Singapore bank shares tumbled after JPMorgan Chase & Co. warned that surging long bond yields will hurt third-quarter earnings for Southeast Asian lenders. DBS Group Holdings Ltd. and United Overseas Bank Ltd. fell more than 5% each, while Oversea-Chinese Banking Corp. dropped as much as 4.8%. They were the biggest drags on the benchmark Straits Times Index, which tumbled 3.5%, the most since April 2025.
The drop comes amid a yearslong rally in Singapore lenders driven by record profits and the city-state’s growing stature as a global wealth hub. That supportive backdrop is now tested by concerns over the impact of high bond yields on dividend payouts, with valuations elevated.
"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," said James Ooi, market strategist at Tiger Brokers in Singapore. While higher rates can lift yields on loans and other assets, banks’ profitability also depends on the levels lenders pay for deposits and other forms of funding, he said.
On Wednesday, a JPMorgan analyst said surging long bond yields will lead to higher marked-to-market losses on trading books and hit capital market activity for Southeast Asian banks. In Singapore, slower balance-sheet growth, rising deposit competition and a potential normalization in wealth-management fees could trigger earnings downgrades, with OCBC more at risk.
"The surprise getting into third quarter 2026 is likely skewed negative for quite a few banks under our coverage," JPMorgan analyst Harsh Wardhan Modi wrote in a note, recommending clients trim their allocations. The rally earlier this year also left Singapore banks looking expensive relative to some Wall Street rivals, including Morgan Stanley and Goldman Sachs. DBS, the country’s largest lender, trades at 2.9 times one-year forward book value, nearly double its historical average.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing