LONDON -- In the last 12 months, shares in Standard Chartered (STAN -0.21%) are 18% higher. However, the bank has reported tougher trading in 2013. While the FTSE 100 is up 13% so far this year, shares in Standard Chartered are off by 1%. The last three months have been especially difficult -- the shares have fallen 12.4%.

As a bank, Standard Chartered has enjoyed the last few years. Between 2007 and 2012, net profits at the bank increased from $2.8 billion to $4.9 billion. In that time, shareholder dividends have increased from $0.67 per share to $0.84 per share.

Valuation
This time three years ago, shares in Standard Chartered were trading at around 1,600 pence. This followed a year in which the company made earnings per share (EPS) of $1.67 and paid a dividend of $0.64 per share. Back then, Standard Chartered shares were trading on a historic price-to-earnings (P/E) ratio of 14.8 and a recent yield of 2.6%.

Today, Standard Chartered shares are trading at 11.8 times 2012 earnings and are on a historic dividend payout of 3.6%. Judging solely on a historic P/E basis, the shares are now 20% cheaper than they were this time three years ago.

Brokers are forecasting Standard Chartered to deliver 18.1% EPS growth this year. That puts the shares on a 2013 P/E of just 10. Again, at this stage three years ago, Standard Chartered shares were priced at 12.8 times full year earnings -- suggesting that the shares are around 22% cheaper than they were three years ago.

Verdict
I would add three important caveats. First, Standard Chartered has frequently traded on a higher P/E and rarely on a lower one than it does now. Second, according to forecasts, the 2014 P/E is just 9.2. Third, Standard Chartered is a bank, and we are in a bull market.

There is a clear case for Standard Chartered shares to be 20% higher today. Winning back its premium rating could push the shares up by more than 50%.

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