Just How Risky Is DBS Group Holdings Ltd Stock Now?

Back in August this year, I published an article that assessed how risky DBS Group Holdings Ltd (SGX: D05) could be for investors.

My verdict was that DBS, Singapore’s largest bank by assets, was not particularly risky. My assessment was based on four financial metrics that are important to banks: the leverage ratio; the loans-to-deposits ratio; the efficiency ratio; and the price-to-book ratio.

(You can find out why these ratios are important, and what to look out for, in an article I wrote that studied the risk-profile of Oversea-Chinese Banking Corp Limited (SGX: O39).)

I think now could be a good time to reassess the risks associated with DBS for two reasons. Firstly, 2016 has so far been a challenging year for banks in Singapore with them grappling with issues such as weakness in the oil & gas industry and a slowdown in economic growth here. Secondly, DBS has released a new set of results – for the third-quarter of 2016 – since my earlier article on the bank was published.

With that, let’s turn to the changes in the four financial ratios that DBS has experienced since the second-quarter of 2016 (with the exception of the price-to-book ratio – that would be from the date of publication of the earlier article):

  • The leverage ratio: From 10.6 to 10.5
  • The loans-to-deposits ratio: From 91.8% to 89.5%
  • The efficiency ratio: From 44.0% to 40.9%
  • The price-to-book ratio: From 0.9 to 1.05

We can see that improvements have been made in DBS’s leverage ratio, loans-to-deposits ratio, and efficiency ratio. The only negative here is that the bank’s valuation – its price-to-book ratio – has increased.

Taking into account all we’ve seen above, I think it’s fair to say that DBS is currently not a risky bank stock. In fact, its risk-profile has even improved slightly 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.