Dear readers, as the Straits Times Index (STI) powered to its highest since 2007, the 3 STI banking counters also rose to one of their highest traded prices this year.
DBS closed last Friday (15 Nov 24) at $42.94, or 41.95% year-to-date.
OCBC closed last Friday (15 Nov 24) at $16.44, or 27.24% year-to-date.
UOB closed last Friday (15 Nov 24) at $36.37, or 27.61% year-to-date.
Based on the above, it seems that OCBC stock seems to be the cheapest given that its rally year-to-date is the lowest among the 3 banks.
However, this is not the right way to gauge whether a stock is cheap or expensive. More commonly used is the Price-to-Book ratio (PB) and the following are the PB ratios for the 3 banks currently.
DBS: PB =1.874
OCBC, PB =1.3
UOB, PB =1.273
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As we can see from the above, UOB with its lowest PB is the cheapest stock among the three STI banking stock currently.
We can also see that DBS is far ahead than OCBC or UOB in terms of valuation and OCBC and UOB trade at around 1.3 PB ratio.
So for those who think that current PB ratio of DBS stock is on the high side, DBS must either increase its book to trade at a more modest PB ratio or the market will sell down DBS stock to close the gap of the PB ratio with the other two banks.