DBS, OCBC and UOB shares hit all-time highs as sentiment improves

[SINGAPORE] Shares of Singapore’s three banks closed at record highs on Tuesday (Jul 7) to top the blue-chip Straits Times Index (STI) after a Citi note earlier in the day lifted the target prices for the trio.

OCBC was the STI’s top performer, climbing 3.3 per cent or S$0.85 to close at S$26.34. UOB gained 2.9 per cent or S$1.17 to a record S$41.69, while DBS rose 2.6 per cent or S$1.73 to finish at S$68.64.

Their rally came after Citi identified DBS as the preferred local bank pick with a “buy” call, followed by OCBC with a “buy” and UOB with a “neutral”.

Citi analyst Tan Yong Hong said he expects about a 10 per cent earnings growth for DBS in the 2027 and 2028 financial years on loans growth recovery. This lending boost will increase the bank’s profit margins on loans and bring in higher everyday service fees, he said.

According to the report, the turnaround is heavily driven by structural shifts in system liquidity. During the recent US rate cut cycle, the local one-month Singapore Overnight Rate Average (Sora) benchmark interest rate plunged 2.7 percentage points peak-to-trough to around 1 per cent by mid-2026.

This drop significantly outpaced the 1.75 percentage point decline in US rates due to flushed liquidity in the Singapore system.

However, banking dynamics are reversing. Banking system data from May 2026 showed that loan growth grew 8.7 per cent year on year, outstripping deposit growth of 6.8 per cent. This pushed the loan-to-deposit ratio back up to 68.7 per cent, while the current account savings account ratio slid 50 basis points to 54 per cent.

Citi noted that Sora rates will find strong support as long as consumer and corporate lending continue to soak up excess system liquidity. Consequently, Citi upgraded its net interest margin forecasts by up to five basis points, targeting a recovery closer to 2019 levels.

The brokerage also lifted its sector loan growth forecast to between 6 and 7 per cent, up from 5 per cent previously, which is expected to boost non-wealth fees such as trade and loan-related services.

Clear preferences

Citi highlighted DBS’ strong dividend per share visibility and its position as a premier Asia wealth proxy as the key reasons for its preference over the other Singapore banks.

Driven by net interest income upgrades, Citi’s earnings estimates for DBS stand 5 to 8 per cent ahead of consensus expectations.

OCBC is still favoured, though, with Citi positioning the stock for growth and a return on equity (ROE) catchup with DBS. The brokerage’s estimates for OCBC sit 2 to 5 per cent ahead of the street, noting that the current price-to-book valuation gap presents a buying opportunity if the ROE gap narrows.

Meanwhile, UOB remains a “neutral” hold. Investors are continuing to monitor its wealth and loan growth trajectories, which currently lag behind its peers.

Citi noted that UOB’s earnings projections remain strictly in line with street expectations, reflecting a wider valuation gap relative to its competitors.