities portfolio provision of $74 million. The Group recorded a credit expenditure of US$150 million during the period, including an additional US$44 million in provisions. Management mentioned an increase in early warning indicators in the Middle East region, while the increase in risk exposure in the second phase was covered by existing provisions.

As of the end of June 2026, Standard Chartered Group's common stock tier 1 capital ratio was 14.2%, higher than expected, and beneficiary risk-weighted assets (RWA) were lower than expected. However, Damo believes this factor will be reversed in the second half of the year. The Group's share repurchases of US$1 billion during the period were close to the bank's estimate of US$1.1 billion; the dividend per share was 20.4 cents, higher than the bank's forecast of 13 cents and the market consensus of 17.8 cents.

At the same time, management raised the annual guidelines. The net interest income growth was revised from a flat forecast to a year-on-year increase with a low number of units; revenue growth was revised from the lower limit of the 5% to 7% range to close to the middle of the range; the annual operating expenses (after deducting one-time projects) were projected to be US$13.3 billion, close to the bank's forecast of US$13.24 billion.