Three trading days.
That was all it took for Singapore’s bank shares to give back over two months of gains.
The sell-off began last Wednesday (7 October), and coincided with Citi downgrading Oversea-Chinese Banking Corporation (SGX: O39), or OCBC, from neutral to sell.
OCBC shares fell by over 5% that day.
DBS Group Holdings (SGX: D05) and United Overseas Bank (SGX: U11), or UOB, fell 1.4% and 2.9% respectively.
By Friday’s close, OCBC shares sat around 11% below their 52-week high. UOB was down by close to 11% and DBS by 7.2%.
If you own bank shares, you don’t need to panic.
As bad as it gets?
The drop feels sharp because it came so fast.
Widen the lens from three days to three months, and DBS and OCBC shares sit roughly where they traded in late July.
The three banks make up 57% of the Straits Times Index (SGX: ^STI), or STI.
That index ended Friday only around 7.3% below its 52-week high.
In other words, we’re not at a 10% decline yet, so we’re not in market correction territory — yet.
You shouldn’t be surprised if one comes.
Historically, the STI has fallen by 10% or more in around eight out of every 10 years.
Was Citi right to call OCBC a sell?
Citi expects OCBC’s third-quarter earnings to come in flat year on year after an exceptional second quarter.
It also expects higher fixed deposit rates to squeeze OCBC’s margins, and it questions OCBC’s valuation.
Here’s the thing: before Wednesday’s downgrade, OCBC shares were already far above their typical valuation multiple.
Before Wednesday’s downgrade, investors were paying around 2.3 times book value.
For context, the shares have historically averaged at roughly 1.2 times.
At 2.3 times, the market just needed a reason to sell.
Any reason would do.
All three banks were due for a pullback on valuation alone, whether Citi said so or someone else did.
On Friday (9 October 2026), OCBC traded at around 2.1 times book value.
To put it simply, the shares are cheaper, but they are far from cheap.
Has anything changed inside the banks?
The short answer is no.
The banks last reported in early August, and those numbers still stand.
In the first half of 2026 (1H 2026), OCBC grew total income by 11% year on year to S$8 billion.
Net interest income fell 3% as the bank’s interest margin narrowed from 1.98% a year ago to 1.73% in 1H 2026.
Non-interest income more than made up the gap.
It rose 36% to S$3.51 billion, backed by net fee income, which grew 26% to S$1.41 billion.
OCBC raised its interim ordinary dividend by 15% to S$0.47 per share, representing a payout of 50% of profit.
Management still expects total income to grow in 2026.
It expects net interest income to dip slightly.
On the flip side, the US Federal Reserve raised interest rates in September 2026 for the first time since July 2023, a move that could slow the decline in margins over time.
We’ll have to wait for management to comment on its outlook when OCBC reports its next earnings.
What should you watch when the banks report?
The banks should report third-quarter results in late October or early November.
On the lending side, expect net interest margins to keep slipping.
At the same time, you want loan growth to be strong enough to offset that decline.
OCBC currently expects to deliver high-single to low-double-digit loan growth in 2026.
On the non-lending side, watch whether wealth management fees and insurance income keep growing.
Get Smart: Think in years, not quarters
Think beyond the next set of results.
You want any rise in the share price to come from business growth, not just optimism.
Over the long term, the business, not the multiple, should drive your returns.
If the business delivers and the share price still falls, you get to buy more of it at a lower multiple.
Catch my CNA segment HERE from last Friday (9 October).
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Disclosure: Chin Hui Leong owns shares of DBS, OCBC and UOB.
