A Worthy British Bank Stock
08/03/2012 11:00 am EST
It may seem insanely contrarian to go looking for a banking stock in the midst of Europe's financial turmoil, but this one remains a great long-term buy, writes the staff of Motley Fool UK.
The last five years have been tough for those in retirement. Portfolio valuations have been hammered and annuity rates have plunged. There's no sign of things improving anytime soon, either, as the Eurozone and the UK economy look set to muddle through at best for some years to come.
A great way of protecting yourself from the downturn, however, is by building your retirement fund with shares of large, well-run companies that should grow their earnings steadily over the coming decades. Over time, such investments ought to result in rising dividends and inflation-beating capital growth.
In this series, I'm tracking down the UK large-caps that have the potential to beat the FTSE-100 over the long term and support a lower-risk income-generating retirement fund. Today, I'm going to take a look at Standard Chartered (London: STAN), a London-listed bank that does the vast majority of its business in Asia, the Middle East, and Africa.
Standard Chartered's overseas focus means it has escaped the worst of the effects of the credit crunch, and has remained profitable and focused on growth. This has helped it perform strongly against the FTSE-100 over the last ten years.
Standard Chartered's trailing ten-year average total return shows it has delivered superior returns to the FTSE-100 despite the credit crunch, an achievement that no other UK bank, not even its Asian peer HSBC Holdings (HBC), has managed. A sharp downturn in Asia could hurt it more than other major UK banks, but good cost control and profitability should help protect it.
Standard Chartered released its interim results today, and the bank's CEO Peter Sands commented that "we see some virtue in being boring." This philosophy could work well for a retirement portfolio.