What is the signal that Standard Chartered Group repurchases its own shares for 80 million yuan?

What is the signal that Standard Chartered Group repurchases its own shares for 80 million yuan?

Judging from the news in the market, the rating of the stock by investment banks is mostly neutral. According to incomplete statistics, at least three investment banks have given Standard Chartered a neutral rating in the past 90 days. So today, Bian Xiao is here to sort out the signal that Standard Chartered Group repurchases its own shares. Let's have a look!

Implement a repurchase of 80 million yuan.

On the evening of September 2 1 day, Standard Chartered Group announced that on September 20, 2022, the Group repurchased1684,000 shares on the London Stock Exchange at a price of 5.988-6. 178 RMB.

By the close of 2 1 day on September 2022, Standard Chartered Group had closed at HK$ 53.75, down 2.09%, with a turnover rate of 0.02% and a turnover of 487,000 shares.

Judging from the news in the market, the rating of the stock by investment banks is mostly neutral. In the past 90 days, three investment banks have given neutral ratings. For example, in early August, Citigroup released a research report saying that Standard Chartered Group was rated as "neutral" with a target price of HK$ 64.65438 +0.

"The company's operating profit before provision in the second quarter was better than market expectations, but its net interest income and net interest margin were worse than bank expectations." Citigroup believes that the management income of Standard Chartered Treasury is weak, but its asset quality is flexible and its capital strength is strong. The quarterly Tier 1 capital adequacy ratio remained at 65,438+03.9%, which was 40 percentage points higher than the market expectation.

Bank of America's repurchase performance was weak in the second quarter.

On the other hand, on the other side of the ocean, the stock repurchase of Wall Street banking giants shrank in the second quarter.

According to JasonGoldberg, an analyst at Barclays, six large banks in the United States bought back only $565,438+billion of shares in the second quarter, down from $ 175 billion in the first quarter and the peak of $28 billion in the third quarter of last year. Some analysts said that in the third and fourth quarters of this year, the repurchase amount of the six major banking giants was less than $5 billion.

Earlier, JPMorgan Chase and Citigroup told investors that they would suspend repurchase to accumulate capital. At the same time, Bank of America (BAC), Goldman Sachs Group (GS), Morgan Stanley (MS) and Wells Fargo (WFC) have not made relevant commitments to investors, that is, to reach specific repurchase levels in the second half of 2022.

Generally speaking, listed entities buy back a large number of shares when the share price is high, and then have to reduce the repurchase scale when the share price is hit. Some analysts said that investors like to see banks buy back shares, in part because it helps them "control their own stock fate"; On the other hand, repurchase reduces the number of shares, improves earnings per share and reduces dividend payout.

For many bank stock investors, the "repurchase shortage" makes them feel depressed. Accordingly, the share prices of JPMorgan Chase, Bank of America, Morgan Stanley and other companies. There have been different degrees of decline this year, almost double digits.

Due to the fear of economic recession, bank shares have fallen, and their trading prices are relatively low relative to earnings and book value. Some analysts believe that the reduction of bank repurchase is affected by multiple factors, including higher capital requirements of federal regulators and strict evaluation of regulatory stress tests. In addition, higher interest rates also reduce the value of bank bond portfolios.

Mike Mayo, a bank analyst at Wells Fargo, said, "The pace of repurchase is slowing down, especially for large banks. In the next few quarters, banks are taking a breath and internally generating funds that can be used for repurchase in 2023. "

Some foreign bank analysts said that before the outbreak of COVID-19, banks had been one of the most radical buyers of their stocks, and some of them bought back 5% to 10% every year. 202 1 most banks resumed repurchase after the regulatory authorities banned repurchase in the second half of 2020.

Optimism in stress testing

In the middle of this year, the Federal Reserve announced the results of the annual stress test of American banks, and all the audited banks passed the stress test in 2022. This means that these American banks have enough funds to cope with the soaring unemployment rate, the sharp drop in real estate prices and the stock market crash.

Specifically, the stress test of the Federal Reserve in 2022 included "a severe global recession, accompanied by a period of intensified pressure in the commercial real estate and corporate debt markets". These are based on the symptoms under the influence of the epidemic. The fictional economic downturn "is magnified by the long-term persistence of telecommuting, which leads to a greater decline in the price of commercial real estate, which in turn affects the enterprise sector and affects the investor's mood".

The characteristics of this scenario are that the unemployment rate in the United States reaches the peak of 10%, the real GDP drops by 3.5% compared with the end of last year, and the stock price drops by 55%. Due to the rising unemployment rate and falling demand, the inflation rate dropped sharply to 1.25% in the third quarter of 2022.

During the hypothetical economic collapse, the total losses of 33 bank lenders inspected by the Federal Reserve are estimated to be 612 billion US dollars, but all of them can keep above the minimum capital requirements. If a bank violates the so-called stress capital buffer at any time one year after the test, the Fed can impose sanctions on it, including restricting capital allocation and bonus payment.

After passing the test, the banking giant will be able to return tens of billions of dollars to investors in the form of dividends and stock repurchases. At that time, the Federal Reserve said in a statement: "Banks continue to have strong capital levels, enabling them to continue lending to households and businesses during the severe recession."

Foreign media predict that American banking giants will return $80 billion to shareholders this year.

In fact, the dividend payments of the six major banks in the United States increased by nearly half last year due to the large amount of excess capital accumulated by large banks during the COVID-19 epidemic. Only Morgan Stanley doubled its quarterly dividend and announced a share repurchase of up to $6,543,802 billion.

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