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Which Singapore-Listed Bank Is Cheaper Than The Stock Market Now?

Since their respective peaks in May 2018, shares in DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corporation Limited (SGX: O39) and United Overseas Bank Ltd (SGX: U11) have lost more than 19% each. For instance, DBS shares have plummeted some 25% to close at S$23.20 apiece yesterday.

Given the poor share performance by the banking trio, it begs the question: Which bank has the most enticing valuation to hold for the long-term? To help answer that, I would be comparing the valuation of the banks against that of the SPDR STI ETF (SGX: ES3), an exchange-traded fund which can be taken as a proxy for the Straits Times Index (SGX: ^STI).

The table below shows the valuation comparison of the banks against the SPDR STI ETF (the best values among the banks are in bold):Source: S&P Global Market Intelligence; SPDR STI ETF website (data as of 19 November 2018)

In terms of PB ratio, UOB looks to be the cheapest bank, but its valuation is still a tad higher than that of the SPDR STI ETF, which has a PB ratio of 1.08.

When using PE ratio as a metric, OCBC has the upper hand over the other banks. Its PE ratio of below 10 is lower than both DBS’ and UOB’s PE ratios, and is also less than that of the market.

When it comes to dividend yield, DBS gives the most bang for the buck with a yield of 5.2%. Furthermore, every dollar invested in DBS gives a higher cash inflow for the investor as compared to the SPDR STI ETF. Do note that the dividend yields for the banks exclude any special dividends declared.

The Foolish takeaway

All banks are still selling at PB ratios above that of the SPDR STI ETF. However, investors who are interested to invest in any of the banks should be mindful that valuations can go lower given the poor market sentiments currently. Pacing out your purchases will help to take advantage of any further falls in share prices.

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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, Oversea-Chinese Banking Corporation Limited and United Overseas Bank Ltd. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.