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Which Singapore Bank Stock Should Investors Buy Now? (Part 3)

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).

In my previous articles here and here, I compared the recent earnings performance of all the three banks and their track record of growth in the last five years. DBS and OCBC were the respective winners in round one and two of the showdown.

In this article, I will look at the last part of my comparison, which is on valuation. Here, I will compare the valuation metrics of the three banks such as their 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 1.3, 1.1 and 1.1 respectively. We can see that OCBC and UOB have the lowest PB ratios.

Next, DBS, OCBC and UOB have PE ratios of 11.1, 9.9 and 10.5 respectively. Here, OCBC appears to have the lowest valuation based on its PE ratio.

Last but not least, the respective dividend yield for DBS, OCBC and UOB are 5.2%, 3.6%, and 4.0%. The higher a company’s dividend yield is, the lower is its valuation. Thus, we can see that DBS has the lowest valuation in terms of dividend yield.

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

Conclusion

In sum, OCBC emerges as the overall winner by winning two out of the three rounds, which are for the best growth track record and lowest valuation.

Though insightful, investors are reminded that the information presented here is by no means a recommendation to take any action on any of the shares mentioned. Instead, it 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. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. Motley Fool has recommendations for DBS Group Holdings Ltd, Oversea-Chinese Banking Corporation Limited and United Overseas Bank Ltd.