The share price of Standard Chartered PLC (LON:STAN) (LSE:STAN.L) has dropped 3.26% after the release of its 2016 results to investors.
In my view, investors should be encouraged by the progress it made in 2016. Standard Chartered made improvements to its balance sheet and in strengthening its capital position. It has also invested in reducing costs, while also investing in improving its competitive advantage. However, its shares are still failing to keep pace with other bank shares so far today.
Standard Chartered’s PBT increased from $0.8 billion in 2015 to $1.1 billion in 2016. That’s in spite of operating income declining 11% to $13.8 billion. Operating expenses were down 5% on the previous year at $10 billion, which is a reduction for the second year in a row. Basic earnings per share were back in the black after a loss in 2015, while no ordinary share dividend was declared for 2016.
Gross cost efficiencies of $1.2 billion were registered, with further efficiencies targeted in 2017 and 2018. Cash investment increased by 50% year-on-year, particularly in H2. Standard Chartered’s credit quality has improved, although stresses do remain in some of its sectors.
Progress was made in my view on Standard Chartered’s capital and liquidity position. The CET1 ratio increased 100 basis points to 13.6%, which was mainly due to reduced risk-weighted assets. An additional $2 billion in additional tier 1 capital was issued in August, and a further $1 billion in January 2017.
In my opinion, Standard Chartered’s 2016 results show progress. The bank’s share price could fall a little more in the short term, but I think it has the potential to bounce back in the medium term. I believe its strategy is good and is focused on the right areas, with a stronger capital position and reduced costs two areas where improvements could have an effect on the company’s share price.
I think there is still some way to go with its turnaround and it will take more than just 2016 or 2017 to return to full health. However, in my view it is on the road to doing so, which is why I’m optimistic about Standard Chartered’s future share price performance.