DBS to benefit the most from interest rate upcycle

It has an advantage in S$-dominated loans.

Banking giant DBS could be the biggest beneficiary of interest rate upcycle given its advantage on Singapore dollar-denominated loans.

According to UOB KayHian, Singapore dollar-denominated loans account for 40.5% of total loans due to its Singapore dollar-CASA ratio at 89.5% (savings accounts: 71.5%, current accounts: 18%).

"DBS’s market share for Singapore dollar- denominated savings accounts has been stable at 52%. It does not need to chase for high-cost fixed deposits, which accounted for a smaller 10.4% of its total deposits in Singapore dollars," UOB KayHian noted.

More so, DBS has the lowest cost of deposits at 0.56%, compared to OCBC's 1.04% and UOB's 1.12%.

"We expect NIM to expand by 10bp yoy to 1.81% in 4Q17 after factoring in three hikes in US interest rates in 2017," UOB KayHian said.