One of the most popular industry among local investors is the banking sector. There are many good reasons to like our local banks. They have stable business performances, solid dividend track records, and much more.
Another good reason to like these banks is their undemanding valuation as compared to the Straits Times Index (SGX: STI). After all, investors are always searching for good value in the stock market.
Here, we will try to answer the following question: Which is the cheapest bank among the trio local banks, namely, DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corporation Limited (SGX: O39) and 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 will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.
To begin with, DBS, OCBC and UOB have PB ratios of 1.3, 1.0 and 1.1, respectively. The lowest PB ratio for OCBC suggests that it has the lowest valuation among the trio.
Next, DBS, OCBC and UOB have PE ratios of 10.7, 9.9 and 10.4, 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 4.9%, 4.0%, and 4.0%, respectively. The higher a stock’s yield is, the lower is its valuation. Thus, we can see that DBS has the best valuation in terms of dividend yield.
Overall, we can argue that OCBC is probably the cheapest stock among the local banks due to its low PB and PE 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 the shares of DBS Group Holdings Ltd, Oversea-Chinese Banking Corporation Limited and United Overseas Bank Ltd.
Motley Fool Singapore 2019