In Singapore’s stock market, the three major bank shares 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 this year, the three banks have seen their share prices decline by around 20% each from their respective highs.
The recent fall in DBS Group, OCBC, and UOB’s share prices may have led to some investors wondering which bank they should consider investing in now. There’s no easy answer, but I want to directly compare the important business and valuation aspects of the three banks in a mini article-series.
This article is the third in the series and it compares the valuation metrics for the three banks. In particular, the valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield. My first article in the series compared the most recent quarterly earnings updates of the three banks, while the second article looked at the banks’ long-term track record of growth.
The table below shows the valuations of the three banks as of 14 October 2018:
|Bank||PB ratio||PE ratio||Dividend yield|
Source: SGX Stock Facts
Looking at the table above, I think it’s clear that OCBC is the cheapest among the three banks due to its lower PB and PE ratios.
The Foolish conclusion
As a recap, it was UOB that had the best performance when I compared the three banks’ most recent quarterly earnings updates in my first article in the series. But, it was OCBC with the best report card for long-term growth, as discussed in my second article. And as we’ve just seen, OCBC is also the bank share with the best valuation. So, OCBC has emerged as the winner by coming out ahead in two out of my three criteria.
But with all the above been said, investors are reminded that the information presented in the series is by no means a recommendation to take any action on the bank shares mentioned. Instead, the information should be viewed only as a useful starting point for further research.
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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 contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommendations for DBS Group, Oversea-Chinese Banking Corporation, and United Overseas Bank.