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Standard Chartered (LSE:STAN) shares are up 77% over two years. This means that £10,000 invested then would be worth £17,700 today. That’s clear a really strong return, and it would have been topped up by a modest dividend during the period — the current yield stands at 2.4%.
But will it go higher still? Well, I like the stock, but there’s one thing I’m a little concerned about…
My worries
During the Biden era, the average effective US tariff was 2.5%-2.7%. Now we all know that things have changed under President Trump and that negotiations are ongoing. But there are several things to bear in mind here.
Firstly, it dawned on me today that these negotiations could simply go on and on. The US might have declared a 90-day truce for negotiations, but what’s to stop that being extended again and again until something is eventually hashed out.
While uncertainty’s typically bad for economies and companies, investors need to remember that baseline tariffs and other sector- and country-specific tariffs remain in place. In May, the average effective US tariff rate was 17.8%.
Anything between this figure and the baseline 10% tariff is likely to have a profound impact on the global economy. And simply, I don’t believe we’ve really seen the impact of that yet.
So why is this important to Standard Chartered? The group operates in over 50 countries, with a strong presence in Asia, Africa, and the Middle East. Together, these account for over 80% of the bank’s income. Key markets include Hong Kong, Singapore, India, the UAE, and Africa (particularly Kenya, Nigeria, and South Africa), while its global headquarters remain in London.
In short, I believe its developing economy focus leaves it more exposed to Trump’s tariffs than other UK banks. Many of its countries of operations were highlighted by the Trump administration for their trade surplus with the US.
Valuation leaves room for growth
Moving away from my concerns and focusing on the quantitative data — which may have priced in some of my concerns — Standard Chartered’s forward valuation suggests meaningful room for share price growth.
The forward price-to-earnings (P/E) ratio remains conservative. It’s forecast to fall from 9.53 times in 2025 to just 6.15 times by 2027. This is powered by strong earnings per share (EPS) growth, moving from $1.62 in 2025 to $2.52 by 2027.
The price-to-book ratio also remains modest, easing from 0.8 times in 2025 to 0.65 times in 2027. This is well below peers and suggestive of further potential should return on equity improve.
Meanwhile, dividend per share’s expected to rise steadily, reaching $0.51 in 2027, translating into a yield of 3.32% at the current price.
With improving profitability, disciplined capital allocation, and expanding shareholder returns, the forward-looking valuation leaves scope for share price appreciation.
I would argue that the stock’s undervalued if it wasn’t for my concerns about tariff exposure. For now, I’m watching from the wings — I won’t add it to my portfolio yet.
