A month ago, I mentioned that although the banks have become attractive, there is no more room for errors in my portfolio allocation. Hence, I have not picked up any bank stocks yet. In the past 2 weeks, all 3 banks have reported their earnings for 2015. How do they stack up against one another from the risk point of view? In this post, I will analyse the banks' Non-Performing Loan (NPL) ratios. The NPL ratio is the percentage of the bank's total loans that are already or close to being in default. It eats into the bank's net interest income. As reported, both DBS and OCBC have NPL ratios of 0.9%, while UOB's NPL ratio is 1.4%. The figure below shows the NPL ratio by geography for each bank.

Fig. 1: NPL Ratio by Geography

As shown in Fig. 1, a huge contributor to the banks' NPL ......