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Which Singapore-Listed Bank Is Cheaper Than the Market Now?

The three listed banks in Singapore are DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corporation Limited (SGX: O39) and United Overseas Bank Ltd (SGX: U11).

The banks make up close to 37% of the Straits Times Index (SGX: ^STI) and are loved by many Singaporean investors due to their resilience. Therefore, it is not surprising that each of the bank’s shares have gained more than 15% year-to-date while the STI has only gone up around 13% during the same time frame.

Given the strong lead up this year, I thought it would be interesting to see which bank is still valued lower than the STI ETF (SGX: ES3), an exchange traded fund which can be taken as a proxy for the STI.

The table below shows the comparison of the banks against the STI ETF (the best values are in bold):

In terms of PB ratio, DBS seems to be the cheapest bank, even lower than the STI ETF’s figure of 1.26.

When using PE ratio as a metric, all three banks look expensive. The market has a PE ratio of 11.6 whereas the banks are all valued at more than 12 times their respective earnings.

In terms of dividend yield, OCBC looks to be the cheapest with a yield of 3.3%. In comparison, the STI ETF’s dividend yield is at 3.1%.

UOB looks to be the most expensive bank stock amongst the three banks as it has the highest PE ratio and the lowest dividend yield.

It looks like there is no clear-cut winner in this exercise. Even if there is, investors who are looking to invest in a bank have to look into other aspects such as its net interest margin, non-performing loans ratio, loan-to-deposit ratio, return to equity, and so on.

To know more about how to analyse a bank, you can check out the links below:

  • How to Analyze a Bank’s Balance Sheet – click here
  • How to Analyze a Bank’s Profitability – click here
  • How to Value a Bank Stock – click 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 United Overseas Bank. Motley Fool Singapore contributor Sudhan P owns units in STI ETF.