6 Things You Must Know About Singapore’s Bank Stocks

Speak of financial stocks in Singapore’s stock market, and it’s almost inevitable that the trio of big local banks, namely DBS Group Holdings Ltd  (SGX: D05)United Overseas Bank Ltd (SGX: U11) and Oversea-Chinese Banking Corp Limited (SGX: O39), will feature.

A recent report from bourse operator Singapore Exchange Limited  (SGX: S68) may offer deeper insight into the trio.

The report actually covers a potpourri of data on financial firms ranging from consumer finance to real estate developers to real estate investment trusts (REITs). But, our focus will be on the big three local banks. Here’re six highlights:

  1. The Financial sector stocks are a big part of the daily turnover at the Singapore Exchange, accounting for 48% in January 2016. DBS, UOB, and OCBC collectively accounted for 23% of the day-to-day turnover for the same period.
  2. Among the three banks, DBS is the bank which derives most of its revenue from Singapore – in the third quarter of 2015, 61% of the bank’s revenue had come from the Garden City. The other two banks, namely OCBC and UOB, are fairly close at 57% and 59%, respectively, over the same timeframe.
  3. Total loans out of Singapore average at around 48% for the three banks. UOB is the only one with more than half of its loans from Singapore. OCBC, on the other hand, has 59% of its loans coming from outside Singapore.
  4. The trio of banks had an average price to book (PB) of around 0.97, as of 29 January 2016. This is lower than the five-year average PB ratio of 1.28 recorded by the same group. Of the trio, DBS Group had the lowest PB ratio of 0.90. UOB, on the other hand, weighed in at a PB ratio of 1.03. OCBC’s PB ratio was in between at 0.99.
  5. In the ten years through 2015, DBS, UOB, and OCBC had generated annualised total returns of 6.4%. Over the past five years, the annual total returns of the trio had been more miserly at 4.6%. For perspective, the SPDR STI ETF (SGX: ES3), an exchange traded fund that mimics the Straits Times Index (SGX: ^STI), had clocked in total annual returns of 6.2% from its inception (11 April 2002) up till the end of January 2016.
  6. As of 29 January 2016, UOB had the highest trailing dividend yield at 4.7%. DBS was the lowest of the trio with a 4.3% yield. OCBC appears to be the goldilocks of the group with its 4.5% yield. Again, for perspective, the SPDR STI ETF offered a distribution yield of 3.8% as of 5 February 2016.

Looking back helps us understand how the banks have fared over the past decade and gives us clues on which might be worth following. This may give us a head-start on our investing homework that follows.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.