OCBC Falls 5.9% as Citi Downgrade Splits Analysts on Outlook
Singapore’s three major banks ended lower on Wednesday, with OCBC falling 5.9 per cent after Citi downgraded the stock to sell. The decline erased more than…
SINGAPORE — Singapore bank stocks drop on Wednesday, with OCBC tumbling 5.9 per cent after Citi downgraded the lender from neutral to sell. The fall wiped more than S$8 billion from OCBC’s market capitalisation by the close, while DBS and UOB also ended lower.
OCBC fell S$1.90 to S$30.30. DBS slipped 1.4 per cent, or S$1.07, to S$77.49, and UOB declined 2.9 per cent, or S$1.28, to S$42.44, according to The Business Times.
The sharpest move came at OCBC. Analysts were divided over whether the sell-off reflects weaker prospects or an opportunity, leaving investors to weigh contrasting views on earnings, interest rates and valuations.
Singapore bank stocks drop as analysts split on OCBC
Citi cut its rating on OCBC to sell on Wednesday morning and set a target price of S$27.50. It expects the bank’s third-quarter earnings to be flat year on year, and said optimism about the lender’s growth could be derailed.
The research house also pointed to OCBC’s valuation. Its price-to-earnings multiple has expanded by 46 per cent this year, while the bank is trading at a dividend yield spread over bond yield of 70 basis points, Citi said.
Citi expects OCBC’s third-quarter net interest margin to contract, citing higher Singapore-dollar fixed deposit rates of 35 to 70 basis points. The bank’s margin is the difference between what it earns on lending and what it pays to fund deposits.
Its calls on the other local lenders differed: Citi maintained a buy rating on DBS and reiterated sell on UOB. It said it preferred UOB to OCBC because of relative valuations and positioning.
RHB took a more positive view. The firm maintained an overweight rating on the Singapore banking sector and named OCBC its top pick, with a target price of S$33.70.
RHB said rising benchmark rates could support operating income and forecast sector net profit growth of 10 per cent for both FY2026 and FY2027. It expects growth to come from a balanced contribution by net interest and non-interest income.
“We think the impact may not be even, with OCBC and UOB likely beneficiaries and DBS lagging due to its NII sensitivity and hedging position,” RHB analysts said.
Rate outlook and investor risks
RHB cited OCBC’s balance sheet and earnings momentum. It also raised its net profit forecasts for FY2027 to FY2028 by 4 to 6 per cent for OCBC and 4 to 5 per cent for UOB, based on improved net interest margin and net interest income prospects.
UOB Kay Hian remained cautious on banks as a sector. Research director Jonathan Koh cited uncertainty from the escalation and prolonged conflict in the Middle East, while noting that safe-haven liquidity inflows and higher bond yields could support bank shares.
“The trends of safe-haven liquidity inflows, higher bond yields and ongoing monetary tightening favour preference for banks,” Koh said.
Still, UOB Kay Hian kept OCBC as its preferred buy despite the intraday decline. Koh said the bank benefits more from growth in wealth management and reported earnings growth of 22 per cent year on year in H1 2026.
For investors, the competing calls underline that a falling share price alone does not settle whether a bank’s outlook has changed. The assessments hinge on different expectations for interest margins, wealth-related income and valuations. Exposure also matters: the stocks are among an initial cohort of 11 that began trading in small board lots on Monday, according to The Business Times.
OCBC’s next quarterly earnings report will test the opposing forecasts, while analysts’ assessments continue to turn on the bank’s margins and growth prospects.
Source: businesstimes.com.sg
