Normal Chartered (LSE:STAN) shares are up 77% over two years. Which means £10,000 invested then can be price £17,700 right this moment. That’s clear a extremely sturdy return, and it will have been topped up by a modest dividend in the course of the interval — the present yield stands at 2.4%.

However will it go greater nonetheless? Properly, I just like the inventory, however there’s one factor I’m somewhat involved about…

My worries

Through the Biden period, the typical efficient US tariff was 2.5%-2.7%. Now everyone knows that issues have modified underneath President Trump and that negotiations are ongoing. However there are a number of issues to remember right here.

Firstly, it dawned on me right this moment that these negotiations may merely go on and on. The US might need declared a 90-day truce for negotiations, however what’s to cease that being prolonged time and again till one thing is ultimately hashed out.

Whereas uncertainty’s sometimes dangerous for economies and firms, traders have to keep in mind that baseline tariffs and different sector- and country-specific tariffs stay in place. In Could, the typical efficient US tariff charge was 17.8%.

Something between this determine and the baseline 10% tariff is prone to have a profound affect on the worldwide financial system. And easily, I don’t consider we’ve actually seen the affect of that but.

So why is that this vital to Normal Chartered? The group operates in over 50 international locations, with a powerful presence in Asia, Africa, and the Center East. Collectively, these account for over 80% of the financial institution’s earnings. Key markets embrace Hong Kong, Singapore, India, the UAE, and Africa (notably Kenya, Nigeria, and South Africa), whereas its world headquarters stay in London.

In brief, I consider its creating financial system focus leaves it extra uncovered to Trump’s tariffs than different UK banks. A lot of its international locations of operations had been highlighted by the Trump administration for his or her commerce surplus with the US.

Valuation leaves room for development

Transferring away from my considerations and specializing in the quantitative knowledge — which can have priced in a few of my considerations — Normal Chartered’s ahead valuation suggests significant room for share price development.

The ahead price-to-earnings (P/E) ratio stays conservative. It’s forecast to fall from 9.53 instances in 2025 to simply 6.15 instances by 2027. That is powered by sturdy earnings per share (EPS) development, shifting from $1.62 in 2025 to $2.52 by 2027.

The price-to-book ratio additionally stays modest, easing from 0.8 instances in 2025 to 0.65 instances in 2027. That is properly under friends and suggestive of additional potential ought to return on fairness enhance.

In the meantime, dividend per share’s anticipated to rise steadily, reaching $0.51 in 2027, translating right into a yield of three.32% on the present price.

With bettering profitability, disciplined capital allocation, and increasing shareholder returns, the forward-looking valuation leaves scope for share price appreciation.

I’d argue that the inventory’s undervalued if it wasn’t for my considerations about tariff publicity. For now, I’m watching from the wings — I gained’t add it to my portfolio but.