Singapore's benchmark stock index rose over 1% to a record high of 5,411.20 points on Wednesday.

Shares of three major Singaporean lenders, DBS Group, Oversea-Chinese Banking Corp. and United Overseas Bank, hit record highs on improved sentiment and earnings outlook.

UOB hit its fifth consecutive record intraday high on Wednesday and last traded 4.22% higher at 43.45 Singapore dollars at midday, equivalent to US$33.75, after hitting S$43.79 earlier.

DBS was 1.18% higher at S$69.67, while OCBC traded 2.92% higher at S$27.11. Both banks have closed at record highs in recent sessions.

Macquarie turned more bullish on the sector and upgraded its stock rating for DBS and UOB to outperform from neutral, raising its target price for DBS to S$70.86 from S$52.38, and for UOB to S$45.16 from S$36.78.

It retained an outperform rating on OCBC and lifted its target price to S$27.76 from S$24.25.

"We see further re-rating potential, supported by an improved sector outlook in which net interest income and non-interest income can grow in tandem," while the Singapore dollar remains a preferred currency amid broad U.S. dollar strength, said Jayden Vantarakis, head of Asean equity research at Macquarie Capital, in a note.

Citi on Tuesday lifted its target prices on all three banks as it expects better earnings growth in 2027 and 2028 on a recovery in loans growth.

The three banks' gains, which make up about half of the FTSE Straits Times Index's weighting, sent the benchmark index to another fresh high on Wednesday. It was last 1.1% higher at 5401.97.

The Straits Times Index's near-term trajectory will be shaped by the upcoming earnings releases from the three banks, said James Ooi, market strategist at Tiger Brokers in a note.

"Although investors remain concerned about the limited upside from net interest margin recovery, the strong momentum in wealth management and growing net fee income could provide a meaningful offset, even if interest rates stay lower for longer," said Ooi.