Morgan Stanley has maintained an "Overweight" rating on Standard Chartered PLC (02888), with a target price of HK$250, after the bank's second-quarter results exceeded market forecasts.

The investment bank noted that Standard Chartered's second-quarter pre-tax profit came in 13% above consensus expectations, driven by revenue growth from non-net interest income. This positive performance was achieved despite a US$7 million negative DVA impact.

Multiple product lines, including wealth solutions and transaction services, outperformed expectations. During the quarter, the company recorded net new fund inflows of US$15 billion, close to Morgan Stanley's estimate of US$16 billion. Operating expenses were 2% below both the bank's and market forecasts, largely due to a one-off impact from a US$74 million provision reversal on a South Korean equity-linked securities portfolio.

The company reported a credit impairment charge of US$150 million for the period, which included an additional US$44 million in provisions. Management indicated that early warning indicators in the Middle East have increased, and the rise in Stage 2 exposure has been partially covered by existing provisions.

As of the end of June 2026, Standard Chartered's Common Equity Tier 1 (CET1) ratio stood at 14.2%, higher than anticipated, benefiting from lower-than-expected risk-weighted assets (RWA). However, Morgan Stanley expects this factor to reverse in the second half of the year.

During the period, the company completed US$1 billion in share buybacks, close to Morgan Stanley's forecast of US$1.1 billion. The dividend per share was 20.4 US cents, exceeding the bank's estimate of 13 US cents and the market consensus of 17.8 US cents.

Management also raised its full-year guidance. Net interest income growth has been revised from a flat forecast to a low single-digit year-on-year increase. Revenue growth guidance has been updated from the lower end of the 5% to 7% range to near the midpoint. Full-year operating expenses (excluding one-off items) are forecast at US$13.3 billion, close to Morgan Stanley's estimate of US$13.24 billion.