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The Stronger Bank: Singapore’s United Overseas Bank Ltd vs. Malaysia’s Hong Leong Bank Berhad

United Overseas Bank Ltd (SGX: U11) is only the third-largest bank in Singapore by assets, but it still counts as one of the largest banks in the Southeast Asia region. While the bank’s based in Singapore, it also has sizeable operations in Malaysia. In fact, Malaysia is now the second largest geographical market for the bank, contributing 12.5% of total operating income in 2015.

For me, this raises the question: How does UOB’s business compare with some of Malaysia’s largest banks? In here, I’m going to pit UOB against Hong Leong Bank Berhad (KLSE: 5819.KL), which is one of five largest banks in Malaysia by assets.

Business size

While Hong Leong Bank is one of Malaysia’s banking giants, it is dwarfed by UOB. As of the first-quarter of 2016, UOB has total assets of S$330 billion, which is over five times Hong Leong Bank’s total assets of RM188.6 billion (around S$63 billion).

Historical growth rates

But in terms of growth, UOB’s size might put have placed it in a disadvantageous position. Over the last five-years, UOB only managed to grow its net income at an annual rate of 3.6%, its dividend per share at 3.1%, and its book value per share at 7.4%.

Hong Leong Bank, on the other hand, saw a 17% annual increase in its net income over its last five fiscal years. Meanwhile, its dividend per share and book value per share both grew solidly at 11.3% per year and 16.2% per year, respectively, over the same period.

Valuation

UOB’s slower growth might be a key reason why it is trading at a discount relative to its Malaysian peer. UOB trades at just 9.5 times its earnings and 1.1 times its tangible book value. Hong Leong Bank meanwhile has a price-to-earnings ratio of 12 and a price-to-book ratio of 1.3.

A Fool’s take

We can see that while UOB is the larger and cheaper bank, Hong Leong Bank is the financial outfit that has seen faster growth. It’s often the case that faster-growing companies are given higher valuations than their peers with more sluggish growth rates.

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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 writer Stanley Lim doesn't own shares in any company mentioned.