To The Moon

Our 3 local banking trio, namely $DBS GROUP HOLDINGS LTD(D05.SI)$, $OVERSEA-CHINESE BANKING CORP(O39.SI)$and $UNITED OVERSEAS BANK LIMITED(U11.SI)$, are household brands that every resident is likely to own an account in one of them, given their long histories in Singapore and prevalence of branches and Automated Teller Machines across the island.

With market capitalization and capital adequacy that rank them high in various measures of bank safety ratings in our region, they are our national pride.

Hence, it is not surprising that I've shareholdings in all 3 of them for stable incomes, though my position in DBS is so far the largest among them, and in fact the greatest by value in my portfolio. Recently, I have been gradually accumulating OCBC shares, which I like for the following reasons:

2Q 2022 Earnings

OCBC topped the trio with a 27.7% year on year increase in net profit, helped by its trading and insurance arms, followed by UOB 11% and DBS 6.6%. Not surprising that DBS has the slowest growth given its size and high earning base.

Loan Growth and Net Interest Margin

OCBC led the pack with an 8.7% year on year improvement in loan growth and the highest NIM in 2Q 2022 at 1.71%.

Cost-to-income Ratio

The cost-to-income ratio measures the bank’s operating efficiency to its total income, so a lower ratio is better. All three banks’ ratios were pretty close, but OCBC’s 43.5% won the day for 2Q2022.

Valuation

OCBC enjoys the most attractive valuation of the three banks, with its price-to-book ratio only slightly above unity.

Dividend Yield

OCBC outstripped its peers with the highest dividend yield close to 4.8%. It is even more remarkable that the bank achieved this feat with the lowest payout ratio, implying that it has the potential to further increase its dividend.

With OCBC winning on all attributes, I've been dollar-cost averaging into the bank shares on price weaknesses.

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