1Q24 results were significantly higher than our and market expectations
Standard Chartered Group announced 1Q24 results: Under the adjusted caliber, revenue was US$5.152 billion, up 17.2% year on year, up +10.2% year on year; profit before tax was US$2.119 billion, up 24.8% year on year, compared with our and market expectations of +29.4% and +33.9%. The adjusted performance was significantly higher than our and market expectations, mainly due to good non-interest income performance.
Development trends
Non-interest revenue increased 33% year over year, significantly better than market expectations. 1Q24's adjusted non-interest revenue increased 33% year over year, including positive contributions from the Egyptian and Ghanaian business of US$234 million in special events. After excluding special events, non-interest revenue increased 22% year over year. Looking at the two major businesses that drive non-interest income, the adjusted revenue of the wealth management and financial markets business increased 21% and 13% year-on-year respectively in 1Q24:
Wealth management: In 1Q24, the wealth management business continued to maintain a good net inflow of customers. The number of new customers (Affluent NTB) was 6.2 million, the net asset inflow (Affluent NNM) was about US$11 billion, and Wealth AUM increased 4% from quarter to quarter.
Financial markets: Flow and episodic's revenue in the 1Q24 financial markets business was US$662 million and US$379 million, respectively, up 5% and 30% year over year. Financial market business has performed well this quarter. We believe that this is partly due to market fluctuations and customer demand, while the company's relatively stable revenue has continued to grow.
Net interest income is basically in line with market expectations, and the month-on-month improvement mainly comes from the impact of short-term hedging tool maturity.
The 1Q24 Company's adjusted net interest income was US$2,419 million, up 1.1% month-on-month. We believe this was mainly due to the positive contribution of the company's short-term hedging tools due to the expiration of the end of February. The company maintains the 2024E annual net interest income guideline of US$10-10.25 billion. Compared with February of this year, the company believes that the delay in interest rate cuts will reduce the negative impact of interest rates on net interest income. At the same time, demand for loans may also be weaker than the company's previous expectations. At the same time, the company expects 2025E net interest income to maintain year-on-year growth, mainly due to the increase in loans and the additional positive contribution of $100 million brought by the maturity of short-term hedging instruments.
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Profit forecasting and valuation
Due to the positive growth in the company's non-interest revenue, we raised our 2024E and 2025E earnings forecasts by 12.8% and 3.7% to $3,687 million and $3,687 million. The current stock price corresponds to 0.5 times the 2024E net market ratio and 0.4 times the 2025E net market ratio. Maintaining a neutral rating, we believe that the path to achieving the 12% ROTE target in the company's three-year plan has become more clear. The target price was raised by 8.7% to HK$82.80, which corresponds to 0.6 times the 2024E net market ratio and 0.5 times the 2025E net market ratio. There is 15.1% upward space compared to the current stock price.
risks
Overseas interest rate cuts have exceeded expectations, and the macroeconomy of the main market has weakened beyond expectations.