The good local banks

The prices of Singapore’s 3 local banks at this moment are UOB $21.45, DBS $16.17 and OCBC $9.69. If the prices are an indication of the strength of these banks, UOB easily is number One followed by DBS a distant second. The respective PE ratios of the three banks are UOB 11.11, DBS 10.69, OCBC 12.26. In terms of yield, the respective numbers are 3.3%, 3.6%, 3.56%.

The PEs and yields are fairly similar but the price gaps are quite wide. What could account for the price difference, if we are to assume that the higher the price the more confident investors have of the stock and the quality of the company and management, UOB stands up from the other two. Why?

One very significant difference in the three banks is that UOB is managed by local talents primarily while the other two have foreign talents as their CEOs and also a fairly large presence of foreign talents among the staff.

Can we draw any meaningful conclusion from the three banks vis a vis the value of foreign talents? One thing for sure, the investors have higher regards for a bank that is managed by local talents than by foreign talents.

This is only a very broad brush comparison and the analysts would have different opinions when they apply different criteria to determine which is a better bank or better investment. Many would rate the presence of foreign talents at the top as a trump card. Some may find this a joker.

What do you think?


Anonymous said...

Can we draw any meaningful conclusion from the three banks vis a vis the value of foreign talents?

I don't think so.
You look at the PAP political party.
The person in charge is a 3rd generation Singaporean.
I challenge you to name me anyone, anywhere, who is more overpaid and underachieving.

simple said...

Oh Dear, for value/price u can't go by PE ratios alone. Must look importantly at net asset value per share

Anonymous said...

I would think their share price is also shaped by events and history.

Remember UOB acquired OUB some years ago?

And OCBC only acquired a smaller bank Keppel TatLee, not as big as OUB.

What do you think?

Anonymous said...

Tiok. A lot of things is due to events and history.

For instance, a Sinkie PMET may be retrenched and jobless after being replaced by foreign talents.

So being jobless, his market value (based on salary) will fall from tens of thousands pm to zero, tio bo?

But that doesn't mean this Sinkie PMET have no more skills, experience or value what, tio bo?

Anonymous said...

if we strive to be a global and
cosmopolitan city, we must be
prepared to have people whether
talents or non talents, to walk
in to make all the money and walk
out when there is little money to
be made.....

who do you think will be left

Anonymous said...

Remember UOB acquired OUB some years ago?

And OCBC only acquired a smaller bank Keppel TatLee, not as big as OUB.

What about DBS acquiring POSB?
Was it a good price?
Was there a global tender?
Was UOB and OCBC encouraged to put in a bid?
How was the price determined?

Anonymous said...

There could be stock spilts or bonus issues that may hv caused the price differences.

Anonymous said...

Recently no stock split. DBS asset value should be the biggest.

Anonymous said...

UOB is a typical Chinese company that master the arts of intimidation of Ah Long loan shark. It can survive in Singapore but if it dares to expand to other countries, it'll die an expensive death with all kinds of lawsuits

Anonymous said...

How much more newer citizens need to vote for the main party?

The calculations is around $30K of newer citizens replace the new citizens who might vote the oppositions as in Punggol East BE? 5 years around 150K?

If sentiment suddenly turn worst there might be numerous factors like high inflation, high jobless rate amount the older or underwork new citizens or locals and locked up CPF schemes? And the massive usuages of mobile internet by the older citizens?

Could the newly approved citizenships reach $40K to 60K in 2016 to counter the lost of votes to the oppositions? Presently planned is 30K of new citizens?

What type of jobs these new citizens work, how it affected the older new citizens?

Anonymous said...

How can you compare just based on price per share?

Tomorrow, DBS merge 10 shares into one, it will be the best bank just by doing some share accounting.

Chua Chin Leng aka redbean said...

Anon 2:40, tiok. Based on just share price, P/E and yield, the three local banks are about the same. Share price alone would not give the full picture and the number of shares would affect the price as well.

Any difference with local or foreign talents?

Anonymous said...

Local talents have higher P/E lah. So why should employers hire locals?

Will u buy shares where u think the P/E is high? No, tio bo?

Anonymous said...

Tiok. No guarantee that paying a Sinkie talent more will get better earnings for the company.

So why hire Sinkies, u tell me lah?

Anonymous said...

With the CPF locked up schemes, previously many can retired at 55 and take out their CPF to look after the grandchildren, now most can't retired because of the locked up CPF schemes?

With many can't retired because of the locked up CPF, so the competitions for jobs became keener and keener with more 30K of newer and newer citizens?

So any ideas how to create more jobs others then property agents, insurance agents, cab drivers, gardeners, security and cleaners is there enough of jobs create for most can't retired like last time and the 1.6 millions younger and cheaper foreigners became newer and newer citizens, how can the older citizens can they still have their jobs?

Previously 55 they can retire for the younger to take over now they can't retire they got to stay on the jobs longer until the 70s, with the hyper cost of living?

oldhorse42 said...

If all three banks have about the same fundamentals, why would sinkie go for the more expensive bank, just because it is run by local chinese?

No wonder they call sinkie daft.

UOB is declaring a final dividend of 55cts in about a month's time. That must have given its share price a boost.

I wouldn't buy UOB at this level because it is close to its upper resistance.

On the oter hand DBS is facing some head wind over its exposure to China property and banking sector.This has depressed its share price.

It is paying a 30cts dividend in May and its paying dividends 4 times a year. Just on dividend payout alone, it is a beter choice.

It may be run by a ah neh. But this ah neh is supervised by a local wonderwoman.

Ah neh always performs better under a local woman!

Anonymous said...

If they can win 60% votes, they can control the banks, in fact can control anything.

So why WP didn't aim to win, and instead give lame excuses of not being ready to win?

Anonymous said...

If not enough smart Sinkies want to join WP, how to expect WP to win, u tell me lah?

In fact Lau Lee also pocked fun of WP during last election by asking: Show me your shadow cabinet!

Chua Chin Leng aka redbean said...

I know of many high net worth clients that swore that they would only put money in western banks and were sold all the great products fit for them until they were taken to the cleaners when the financial crisis and the toxic bonds hit them.

The said...

Besides being run by locals, UOB is also run by major shareholders - one tends to be more careful when one's own money is at stake. OTOH, DBS and OCBC are run by mercenaries - they tend to take bigger risks as the risk/return is asymmetrical. If the huge risk pays off, the employee-CEO is paid handsomely. If the huge risk does not pay off, the employee-CEO takes big bonuses, converts his stock options and goes laughing all the way to the bank, or to another bank willing to be suckered.

Chua Chin Leng aka redbean said...

It is better for the local banks to distant itself from the casino play in the banking sectors and go back to safe and conservative banking services and products. When the derivatives and gambling products go bust, the fallout is unimaginable.

The western financial system is now run by such products and services and it is becoming a huge ponzi scheme that cannot stop. The balloon is being pumped bigger and bigger and it has only one way to go.

In the early stages it looks damn good as money is created all over the place and profits are shooting sky high with fat salaries and bonuses. The money must come from somewhere. At the moment the banks are just printing money by writing derivatives or gambling chits.

Local banks should restrain themselves from playing with fire, go for lesser profits, smaller salaries and bonuses but with both feet firmly on the ground.

Anonymous said...

Greed will dull all their senses.

Anonymous said...

Solid as a bank. The bank is meant to be a conservative and safe institution to guard the savings of its customers. When the banks engaged in speculations and gambling, it is the beginning of its downfall. All western modelled banks are in this game now, including Singaporean banks.

The govt must have the wisdom and conviction to stop the banks from going down this road. It is still time to pull them bank befall the great fall.

Stop the greed and stop the stupidity of following the crooks in the banking industry.

Anonymous said...

50 years of independence and Spore cannot manage its financial jewels without local born Singaporeans:

DBS, OCBC, SGX, etc.

Come on Spore Inc. You do not have enough faith in your own people?

Would you expect large Japanese, Chinese, Korean, Indonesian banks be run by foreigners?

If SIA can be one of the best and be run by Singaporeans what is wrong with MAS and Temasek? No faith in our own talents?

Anonymous said...

This is what happened in a country run by asses.

Anonymous said...

the 3 banks made $10 billion a year. How much of this is distributed to the staff. All these impressive economic figures do not benefit citizens, the people