One of the most popular industries among local investors is the banking industry. There are many good reasons to like our local banks: their stable business performances, solid dividend track records, and more.
Another good reason to like these banks is their undemanding valuations compared to the Straits Times Index (SGX: STI). Despite this, investors might still want to know which bank among the three has the lowest valuation now. After all, investors are always searching for good value in the stock market.
In this article, we’ll try to answer this question: Which is the cheapest bank among the trio of local banks, DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corporation Limited (SGX: O39), or United Overseas Bank Ltd (SGX: U11)?
To do so, we will compare the valuation metrics of the three banks (as of writing). The three valuation metrics I’ll focus on are the price-to-book (P/B) ratio, price-to-earnings (P/E) ratio, and dividend yield.
To begin with, DBS Group, OCBC, and UOB have P/B ratios of 1.3, 1.0, and 1.0, respectively. The lower P/B ratios for OCBC and UOB suggest the companies have lower valuations (as compared to DBS Group) based on P/B ratio.
Next, DBS Group, OCBC, and UOB have P/E ratios of 10.7, 9.9, and 10.6, respectively. Here, OCBC appears to have the lowest valuation based on its low P/E ratio.
Last but not least, the respective dividend yields for DBS Group, OCBC, and UOB are 4.8%, 4.4%, and 4.1%. The higher a stock’s yield, the lower its valuation. Thus, we can see that DBS Group has the lowest valuation in term of dividend yield.
The Foolish bottom line
OCBC is probably the cheapest stocks among the local banks due to its low price-to-book and price-to-earnings ratios.
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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. 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 2019