Warren Buffet recently said that banks are a good investment for 2023.
I made a study of the financials for global banks. My findings are:
a) The average PE ratio is 10.6 times and dividend yield is 3.6%.
b) Most US banks have a PE ratio of around 10.0 times. The Asia banks (HSBC, DBS, MUFG) have a higher PE ratio. ICBC (China) has a low PE ratio
The risk to global banks is the possible loss from the drop in the property markets. The banks lent a lot of money on mortgages. This could cut into their earnings.
The property markets in several countries are under stress. The mortgages are being squeezed by higher interest rates. The defaults are expected to rise.
I will avoid the banks, except for ICBC which has a very low PE ratio and a high dividend yield.
Note - This is a personal observation. It is not investment advice.
Tan Kin Lian
https://fisca.sg/ArticleDisplay.aspx?ID=1296
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