Thursday, August 14, 2014

Evaluating Bank Stocks (Follow Up)

A few weeks ago, I tried my hand at evaluating bank stocks. I have to admit, bank stocks are not that straight forward and simple to evaluate. Compared to other types of industries and businesses, I think companies in the financial sector are very tricky to evaluate.

The metrics that I used for my evaluation were:

*error, top left box is supposed to be Jul 2014 not 2013

Valuation
Price/Earnings
Price/Book

Earnings Quality

Net Interest Margin
Non-Interest Income
Non-Performing Loans

Shareholder Yield
Return on Equity
Dividend Yield

Growth Prospects
Loan/Deposit
Cost/Income

Based on fundamentals, OCBC > DBS > UOB. The chilli padis are Sing Fin & Inv > Hong Leong > Singapura Finance.

Based on technicals, UOB > DBS > OCBC. The chilli padis are Sing Fin & Inv > Singapura Finance > Hong Leong.

Anyway, while I was surfing the internet, I stumbled upon this article that took a look at the 3 big local banks here. It is fairly recent, just last week. However, I think the more interesting part of the article is actually the OSK DMG report that came along with it! You should definitely give it a read, especially if you are thinking of bank stocks. I think their research is quite comprehensive, and I really liked that they pulled out all the important numbers for you as well. The ending with comparisons to regional banks was also very interesting. Can you believe that Singapore banks on the whole are the cheapest in the region based on P/E? Hah, interesting!

Although the research favoured DBS, I still stick with my guns and I would say that OCBC is the better choice to me, based purely on valuations

Now that I have cleared up a lot of things that have been on my plate and bugging me, I can finally get down and dirty to start making my watchlist of stocks and slowly populate it with historical financial data. I'm hoping to get at least 3 years worth of data for most of the stocks that I am interested in.

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