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Is United Overseas Bank Ltd a Risky Stock Now?

United Overseas Bank Ltd (SGX: U11), Singapore’s third largest bank by assets, released its 2016 fourth quarter results just last week.

In December 2016, I wrote and published an article that studied how risky UOB was for investors using its financials for the third quarter of 2016.

I had looked at four important financial ratios – the leverage ratio, the loans-to-deposits ratio, the efficiency ratio, and the price-to-book ratio – and came to the conclusion that UOB is a fairly low-risk bank stock and that its risk profile had not changed much from the second quarter of 2016.

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

With new financials from UOB available now, I think it’s a good time to reassess the bank’s risk. So, here are how the four financial ratios have changed for UOB since the publication of my aforementioned December article on the bank:

  • The leverage ratio: From 10.1 to 10.3
  • The loans-to-deposits ratio: From 85% to 86.8%
  • The efficiency ratio: From 45.0% to 47.2%
  • The price-to-book ratio: From 1.1 to 1.16

It’s clear that all four financial ratios for UOB have deteriorated slightly, so I think it’s fair to say that the bank has become riskier compared to the third quarter of 2016.

But, I will stress that UOB is still not a risky bank at all. Its leverage ratio, loans-to-deposits ratio, and efficiency ratio are all at very healthy levels. Meanwhile, its current price-to-book ratio is actually 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. The Motley Fool Singapore has recommended shares of United Overseas Bank. Motley Fool Singapore writer Chong Ser Jing does not own shares in any company mentioned.