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Standard Chartered falls 4.8 percent to the bottom of a flat FTSE100 index as the Asia-focused bank reports an operating profit fall inits consumer and wholesale businesses, casting a shadow on its full-year (FY)performance.
"STAN's management indicated that they remain comfortable with FY consensus;in our view, however, this could be a challenge," analysts at RBC CapitalMarkets say in a note, adding consensus estimates may need to come down by asmuch as 12 percent.
"It would take a very robust recovery to deliver the near-double-digit (PBT)profit before tax growth after the falling operating profit in Q1."
The disappointment is heightened by a relatively strong earnings season forEuropean banks that have reported so far, 62 percent of which have beatenconsensus estimates according to Thomson Reuters StarMine data, including globalpeer HSBC on Tuesday.
Standard Chartered has notched up 10 years of consecutive record profitsthanks to strong Asian markets, helping it become one of the most lovedEuropean-listed banks, as shown by high valuation multiples and low interestfrom short sellers.
The stock trades at 19.3 times its expected earnings for next year, a slightpremium to HSBC's 19 multiple and well above UK domestic lenders Barclays and Lloyds.
Around 3 percent of Standard Chartered's stock available for lending was outon loan as of the market close on Monday, Markit data showed, compared to a 5.7percent average utilisation rate for all banks listed in Europe, the Middle Eastand Africa.
Short sellers borrow a security with a view to selling it and buying backand at a lower price before returning it to the lender, pocketing thedifference.
In the first hour of trading Standard Chartered's stock has gone throughhalf of its full-session average volume for the past 90 days.
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Reuters messaging rm://francesco.canepa.thomsonreuters.com@reuters.net
