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An Investor’s Update On The Riskiness Of Oversea-Chinese Banking Corp Limited Stock

Image: Paysafe. Fair use

Four months ago in August, I wrote an article on how risky Oversea-Chinese Banking Corp Limited (SGX: O39) could be as a stock for investors.

I judged the bank’s riskiness with four financial ratios, namely, the leverage ratio, the loans-to-deposits ratio, the efficiency ratio, and the price-to-book ratio. (You can find out why these ratios matter in my aforementioned article.)

What I found was that OCBC was not a particularly risky bank. But, I thought it would be a good idea to revisit my risk-assessment of the bank for two reasons.

First, banks in Singapore have been facing a challenging environment this year, with issues such as our country’s slowdown in economic growth and the weakness in the oil & gas sector. Second, OCBC has released a new set of results – for the third-quarter of 2016 – since the earlier article was published.

So, let’s see how the four financial ratios for OCBC have changed since the second-quarter of 2016 (with the exception of the price-to-book ratio – that would be from the date of publication of my earlier article):

  • The leverage ratio: From 11.1 to 10.9
  • The loans-to-deposits ratio: From 82.2% to 83.1%
  • The efficiency ratio: From 45.5% to 43.2%
  • The price-to-book ratio: From 1.05 to 1.07

The positive changes are the declines in the leverage ratio and the efficiency ratio while the negatives are the higher loans-to-deposits ratio and the price-to-book ratio. But, given that the quantum of change is tiny in all four cases, I think it’s reasonable to say that OCBC’s risk-profile – based on the four financial ratios – have not changed much since my previous article.

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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 Chong Ser Jing does not own shares in any companies mentioned.