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 40% of the Straits Times Index (SGX: ^STI) and are loved by many Singaporean investors due to their resilience. Therefore, it is not astonishing that each of the bank’s shares rose more than 29% in 2017 while the STI only went up around 18% during the same time frame. Given the strong lead up last year, I thought it would be interesting to see which bank is…
The banks make up close to 40% of the Straits Times Index (SGX: ^STI) and are loved by many Singaporean investors due to their resilience. Therefore, it is not astonishing that each of the bank’s shares rose more than 29% in 2017 while the STI only went up around 18% during the same time frame.
Given the strong lead up last year, I thought it would be interesting to see which bank is still valued lower than the SPDR 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 SPDR STI ETF (the best values are in bold):Source: S&P Global Market Intelligence (Data as at 10 January 2018)
In terms of PB ratio, UOB seems to be the cheapest bank, even lower than the STI ETF’s figure of 1.35.
When using PE ratio as a metric, all three banks look expensive. The market has a PE ratio of 11.54 whereas the banks are all valued at more than 13 times their respective earnings.
With regards to dividend yield, all the banks are yielding lower than the market. However, OCBC offers the highest yield amongst the banks with a dividend yield of 2.8%.
DBS looks to be the most expensive bank stock amongst the three banks with its highest PB and PE ratio, and lowest dividend yield. The rich valuation is hardly surprising. In 2017, the bank’s shares surged 43% to end the year at S$24.85. In comparison, OCBC’s shares rose 39% while UOB’s saw gains of 30%.
It looks like there is no clear-cut winner of the bank which is cheaper than the market. Even if there was, investors who are looking to invest in the winner 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:
a) How to Analyze a Bank’s Balance Sheet – click here
b) How to Analyze a Bank’s Profitability – click here
c) 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 DBS Group Holdings Ltd and United Overseas Bank Ltd. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.