2014 has been a dismal year for investors in Standard Chartered (LON: STAN). Thats because two profit warnings and further allegations of wrongdoing have combined to weaken sentiment and push the banks share price down by 26%.
Certainly, Standard Chartered is experiencing a challenging period and, in the short run, its share price is likely to remain volatile. However, for longer term investors, now could prove to be an opportune moment to pick up shares in a high-quality bank at a great price. As such, it could help you to retire rich.
Although the Eurozone has dominated news headlines in recent months, with the slowest growing region in the world on the brink of a deflationary period, the Chinese economy has experienced something of a soft-landing in 2014. Of course, it continues to grow at a pace that us Europeans can only dream of, but compared to recent years China is not growing at quite the same pace as it once was.
This is highly relevant to Standard Chartered, since it is focused on Asia and, as the biggest economy in the region, China has a major impact upon its performance. With the latest profit warning being attributable to higher bad loans than anticipated (as well as restructuring costs in South Korea) it seems as though external factors are at least partly responsible for a disappointing bottom line.
Looking ahead, though, China and the wider Asian economy has huge potential. It is moving towards developed status at a rapid rate and, more importantly, is transitioning from a capital expenditure-led model to one that is focused on consumer spending. As a result, banks such as Standard Chartered are well-placed to deliver more loans to businesses and individuals over the long term.
Although profit in the third quarter of this year fell by 16%, Standard Chartered remains well placed to deliver impressive levels of growth in future years. With shares in the bank trading on a price to earnings (P/E) ratio of just 9.9 and having a yield of 5.2%, they seem to have considerable appeal for income and value investors especially when the FTSE 100 has a P/E ratio of 13.5 and a dividend yield of 3.5%.
Certainly, there are likely to be further setbacks for Standard Chartered, with the Chinese economy bound to experience numerous lumps and bumps on its road to developed status. However, where external factors hit earnings, as is now the case, it could prove to be a great time to buy shares in Standard Chartered for the long term. As a result, it could boost your bottom line and help you to retire rich.
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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.