Extremely cheap bank stocks lure investors as interest rate hike looms

After last month's selloff.

According to a report by Bloomberg, Singaporean bank stocks are priced near the cheapest valuations in 16 months as the city’s borrowing costs and loan volumes drop, presenting an opportunity to investors betting on a U.S. interest-rate increase this year.

The decline in Singapore’s interbank rate from a six-year high is temporary and it will probably rise in step with Federal Reserve rates in coming months, according to Samsung Asset Management’s Alan Richardson.

That’s likely to boost interest income and margins at DBS Group Holdings Ltd., Oversea-Chinese Banking Corp. and United Overseas Bank Ltd., he said.

Shares of the banks, Southeast Asia’s largest, slumped an average 4.6 percent last month as the interbank rate retreated and data showed outstanding loans in the city dropped for a third month in April to a one-year low. The lenders’ mean price-book ratio slid to 1.25 times on June 2, the lowest since February 2014, data compiled by Bloomberg show.

Read the report in full here.