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Standard Chartered Credit Versus a Sovereign CDS Portfolio

Standard Chartered Legacy Tier 1 Is on Fire

Standard Chartered: Capital, Forbearance and CDS

Gravity Works As WeWork Doesn't; Now Plan B

Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Credit

We screen for value in <a href="https://www.smartkarma.com/entities/standard-chartered-plc" target="_blank" data-smartkarma-citation="entities:193:1" rel="noopener">Standard Chartered' s  (StanLn)</a> Additional Tier 1 (AT1) curve within a post-Covid-19 economic operating environment. This is the final installment of a series of linked insights on Standard Chartered. Please see: <a href="https://www.smartkarma.com/insights/standard-chartered-credit-versus-a-sovereign-cds-portfolio" target="_blank" data-smartkarma-citation="insights:47205" rel="noopener">Standard Chartered Credit versus a Sovereign CDS Portfolio</a> as well as <a href="https://www.smartkarma.com/insights/standard-chartered-capital-forbearance-and-cds" target="_blank" data-smartkarma-citation="insights:47266" rel="noopener">Capital, Forbearance and CDS</a> for background on StanLn.First we assess whether StanLn has the capacity to absorb losses from its Covid-19 relief lending. Then we screen for potential extension risk and determine where the market may be mispricing StanLn’s credit risk while considering the liquidity of its AT1 instruments and other factors that may influence credit spreads.Standard Chartered ’s recently issued 4.75% coupon 2031 first call AT1 bond should be trading tighter given a higher Common Equity Tier 1 capital buffer than other banks which recently issued 10-year AT1 notes. However, the question is whether investors should reach for duration at this point in the Covid-19 economic cycle. Concurrently, Standard Chartered’ s Legacy Tier 1 bonds may be of interest to event-driven investors. Please see: <a href="https://www.smartkarma.com/insights/standard-chartered-legacy-tier-1-is-on-fire" target="_blank" data-smartkarma-citation="insights:45722" rel="noopener">Standard Chartered Legacy Tier 1 is on Fire</a> for more details.Our top pick is the 7.75% coupon 2023 AT1 bond due to superior credit-adjusted returns, moderate duration as well as low extension risk and decent liquidity.  The main risk to this top pick is the tension between assuring sufficient shareholder returns in the near-term versus StanLn’s long-term provisioning needs. The bank is expected to announce full-year results towards the end of February.

We screen for value in Standard Chartered' s  (StanLn) Additional Tier 1 (AT1) curve within a post-Covid-19 economic operating environment. This is the final installment of a series of linked insights on Standard Chartered. Please see: Standard Chartered Credit versus a Sovereign CDS Portfolio as well as Capital, Forbearance and CDS for background on StanLn.First we assess whether StanLn has the capacity to absorb losses from its Covid-19 relief lending. Then we screen for potential extension risk and determine where the market may be mispricing StanLn’s credit risk while considering the liquidity of its AT1 instruments and other factors that may influence credit spreads.Standard Chartered ’s recently issued 4.75% coupon 2031 first call AT1 bond should be trading tighter given a higher Common Equity Tier 1 capital buffer than other banks which recently issued 10-year AT1 notes. However, the question is whether investors should reach for duration at this point in the Covid-19 economic cycle. Concurrently, Standard Chartered’ s Legacy Tier 1 bonds may be of interest to event-driven investors. Please see: Standard Chartered Legacy Tier 1 is on Fire for more details.Our top pick is the 7.75% coupon 2023 AT1 bond due to superior credit-adjusted returns, moderate duration as well as low extension risk and decent liquidity.  The main risk to this top pick is the tension between assuring sufficient shareholder returns in the near-term versus StanLn’s long-term provisioning needs. The bank is expected to announce full-year results towards the end of February.

Standard Chartered: Screening for AT1 Value, Post-Covid-19