Singapore Bank Stocks Just Fell Hard. Are They Overvalued, or Is This a Normal Pullback or A Major Crash Coming?

Hi Folks, welcome back to Investment Income For Life. For most of 2026, owning DBS, UOB and OCBC was easy. Then on 7–8 October the three banks lost between 6% and 10% in just two trading days. Many investors are now asking whether the rally went too far and there are many posts on social media talking about it and there are a lot of fear mongering on further crashes in banking stock prices.

1. What happened? 

On 8 October DBS closed at S$73.85, UOB at S$40.25 and OCBC at S$29.00. Two days earlier they were at about S$78.56, S$43.72 and S$32.20. OCBC fell the most after Citi downgraded it to “Sell”. Citi expects flat third-quarter earnings and also pointed to a weaker wealth-management outlook and valuations above regional peers. Other reasons given for the sell-off:

(i) The US 10-year Treasury yield rose to 5.32%.

(ii) Bank shares were being sold around the world.

(iii) Investors took profits after a very strong run.

2. My Personal Perspective and Thoughts. 

Even after the drop, DBS is still up about 36% over 12 months, UOB about 14% and OCBC about 72%. OCBC now trades at about 2.1 times book value, up from roughly 1.4 times at the end of 2025. That is where the “overvalued” worry comes from.

3. Three ways to handle it if you hold these banking stocks

(i) Look at the drop against August prices, and keep holding. The fall looks much smaller next to prices two months ago than next to the September peak. OCBC traded around S$29–30 in early August, which is about where it is now. DBS (S$73.36) and UOB (S$40.25) are back near their mid-to-late August levels. If you bought for the long term and the dividends, giving back about two months of gains may be no reason to change your plan.

(ii) Worried about valuations? Sell half lor. If high price-to-book ratios make you uneasy, a common middle path is to sell half of each bank position. You lock in part of a very good year, but you still collect dividends and keep some upside if prices recover. It also takes away the pressure of having to call the top exactly right. This was my approach to OCBC back in August 2026 when it traded above S$29 per share and sold around half of it and re-invest the proceeds into other non-banking stocks.

(iii) Optimistic? Then try buying more during the current price correction lah. Some investors believe higher interest rates will lift banks’ net interest margins (the gap between what banks earn on loans and pay on deposits). They also expect wealth management to keep growing while rates stay high. For them, a 7–10% pullback from record highs is a chance to buy, and some analysts still see upside for DBS and UOB. A fair warning: some analysts expect the opposite. They see rising deposit competition and a lower SORA (Singapore’s benchmark interest rate) squeezing margins. Buying in two or three smaller lots ahead of the third-quarter results lowers the risk of buying too early.

Personal Thoughts

Honestly, I am not sure why there seems to be a ruckus being made due to the sharp plunge in valuation over 1-2 days. DBS, UOB and OCBC are definitely over-priced and this ecstasy cannot keep running up forever especially when we are talking about the Singapore SGX. So, if one is super worried about further crash such that you can no longer sleep peacefully at night, then just sell half of one's current holdings. Ok folks, that's all from me today. Have a great week ahead!

Upcoming US Recession and SREIT Rally From Lower Interest Rate Fallacy.

Wow, this is really bad news! Early US economic data for the first quarter of 2025 is pointing towards negative growth, according to the Federal Reserve Bank of Atlanta. If we have 2 consecutive quarters of negative growth, then techincally, the US would be in an economic recession. What this means is that the probability of two or even more Federal Reserve rate cuts has just increased drastically. 

1. The Call to Buy REITs as Interest Rate Cuts Will Mean Huge Savings in Financing Cost is a Fallacy.

Interestingly, a number of folks on social media have mentioned that now maybe the best time to buy into REITs which have been performing badly and in the doldrums. Nevertheless, it is important to note that a financing cut may not lead to a rally in SREIT market price because the main factor is still whether the REIT can continue to generate sustainable rental income. Many businesses will be severely impacted and there will be increased in bankruptcy from firms and consumers. There will also be widespread retrenchment of staff (which we are already seeing for a number of years).   

Not suprisingly, during past recessions, most of the REITs will have substantial drop in their market price (along with the broad market sentiment) despite a lower interest rate environment. So far, I have not seen REITs price rally in past recessions. Do remember that REITs are still equities afterall and underlying business fundamentals are still the essential determinant of its market price. This is unlike bonds instrument whereby their market price soar when interest rate is being cut- this is the basic 101 inverse relationship of bond price vs the market financing rate.  

2. REITS I Will Try Avoiding During Recession

Personally, I will be avoiding the following REITs sector:

(1) Hospitality REITs- if everyone is struggling with bread and butter, no one will be in the mood for travelling; demand will thus plunge. 

(2) Office Commercial REITs- Too cyclical and unpredictable.

Instead, I think that shopping mall REITs (Frasers Centrepoint Trust and Lendlease REIT) as well as Industrial REITs (backed by Temasek Holdings) will be a safer buy while waiting for the market to recover.  Special theme REIT like strip malls with grocery focused business (United Hampshire US REIT) should also be a safer place to ride out the recession. 

Parting Thoughts

With a narrowing net interest margin spread, bank stocks like DBS, UOB & OCBC will find their earnings dipping soon as they have peaked. SREITs will also be in the doldrum for at least another year or two. So will you folks be making any adjustment to your current portfolios?

SREITS Crashed Again- REITS Or SG Banks More Attractive?

SREIT tumbled down again over the past 2 weeks. Interestingly, I see a number of folks like Josh Tan buying into Mapletree Industrial Trust (“MIT”) or Master Leong strong preference for Mapletree PanAsia Commercial Trust (“MPACT”) to take advantage of the recent “crash” while others like the famous AK71 preferred the local trio of DBS, OCBC and UOB banking stocks as better buy than REITs. For the latter, the local banks are only paying out 50%-60% of their earnings as dividends to shareholders while ploughing back 40%-50% of their earnings into the business which should theoretically keep building up their Net Assets Value and eventually their market price should gradually increase. So it gets kinda of confusing on whether one should buy more REITs during the current downturn for the REITS sector or accumulate more local SG bank stocks given the different opinions of their preferences. 

1. Time to Chiong/Accumulate more SREITs while prices crash and interest rate being slashed gradually into 2025?

Personally, I have mentioned before my thoughts in September 2024 that most of our SREITs are now priced fairly given that we should not expect future interest rate to be near the previous decade of zero interest rate environment. Distribution yield of 5.5% to 6.0% for blue-chips SREITs should be the norm now. Anything that is lower will not compensate for the additional risk premium one undertakes relative to the local risk-free rate. 

MIT’s distribution yield of 5.96% at unit price of  S$2.27 per unit is decent. But I would not say super attractive given that its market value per unit is at a huge premium over its NTA per unit. Since MIT is my second largest holdings already, I did not add on any further.

As for MPACT, while its distribution yield is now at an attractive 6.9% (@ S$1.23 per unit) and its market value per unit is at a large discount over its NTA per unit, the stock market maybe pricing in substantial worsening in distributions from its Hong Kong, China and Japan exposure. Also, its crown jewel of Mapletree Business City seems to be losing its luster. So I guess the usual high risk high reward adage will apply here. It thus depends on which crystal ball you are gleaning into for whether the foray here will reap handsome return or just a lackluster one.

2. Local Banks With Splendid Results Expected Into 2025.

There is no doubt that DBS, UOB and OCBC trio have been having a good run since last year due to the sudden spike in interest rate on their net interest margin and also wealth management business. But if recession comes, bank stocks will also crash and risk of bad debts increase exponentially. I will be staying away from banks for now unless there is a substantial correction in their prices. 

Parting Thoughts and My Watchlist.

Given the recent developments as aforesaid mentioned, I have been focusing my monthly nibble size investments into Endowus bond funds and Keppel Ltd. I thought that overseas REIT such as Link REIT looks more attractive given its market price is almost 40% off its net book value per unit and giving a distribution yield of 7.6% with 21% leverage ratio.