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Which Singapore Bank Has The Cheapest Valuation Now?

In Singapore, the three major listed banks are DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corporation Limited (SGX: O39) and United Overseas Bank Ltd (SGX: U11). After peaking in April, the banks have seen their stocks price declining in the next few months. In fact, DBS Group and OCBC have lost about 10% of their market capitalisation in the last month alone.

The recent decline in the banks’ stocks price might draw some interest from investors. In particular, they might wonder which bank is trading at the lowest valuation at the moment.

Unfortunately, there is no easy answer. However, we can still get some insights by comparing the valuation metrics of the three banks (as of 11 July). The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.

The showdown

To begin with, DBS, OCBC and UOB have PB ratios of 1.37, 1.17 and 1.17, respectively. The low PB ratios for OCBC and UOB show that both companies have lower valuation as compared to DBS based on PB ratio alone.

Next, DBS, OCBC and UOB have PE ratios of 14.53, 10.94 and 12.80, respectively. Here, OCBC appears to have the lowest valuation based on its low PE ratio.

Last but not least, the respective dividend yield (excluding special dividends) for DBS, OCBC and UOB are 3.54%, 2.96%, and 2.96%. The higher a stock’s yield is, the lower is its valuation. Thus, we can see that DBS has the lowest valuation in terms of dividend yield.

Conclusion

In all, we can argue that OCBC is probably the cheapest stocks among the local banks due to its low PB and PE ratios.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. Motley Fool has recommendations for DBS Group Holdings Ltd and United Overseas Bank Ltd.