Which of Singapore’s 3 Bank Stocks Has the Lowest Valuation?

Bank stocks in Singapore have had a rough time over the past 12 months. The trio of DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corp Limited (SGX: O39), and United Overseas Bank Ltd (SGX: U11) have seen their stock prices fall by between 13% and 24% since 20 July 2015.

Some possible reasons for the banks’ lower stock prices could be the current low interest rate environment, their exposure to the oil and gas industry via loans made to the industry’s players, and Singapore’s slower pace of economic growth as compared to previous years.

Given the trio’s price declines over the past year, I thought it may be interesting to see which bank has the lower valuations in terms of the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.

The following table shows the three valuation metrics for DBS, OCBC, and UOB:

DBS, OCBC, and UOB valuation table
Source: S&P Global Market Intelligence

One thing that stands out for me is that all three banks have valuation numbers that are very close to one another – in other words, there is no clear-cut winner.

It should be noted that the above exercise, while giving useful insight, should only be seen as a starting point for further research on DBS, OCBC, and UOB. With a bank, investors may also want to focus on the quality of loans it has been making, and the level of liquidity and solvency risks it is taking on, among other issues.

A Fool’s take

As I’ve mentioned, there are many other things for investors to consider with banks beyond the three value metrics. This is important to keep in mind since the metrics are based on past information whereas a bank’s future stock performance will have strong links to its future business performance.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.