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DBS, UOB or OCBC: Who has a Better Share Valuation for 2019?

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 2018, these banks have seen their stocks price declining for the next few months, down by more than 20% from their respective peaks.

The decline in the banks’ stocks price might draw some interest from investors. One of this group of investors is the dividend investors. In particular, dividend investors might want to know which bank might be a better dividend stock.

Clearly, there is no easy answer to the above question. After all, we do not know what will happen in the future. Still, we would like put the trio side by side for a direct comparison

In our previous articles, we compared the dividend and financial track record of all three banks in the last 10 years. DBS Group and OCBC were the respective winners in round one and two of our showdown.

In this article, we will look at the last part of our comparison, which is on valuation. Here, we will compare the valuation metrics of the three banks (as of writing). 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 Group, OCBC and UOB have PB ratios of 1.2, 1.1 and 1.1, respectively. The low PB ratios for OCBC and UOB suggest that both companies have lower valuation (compare to DBS Group) based on PB ratio.

Next, DBS Group, OCBC and UOB have PE ratios of 11.0, 9.9 and 10.5, respectively. Here, OCBC appears to have the lowest valuation based on its low PE ratio.

Last but not least, the respective dividend yield for DBS Group, OCBC and UOB are 5.1%, 3.5%, and 3.9%. The higher a stock’s yield is, the lower is its valuation. Thus, we can see that DBS Group has the lowest valuation in term of dividend yield.

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

Conclusion

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

Nevertheless, investors are reminded that the information presented here is by no means a recommendation to take any action on the stocks 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.