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How Cheap Are Singapore-Listed Banks Currently?

Since hitting their respective peaks in the earlier part of 2018, shares in DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corporation Limited (SGX: O39) and United Overseas Bank Ltd (SGX: U11) have declined significantly. For instance, the biggest of the trio, DBS, saw its share price fall 23% to S$23.28 yesterday, since hitting a high of S$30.84 on 30 April 2018.

With the tumbling share prices, investors might be wondering if there is value in the banks’ shares at the latest stock prices. To answer that, let’s compare the historical price-to-book (PB) ratios, price-to-earnings (PE) ratios and dividend yields of the three banks with current valuations.

Bank #1: DBS

The following is a snapshot of DBS’ valuations from 2013 to 2017:Source: DBS 2017 annual report

Over the past five years, DBS’ dividend yield (excluding special dividends) ranged from 3.1% to 4.5%, with an average of 3.7%. In terms of PE ratio, it was between 9.3 and 12.3, giving an average ratio of 11.1. As for the PB ratio, it fluctuated from 0.9 to 1.2, translating to an average of 1.1.

At DBS’ closing share price of S$23.28 yesterday, it had a dividend yield (excluding special dividends) of 5.2%, PE ratio of 10.7 and a PB ratio of 1.2. DBS’ PE and dividend yield are better than the average, but its PB ratio is slightly higher than the mean.

Bank #2: OCBC

Moving on, let’s take a look at OCBC’s valuations from 2013 to 2017:Source: OCBC 2017 annual report

During the period under review, OCBC’s dividend yield has ranged from 3.4% to 4.2%, giving an average of 3.7%. In terms of PE ratio, it was between 10.4 and 13.2, with an average ratio of 11.1. As for its PB (or price-to-NAV) ratio, it has fluctuated from 1.0 to 1.4, translating to an average of 1.2.

At yesterday’s share price of S$10.95, OCBC had a dividend yield of 3.6%, PE ratio of 9.9 and a PB ratio of 1.1. OCBC’s dividend yield is slightly lower than average; but its PE and PB ratio are better than average.

Bank #3: UOB

The following is a snapshot of UOB’s valuations from 2013 to 2017:Source: UOB 2017 annual report

Over the past five years, UOB’s dividend yield (including special dividends) ranged from 3.4% to 4.3%, with an average of 3.8%. In terms of PE ratio, it was between 10.0 and 11.2, giving an average ratio of 11.1. As for its PB ratio, it fluctuated from 1.0 to 1.3, translating to an average of 1.2.

At UOB’s closing share price of S$24.03 yesterday, the bank had a dividend yield (including special dividend) of 4.8%, PE ratio of 10.4 and a PB ratio of 1.1. All of UOB’s valuation metrics are better than the average.

The Foolish takeaway

It looks like UOB gives the most value among the three banks at yesterday’s closing share price of S$24.03. However, UOB shares could fall further due to poor market sentiments currently. Investors who are interested to buy the bank’s shares should pace out their stock purchases to take advantage of any further price falls.

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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.