In the fourth quarter of 2022, the US Federal Reserve increased interest rates by a total of 125 basis points. Entities like banks and insurance companies typically profit from rising interest rates. This is due to profit margins that actually increase as rates rise.

The banking sector in Singapore is one of the most developed in Asia. This is mainly led by the three local banks, DBS, OCBC and UOB. As of 24 February 2023, all three local Singapore banks have reported their Q4 earnings. On a whole, all three banks have reported seemingly great results for the year. All banks have reported significant earnings growth ranging from 34% to 68%.

Given their great performance, could this be an opportune time to invest in them? And if so, which SG bank stock appears to be the most appealing at this point in time? 

Q4 Results Breakdown for the Singapore Local Banks

As all the banks reported their Q4 earnings, it’s a good time to take a look at all their financials. Here is an overview for the key figures for the banks in Q4.

Firstly, DBS saw the biggest growth in total income for the quarter, up 41% from the same period last year. This was mostly attributable to its significant increase in interest and other income. 

However, when compared to the other 2 local banks, UOB had the greatest operating profit margin at 57.4%. As investor attitude toward the market remains subdued, all three banks reported decreased fees’ incomes compared to last year.

Finally, DBS had the lowest cost-to-income ratio (41%) in the fourth quarter of 2022. As a whole, DBS appears to be performing the best overall this quarter compared to the other leading local banks.

2022 Results for the Singapore Local Banks

The performance of the bank as a whole might not be represented by one quarter’s earnings. Let’s examine the financial outcomes of the top three local banks for the Fiscal Year 2022. 

Firstly, UOB saw the biggest growth in total income for the year, up 18% from the prior year. This was mostly attributable to its significant increase in net interest and other income. 

In addition, all 3 banks had relatively similar operating margins for 2022 at 57%. As compared to 2021, the equities market has cooled down significantly. As a result, all 3 banks recorded decreased fees’ income of between 9% to 18%. 

Finally, DBS and OCBC had the lowest cost-to-income ratio (43%) for 2022. Although DBS and UOB appear to do slightly better, all three banks have unquestionably had a successful fiscal year.

Current Valuation across the Singapore Local Banks

As shown above, 2022 has been a record-breaking year for the local three banks. Could this be a good moment to invest in them? 

Let’s compare some of the key valuation metrics to better determine them. Do note that the data provided are accurate as of 24th Feb 2023. For those ratios that are below their 5 year averages, they will be highlighted out in Red. 

DBS and OCBC are currently undervalued as compared to UOB, with a price-to-equity ratio that is below the five-year average. The three local banks are reporting price-to-book ratios that are marginally higher than their five-year norms. Finally, OCBC and UOB are currently paying out dividends above their five-year averages for dividend yields.

Singapore Banks Valuation Metrics


On a whole, OCBC seems slightly more attractive than its other peers based on their current valuation metrics. Please, do not misunderstand this as to imply that the other local banks are bad. 

But, it appears that the present prices of bank stocks have already factored in the increase in interest rates. There doesn’t appear to be any additional factors right now that may further increase their prices in the coming future. Therefore currently it might not be the ideal time to invest in bank stocks. 

Personally, I would hold off on establishing a position now. It may be more ideal to wait for the bank stocks to be more slightly affordable and provide a bigger margin of safety.

Disclosure: No existing position in any of the 3 local banks.

If you are keen, check out our articles on other analysis: Trust Bank Referral, CIMB Credit card deals and Top 5 highlights for Budget 2023.  

Disclaimer: The information provided by LearnToInvest serves as an educational piece and is not intended to be personalized investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock.


Leave a Reply