OCBC shares plunged 5.9% on Wednesday, October 7, wiping out S$8 billion in market value after Citi downgraded the bank from neutral to sell. The decline brought the share price down to S$30.30, marking a significant pullback after the lender experienced a 46% expansion in its price-to-earnings multiple earlier this year. Peers also faltered as DBS fell 1.4% to S$77.49 and UOB dropped 2.9% to S$42.44.
The simultaneous dip across all three major local banks signals a shift in investor sentiment following a period where share prices reached record highs. For investors, the volatility reflects a transition from record-breaking gains to a more cautious assessment of earnings expectations. Analysts suggest that the recent sell-off may be driven by profit-taking rather than a fundamental deterioration of the banking sector, as market participants look ahead to third-quarter performance metrics.
Citi’s downgrade of OCBC is rooted in concerns that the bank’s third-quarter earnings will be flat year-on-year, potentially derailing previous growth optimism. Citi specifically pointed to a contraction in the net interest margin due to rising Singapore-dollar fixed deposit rates. Meanwhile, Jefferies analyst Joanna Cheah noted that investors are questioning if the exceptional income strength seen in the bank’s second quarter is sustainable. While Citi remains bearish on OCBC, other institutions maintain different outlooks; RHB retains an overweight rating on the sector, citing the potential for benchmark rates to bolster long-term operating income.
Market watchers remain focused on upcoming third-quarter earnings reports to determine if the sector’s resilience can withstand the current normalization of trading and non-interest income.