OCBC sheds S$8 billion in value as shares close nearly 6% down; analysts cautious on banks

[SINGAPORE] Shares of OCBC dropped nearly 6 per cent on Wednesday (Oct 7), with the bank downgraded by Citi from “neutral” to “sell” earlier on the same day.

Analysts remained cautious on OCBC and banks as a whole, while RHB was an outlier. It maintained an “overweight” rating on the Singapore banking sector, identifying OCBC as its top pick with a target price of S$33.70 in a Wednesday report.

All three local banks ended lower. OCBC declined 5.9 per cent or S$1.90 to S$30.30, DBS slipped 1.4 per cent or S$1.07 to S$77.49 and UOB was down 2.9 per cent or S$1.28 at S$42.44. OCBC’s slide lobbed more than S$8 billion off its market capitalisation as at market close.

RHB said that rising benchmark rates may provide further growth in the banks’ operating income, projecting sector net profit growth of 10 per cent for both FY2026 and FY2027, driven by a balanced mix of net interest income (NII) and non-interest income growth.

“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.

The firm highlighted OCBC for its “all-round balance-sheet strength and earnings momentum”.

RHB recently raised its FY2027 to FY2028 net profit forecasts for OCBC by 4 to 6 per cent, and for UOB by 4 to 5 per cent, on the back of improved net interest margin (NIM) and NII prospects.

Citi, on the other hand, downgraded OCBC to “sell” on Wednesday morning, with a target price of S$27.50. It expects the bank’s third-quarter earnings to be flat year on year, and growth optimism for the lender to be derailed.

This year, OCBC has had the steepest jump in its valuation, with its price-to-earnings multiple expanding by 46 per cent. Citi noted that OCBC is trading at the tightest dividend yield spread over bond yield at 70 basis points.

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Citi noted the market’s misplaced optimism on Singapore interest rates and OCBC’s exceptional first half-year wealth-related income. It forecasts the bank’s Q3 NIM to contract due to higher Singapore-dollar fixed deposit rates of 35 to 70 basis points.

The research house maintained its “buy” rating on DBS, and reiterated “sell” on UOB. It cited a preference for UOB over OCBC, “due to relative valuations/positioning”.

Meanwhile, UOB Kay Hian (UOBKH) said it remained cautious on banks as a sector, with research director Jonathan Koh citing concerns about uncertainties from the escalation and prolonged conflict in the Middle East.

However, he added: “The trends of safe-haven liquidity inflows, higher bond yields and ongoing monetary tightening favour preference for banks.”

UOBKH said that its preferred “buy” remains OCBC despite the intraday fall.

“It benefits more from growth in wealth management. Its earnings growth is the strongest at 22 per cent year on year in H1 2026,” Koh noted.

The three Singapore banks are part of an initial cohort of 11 stocks that began trading in small board lots on Monday.