Singapore Bank Stocks Drop Amid Concerns Around Earnings Risks

By Megan Cheah

SINGAPORE--Shares of Singapore's three local banks lost ground with investors spooked by a rating downgrade on one lender as well as concerns around the sector's earnings risks.

Southeast Asia's largest lender by assets, DBS Group, saw its stock fall as much as 4.5% to 74.00 Singapore dollars, equivalent to US$57.82, before paring its losses to trade 4.4% lower on Thursday.

Its smaller peers Oversea-Chinese Banking Corp. and United Overseas Bank also fell, with the former shedding 4.65% to S$28.89 and the latter last down 5.1% at S$40.29.

The losses dragged Singapore's benchmark FTSE Straits Times Index into the red, setting it up for its worst day since April last year. The three banks make up more than half the weight of the market-capitalization-weighted gauge, which was recently 3.2% lower.

The declines come after the bank stocks' strong run up on resilient earnings and substantial dividend and share buybacks, as robust wealth-management fees bolstered profits despite thinner net-interest margins.

Since then, investors could have become more sensitive to earnings risks and negative catalysts, said James Ooi, a market strategist at Tiger Brokers.

He pointed to OCBC's shares, which dropped sharply Wednesday after Citi downgraded its rating on the lender to sell from neutral. OCBC closed 5.9% lower, while DBS and UOB fell between 1% to 3% on Wednesday.

"When expectations are already elevated, it can take slightly negative news to trigger some profit-taking," said Ooi.

Citi analyst Tan Yong Hong said the three banks face risks to their third-quarter earnings as the market's optimism on Singapore-dollar interest rates appears misplaced. Exceptional wealth-related income in the first half of the year could also normalize in the June-September quarter, he said.

Tiger Brokers' Ooi noted that the market could also be reassessing the expectation of benefits from higher Singapore-dollar interest rates. While higher rates could lift yields on loans and newly deployed assets, they also push up what banks pay for deposits and other funding.

"For banks, what matters is not just where rates are going, but whether asset yields can keep pace with rising funding costs to defend net interest margins," he said. The lenders' third-quarter results are due in November.

Write to Megan Cheah at megan.cheah@wsj.com

(END) Dow Jones Newswires

October 07, 2026 23:44 ET (03:44 GMT)