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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).

Year-to-date, shares of the trio have outperformed the Straits Times Index (SGX: ^STI). For instance, DBS’ shares have risen more than 11% since the start of 2018 to end last Friday at S$28.41.

Given the strong lead up thus far, 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 Straits Times Index.

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

Source: Author’s calculations using the banks’ 2017 financial statements; price as at the close of 2 March 2018

If we include the special dividend of 50 cents per share proposed for DBS, its adjusted dividend yield would be slightly above 5%. UOB’s board has also declared a special dividend, which amounted to 20 cents per share. The bank’s adjusted dividend yield would be 3.6% if we account for the special dividend.

In terms of PB ratio, UOB seems to be the cheapest bank, but it is still higher than the SPDR STI ETF’s PB ratio of 1.3.

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 13 times their respective 2017 earnings.

When it comes to dividend yield, DBS gives the best bang for the buck among the banks with a yield of 3.3%. Furthermore, every dollar invested in DBS gives higher cash inflow for the investor as compared to the SPDR STI ETF.

In general, it looks like all three banks are more expensive than the Straits Times Index. Therefore, there is no clear-cut winner of which bank is cheaper than the market now. 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 on equity, and so on.

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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.