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I have always been wondering about it but i am still unable to find a good answer.
Personally, I think that DBS is the weakest, judging from its profit margin, debt, ROA and ROE compared to the the other 2.
While Bloomberg once ranked OCBC as the strongest bank in the world, that ranking was based on the capital ratio and not exactly from a holistic point of view with regards to profit, market share and growth.
UOB's strength lies in it being under the Wee family control, which makes it more risk-averse since they are operating the business with a long-term view.
Without taking into account the price factor (P/B and PE), which bank will you hold if you must choose one?
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If all 3 banks are in financial trouble, which one do you think the govt will bail out? UOB is definitely out.
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First to be bailed out will be DBS imo. But I really hope this doesn't happen to our local banks.
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Bibi Wrote:If all 3 banks are in financial trouble, which one do you think the govt will bail out? UOB is definitely out.
The 3 local banks each account for roughly 1/3 of the banking sector in Singapore. Therefore each of them is too big to fail. So if any of them get into serious trouble, MAS will have to bail them out.
Shareholders could be wiped out of course, but MAS will do its utmost to ensure depositors get paid back, because if depositors lose money (the pathetic deposit guarantee notwithstanding) it will be the end of Singapore as a financial centre, which will also mean the end of Singapore as an independent country.
MAS will never say that it will bail out the banks, because that would officially create a moral hazard. But it is clear that MAS has no choice at all.
Once upon a time there were many more than 3 banks in Singapore. But someone in government decided there were too many banks, and a professor in NUS obligingly came up with a study that said Singapore was only big enough for 2 banks. Next thing you know, banks were buying each other left and right, and presto! Only 3 banks left, and no way for MAS to let any of them fail.
FFNow Wrote:First to be bailed out will be DBS imo. But I really hope this doesn't happen to our local banks.
FYI DBS has already received 2 bailouts: the acquisition of POSB (which was really POSB rescuing DBS), and the rights issue in 2008 when all shareholders ( Temasek being the largest) were asked to put in money on pain of dilution.
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(07-02-2012, 10:13 PM)d.o.g. Wrote: FYI DBS has already received 2 bailouts: the acquisition of POSB (which was really POSB rescuing DBS), and the rights issue in 2008 when all shareholders (Temasek being the largest) were asked to put in money on pain of dilution. I think the rights issue benefited the shareholders. I was waiting for DBS to go XR hoping its price will drop but surprisingly it didnt drop much. I bought some after it goes XR and few weeks later the price bounce right up.
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07-02-2012, 10:42 PM
(This post was last modified: 07-02-2012, 10:45 PM by d.o.g..)
Bibi Wrote:I think the rights issue benefited the shareholders.
From the business point of view, a rights issue can only benefit shareholders when the money is used for expansion, whether organically or by acquisition. In this case the money was raised to prevent DBS from blowing up, it didn't help DBS expand at all.
From the investor's point of view, the rights issue destroyed shareholder value. Before the rights issue, shareholders owned 100% of DBS for $X. After the rights issue, shareholders owned 100% of DBS for $X+$Y. Same profits, higher cost base.
If you owned 100% of a car for $50k, and you were asked to put in another $25k to continue owning the car, is it a good deal? You still own 100% of the car before and after the rights issue, but now your cost of the car is $75k. No improvements have been made to the car whatsoever, so its utility to you is unchanged. A good deal?
There was some market inefficiency where some shareholders did not subscribe to their entitlements in full. As a result, some shareholders obtained excess rights. It was only this very small group of shareholders who benefited from the rights issue, at the expense of the shareholders who did not take up their rights. But that does not compensate for the huge overall value destruction at the company.
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(07-02-2012, 10:42 PM)d.o.g. Wrote: the money was raised to prevent DBS from blowing up
Any figures to back this up? I heard they made some bad investments in Dubai, didn't think it was that bad.
Just curious, I don't buy bank stocks. I do however keep most of my cash in DBS...hopefully protected by Singapore Inc.
I wait until there is money lying in the corner, and all I have to do is go over there and pick it up.
Jim Rogers
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Quote:FYI DBS has already received 2 bailouts: the acquisition of POSB (which was really POSB rescuing DBS), and the rights issue in 2008 when all shareholders (Temasek being the largest) were asked to put in money on pain of dilution.
This is interesting information. I am sorry my knowledge of Singapore's banking history is limited. What did DBS do to screw up until they needed a bail-out by POSB? I cannot find the answer using Google because this happened too long ago. The acquisition was completed in 1998. Was the bail-out due to the Asian financial crisis?
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The rights are issued at a discounted price to its current share price. There is a ex-rights share price to account for the share dilution. I use an example to explain. E.g:
I have 1000 existing shares at $5/share = $5000
I subscribe for 100 shares at say $3/share = $300
Value of 1100 shares = $5300
Share price after ex-rights = $5300/1100 shares = $4.82.
I said DBS shareholders benefited from rights issue is because after ex-rights, the share price is higher than the XR price which in the above example is $4.82. In fact that time DBS is trading at much higher than XR price after it goes XR on that day. And it never went below XR price after that.
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08-02-2012, 12:03 AM
(This post was last modified: 08-02-2012, 08:14 PM by Jared Seah.)
Hmm. Let me try with my O level math.
My car cost me 50,000. After "repair" it cost an extra 25,000. Total out of pocket = 75,000
Due to super sky high COE, I managed to off-load this lemon for 100,000! Used car becomes pre-owned! Make a profit some more!
But boy oh boy, I now make sure the next car I buy will have less "maintenance" costs! Same same but different!
By the way, I thought the strongest local bank is Standard Chartered? When young, I got a Donald Duck piggy-bank from them with the words: Big, Strong, and Friendly Bank. Remember the jingle?
Huh? Not local enough? 150 years in Singapore still not considered "local"? Now that'S parochial!
Just google singapore man of leisure
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