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3 Things Investors Should Know About Singapore’s Bank Stocks Today

Singapore’s three major banks make up around a third of the local stock market benchmark, the Straits Times Index (SGX: ^STI).

The three banks would be DBS Group Holdings Ltd (SGX: D05), Overseas-Chinese Banking Corp Limited (SGX: O39), and United Overseas Bank Ltd (SGX: U11). To understand the three banks, a recent report from bourse operator Singapore Exchange may be helpful. The report included information on the banks’ stock market performance, returns on equity, and more.

Without further ado, here are three things that investors should know (figures as of 5 May 2017, unless otherwise stated):

1. When it comes to long-term stock market performance, DBS Group comes up tops. Singapore’s largest bank recorded a total annualised return of 11.5% over the past five years. UOB is in second place with a total annual return of 8.5%. OCBC is the relative laggard with a total return of 6.6% per year.

2. Where OCBC lags in performance, it makes up for with its return on equity (ROE). OCBC’s ROE is 11% while DBS and UOB weigh in with an ROE of 10.3% and 10.5% respectively. The ROE metric measures a bank’s ability to generate profits with shareholders’ equity. In general, the higher the ROE is, the better, although investors have to be aware that a ROE that’s too high may be a sign that a bank’s taking on too much financial risk. That’s because leverage (the use of borrowings) can help juice up a bank’s ROE.

3. According to financial magazine Global Finance World, DBS is ranked 12th among the world’s safest banks. OCBC comes in at 14th place while UOB sits at the 16th spot.

The above is a brief comparison of Singapore’s three major banks over three dimensions: their stock market performance, ROE, and safety ranking. As Foolish investors, we might want to dig deeper to find out the individual challenges that each bank faces.

If you'd like more investing insights as well as the latest news about Singapore's stock market, you can get both from The Motley Fool's free weekly investing newsletter, Take Stock Singapore. Written by David Kuo, Take Stock Singapore can help you grow your wealth in the years ahead. So, come sign up here.

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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 Singapore Exchange and United Overseas Bank. Motley Fool Singapore writer Ching Hui Leong doesn't own shares in any companies mentioned.