Is Oversea-Chinese Banking Corp Limited A Risky Stock Now?

Singapore’s second largest bank by total assets, Oversea-Chinese Banking Corp Limited (SGX: O39), released its 2016 full year results just last week.

In December 2016, I wrote an article that assessed the riskiness of OCBC using its financials for the third quarter of 2016. My verdict back then was that OCBC was not a particularly risky stock and that its risk-profile had not changed much from the second quarter.

My view was based on a study of four ratios for OCBC: the leverage ratio; the loans-to-deposits ratio; the efficiency ratio; and the price-to-book ratio.

(For why the ratios are important and what to look out for with them, you can head to an even earlier article I wrote.)

Now that new financial numbers from OCBC have been released, I think it’s a good time to take a look again at the bank’s riskiness. So, here are how the four financial ratios have changed for OCBC since the publication of my aforementioned December 2016 article on the bank:

  • The leverage ratio: From 10.9 to 11.1
  • The loans-to-deposits ratio: From 83.1% to 82.9%
  • The efficiency ratio: From 43.2% to 45.1%
  • The price-to-book ratio: From 1.07 to 1.12

Turns out, the only ratio that showed improvement was the loans-to-deposits ratio – the other three had all taken a step backward. Given this, I think it’s fair to say that OCBC has become a slightly riskier bank stock.

But, it’s crucial to acknowledge that OCBC is still not a bank stock that carries a high level of risk in any way. The bank’s leverage ratio is still healthy, and so is its efficiency ratio. Meanwhile, its price-to-book ratio of 1.12 at the moment is also near a five-year low.

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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 owns shares in Oversea-Chinese Banking Corp.