Are these the only 2 banks worth owning?

The banking sector can't seem to catch a break. Eight years on from the collapse of Lehman Brothers, banks are still being hauled in front of regulators for mis-selling scandals and past mistakes. And the constant merry-go-round of criticism makes it difficult for even the most contrarian of value investors to view the industry as 'investable.'

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However, outside developed markets, emerging market-focused banks such as Standard Chartered(LSE: STAN) and HSBC(LSE: HSBA) are proving to be a lot more adept at managing the economic and regulatory environment than their developed market peers.

For example, even though HSBC and Standard Chartered have regularly faced those problems in the past, both groups now seem to have put these issues behind them to focus on running the business.

Preparing for uncertainty

When it comes to running the business, HSBC's management is buckling down for uncertainty. The bank reported a 45% slide in second-quarter profits, the decline partly reflecting the harsh economic environment and partly the bank's reduction of its risk-weighted assets. HSBC's RWAs fell another $33bn in Q2. The bank has pledged to cut $280bn of RWAs by 2017 and has now hit 60% of that target.

With RWAs falling, HSBC's Q2 core tier 1 capital ratio ticked up to 12.1%. As management shrinks the business, it's also looking to return cash to shareholders. Alongside Q2 results the company announced a $2.5bn share buyback, facilitated by the sale of its Brazilian unit. And City analysts expect more buybacks going forward as HSBC further shrinks its operations to become a more focused bank.

Overall, it's seeking stability in an increasingly volatile and complex world. The bank's shares currently trade at a forward P/E of 12.9 and support a dividend yield of 6.8%.

Growth in emerging markets

Shares in Standard Chartered have been on a rocky ride over the past few years, but now the company appears to be getting back to its old self. Within the group's first half results, management said the bank was seeing signs of stabilising income, while underlying profit came in at $994m compared to a loss of $990m in H2 2015.

City analysts have pencilled-in earnings per share of 20p for this year and 43.1p for 2017, indicating EPS growth of 115% next year as the recovery really gets underway. Unlike its developed market peers, Standard will benefit from exposure to fast-growing emerging markets, which should help speed up the recovery.

Shares in Standard currently trade at a forward P/E of 31.2, falling to 14.5 next year.

The bottom line

All in all, Standard and HSBC's shares may not look cheap on a forward P/E basis but in an industry that's plagued with structural issues, these two banks have many advantages. HSBC is seeking stability over growth while Standard is restructuring its business to become more efficient and is well-positioned to capitalise on economic expansion in fast-growing emerging markets.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.