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Which Local Bank Should You Invest In? How Did DBS, UOB, and OCBC Perform In Q1 FY2024?

As we approach 2H FY2024, the financial markets have faced many ups and downs thus far. From the conflict between Israel and Iran, to the FEDs reducing their forecasted rate cuts for the year. From an initial forecasted net terminal rate of 4.25% – 4.50%, the current forecasted net terminal rate for FY2024 stands at 4.75% – 5.00%. As our 3 local banks namely DBS (SGX: D05), UOB (SGX: U11), and OCBC (SGX: O39), have just released their Q1 FY2024 earnings, let’s take a deep dive to see how well they’ve done so far! In this article, I’ll cover the FY2023 results and compare the 3 local banks on which one you should invest in.

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Q1 FY2024 Operating Performance

Year on Year DifferenceRevenueProfit Before AllowancesAllowances MadeNet Profit
DBSS$5.557 billion (+13%)S$3.478 billion (+14%)S$135 million (-16%)S$2.951 billion (+15%)
UOBS$3.523 billion (+0%)S$1.729 billion (-1%)S$163 million (-4%)S$1.487 billion (-2%)
OCBCS$3.626 billion (+8%)S$2.28 billion (+8%)S$169 million (+53%)S$1.982 billion (+5%)

Starting off with the operating performance of the 3 local banks, we can see that DBS has yet again grown its revenue the most by 13%, with OCBC trailing behind at 8% and UOB seeing almost flat growth year over year. When we look at the profit before allowances, DBS also takes the lead at 14%, with OCBC trailing behind at 8% and UOB falling behind with a 1% drop year over year.

Looking at the allowances made, we can see that DBS and UOB accounted for lesser allowances in Q1 FY2024, 16% and 4% respectively, whereas OCBC accounted for significantly more allowances, increasing it by 53%. Lastly, when looking at the net profits across the 3 local banks, we can see that DBS had the strongest growth at 15% year over year, with OCBC placing second at 5%. UOB had a disappointing Q1 with a 2% decrease year over year.

Digging deeper, we can see that UOB had a weaker quarter as its Group Retail business saw a 1% decrease year over year, as well as its Group Wholesale Banking business which saw a 7% decrease year over year. Overall UOB had a weaker net interest margin (NIM) in Q1 FY2024 at only 2.02% as compared to 2.14% a year prior.

Key Financial Ratios

As at 31st Mar 2024Net Interest MarginCost/Income RatioNon-Performing Loans RatioLiquidity Coverage Ratios (LCR)Leverage RatioCommon Equity Tier 1

Moving onto key financial ratios, as I’ve mentioned before, is definitely the most important part when analyzing and evaluating a bank. At first glance, we can see that OCBC has the highest NIM at 2.27% while its peers are trailing behind with DBS at 2.14% and UOB at 2.02%.

Next, we will look at the Cost/Income ratio which DBS is leading at 37%, with OCBC following closely behind at 37.1% and UOB trailing behind at 41.9%. Just to recap, the Cost/Income ratio is used to see how well the company is managing its costs and spending to generate revenue. In essence, a low Cost/Income ratio signifies that the company is managing its costs well and is not overspending to generate revenue.

Moving onto the NPL ratio, we can see that OCBC has the lowest NPL at only 1% with DBS and UOB trailing behind at 1.1% and 1.5% respectively. When comparing the LCR, UOB leads the pack at 160% with OCBC and DBS trailing behind at 146% and 144% respectively. In addition, OCBC has the highest leverage ratio at 7.3% and the strongest CET-1 ratio at 16.2%. DBS’s leverage ratio is the lowest amongst the 3 local banks at 6.5% with UOB trailing ahead at 7.0%. DBS edges UOB out with a CET-1 ratio of 14.7%, beating UOB’s 13.9%.

Based on the financial ratios, we can definitely see that OCBC has performed the best with the strongest balance sheet, highest NIM, and second most efficient cost/income ratio.


Annualized PE RatioPB RatioExpected Dividend Yield
DBS @ $35.398.51x1.64x6.10% ($2.16)
UOB @ $30.3511.53x1.14x5.60% ($1.70)
OCBC @ $13.237.52x1.08x6.20% ($0.82)

Based on the last closing price of the 3 local banks, we can see that OCBC is the cheapest in terms of valuation as compared to its peers whereas UOB is the most expensive bank in terms of valuation. At the last closing price, we can see that UOB has the highest annualized PE ratio of 11.53x whereas its peers are much lower with DBS at 8.51x and OCBC at 7.52x. Next, comparing the PB ratios, DBS is much higher at 1.64x while UOB and OCBC are much lower at 1.14x and 1.08x. When comparing the annualized forward dividend yield, OCBC has the highest yield at 6.20% with DBS coming in second with a yield of 6.10% and UOB following close behind in 3rd place at 5.60%.

Another good metric to valuate these banks would be using ROE or ROCE. Return on equity (ROE), also known as return on common equity (ROCE), is a measure of a business’s profitability. Specifically, it is a ratio describing the rate of profit growth a business generates for shareholders and owners. DBS has the strongest ROE at 19.4%, growing from 16.1% last year. OCBC comes second with an ROE of 14.7% as compared to a year ago at 12.4%. UOB comes last at 14.0% as compared to a year ago at 14.9%, the only bank that saw a drop in ROE year over year.

Final Thoughts

In summary, DBS and OCBC performed pretty well in Q1 FY2024 whereas UOB’s earnings were quite disappointing. Based on the valuation metrics above, we can see that OCBC can be considered relatively undervalued with a PB of only 1.08x and a low PE of only 7.52x. Not forgetting the fact that OCBC is planning to privatize Great Eastern (GE), this could mean further upside for OCBC moving forward. The offer price (S$25.60 per share) represents a huge premium to the last traded price as well as VWAP across different time periods (1-month, 3-month, 6-month, 12-month, and 5-year). DBS on the other hand, is rather expensive when we look at its PB of 1.64x but we have to consider that the PE is also in line with its peers at 8.51x. Another reason why I find all 3 local banks undervalued is because they are yielding near 6% which is quite uncommon as they are usually yielding within the range of 4% in the past.

Among the 3 local banks, we can see that OCBC has done the best with the strongest balance sheet, highest NIM as well as second most efficient cost/income ratio. When we talk about valuation, OCBC is also the cheapest with a PE of only 7.52x, PB of only 1.08x, and a forward annualized yield of 6.20%, which is much higher than our risk-free rate in Singapore (CPF SA – 4%). Taking all these factors into account, I will pick OCBC now in comparison to the other 2 local banks because of the strong acquisition of GE. In addition, its valuation is the most attractive.

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