CICC has released a research report stating that, considering an improved outlook for Standard Chartered's (02888) net interest income, the investment bank has raised its forecast for the company's adjusted operating revenue in 2026/2027 by 2.7%/3.8% to $21.9 billion/$22.5 billion. The forecast for adjusted net profit attributable to ordinary shareholders in 2026 remains largely unchanged, while the forecast for 2027 has been increased by 1.7% to $5.6 billion.

The stock currently trades at 1.2x/1.1x 2026E/2027E price-to-book ratio. After comprehensively considering earnings expectations and changes in market risk appetite, CICC has modestly raised its target price for the company by 6.6% to HK$227.27. This new target corresponds to 1.3x/1.2x 2026E/2027E P/B and implies a potential upside of 14.8%. The Outperform industry rating is maintained.

Key points from CICC are as follows:

**2025 Performance Met Expectations** Standard Chartered announced its 2025 results. Full-year 2025 adjusted operating revenue increased 6.1% year-on-year to $20.9 billion, while net profit attributable to ordinary shareholders rose 25.4% YoY to $5.4 billion. Fourth-quarter 2025 revenue grew 0.3% YoY to $4.8 billion, with net profit attributable to ordinary shareholders increasing 20.0% YoY to $800 million. This performance aligned with CICC's expectations.

**Resilient Revenue Supporting Steady Growth** The company's Q4 2025 and full-year 2025 revenue were largely in line with market expectations. A breakdown shows that Q4 2025 net interest income increased 8% quarter-on-quarter but decreased 1% year-on-year, surpassing consensus estimates by 7.5%. This was primarily driven by HIBOR rates in Q4 2025 being higher than anticipated, contributing to a full-year NII increase of 0.8% YoY. Looking ahead, the company anticipates a 44 basis point decline in its weighted average interest rate for 2026 based on its currency exposure structure. Additionally, optimization of the retail credit portfolio to control credit costs is expected to negatively impact 2026 NII by approximately 2%. Considering credit volume growth, 2026 NII is projected to be roughly flat compared to 2025.

Non-interest income in Q4 2025 decreased 21.2% QoQ but increased 2.3% YoY, falling 11.4% short of consensus estimates. This underperformance was mainly due to a 15% YoY decline in the CIB Global Markets business line in Q4 2025. The company cited increased volatility across multiple major asset classes, reduced client positioning, and timing fluctuations in large client transactions leading to lower-than-expected episodic revenue. Wealth management revenue momentum remained strong, growing 20% YoY in Q4 2025. Bancassurance and investment distribution revenues increased 13% and 22% YoY, respectively. The company's wealth management strategy, focused on affluent clients, saw Assets Under Management grow by approximately $10 billion QoQ, with 40% in non-deposit products, indicating an improved product mix. For the full year, non-interest income grew 12.9% YoY, serving as a key revenue driver, primarily supported by wealth management and global markets businesses.

**Full-Year Cost-to-Income Ratio Improved** The company's 2025 operating costs increased 4% YoY, mainly due to business expansion leading to increased headcount. However, the cost-to-income ratio improved by 8 basis points to 59.1%, fulfilling the guidance for gradual annual improvement. Q4 2025 operating costs rose 16.1% QoQ, primarily due to employee incentive payouts and one-off regulatory costs. CICC estimates the company's comprehensive credit cost was 20bp annualized in Q4 2025 and 23bp for the full year. The company disclosed a loan credit loss rate of 14bp annualized for Q4 2025 and 19bp for the full year, both among the lowest for Hong Kong-listed banks. The company's Hong Kong Commercial Real Estate exposure is only $1.5 billion, and its Mainland China CRE exposure is $800 million. The corporate segment has maintained low credit costs for multiple consecutive quarters, demonstrating outstanding asset quality.

**Dividend Exceeds Expectations, Emphasizing Shareholder Returns** The Q4 2025 dividend per share was $0.49, bringing the full-year 2025 DPS to $0.61, a 65.7% YoY increase that exceeded market expectations by 30.4%. Total dividends for the year amounted to $1.4 billion, up 54% YoY, representing a payout ratio of 31%. The company completed $2.8 billion in share buybacks during the year, resulting in a comprehensive capital return ratio of 92%. The company announced a new $1.5 billion buyback program for the first half of 2026, matching the H1 2025 program. Assuming a maintained 31% payout ratio and unchanged full-year buyback amount ($2.8 billion), CICC calculates a projected 2026E dividend yield of approximately 2.8% and a comprehensive return ratio of 7.9% based on the closing price on February 24, 2026, which remains highly attractive.

The company announced that starting Q1 2026, it will change its guidance basis from an underlying basis to a statutory basis. This move aims to align with most peers and facilitate a more transparent display of financial details, ensuring financial disclosures are consistent with shareholders' actual interests.

**Positive 2026 Guidance, Focus on New Three-Year Strategy in May** The company guided for a 2026 statutory return on tangible equity above 12% (compared to 11.8% in 2025), with operating revenue growing approximately 5% YoY. NII and operating costs are expected to be largely flat compared to 2025. The company announced it has completed its 2024-2026 three-year strategy ahead of schedule and will announce a new three-year guidance framework in May 2026.

**Risk warnings include a potential sharper-than-expected decline in interest rates and latent asset quality risks.