by winston » Mon Dec 18, 2023 11:25 am
SINGAPORE BANKS: TO EXIT OR DOUBLE DOWN?
From the pandemic lows in March 2020 till now, Singapore banking stocks have recovered almost 70% on average – a credible performance over a period of less than four years.
In the last three months, shares of DBS & UOB have declined, reflecting the expected softening in the macroeconomic environment in 2024.
With the recent share price corrections, valuations have similarly come off.
Based on the FTSE ST All-Share Financials Index, price-to-book (P/B) is now at 1.2x versus the recent high of 1.4x in Feb 2022.
We do not deem this to be excessive especially since profits have grown tremendously in the past 10 years.
In FY2014, the combined net profits of the listed Singapore banks amounted to SGD11.1b. By 9-month FY2023, this swelled to SGD17.5b.
On an annualised basis, profits have more than doubled in the last 10 years. This speaks of the transformation and the diverse earnings streams of the local banks.
When compared to other peers, valuations are also not expensive and at the lower end of the valuation spectrum.
We have an overweight on the Singapore banks. DBS [DBS SP; FV: SGD39.00] is our top pick in the local banking sector, and UOB [UOB SP; FV: SGD32.50] is a BUY.
Source: OCBC
It's all about "how much you made when you were right" & "how little you lost when you were wrong"