Hail to the victor: DBS the runaway winner as interest rates rise

Thanks to its strong deposit franchise.

Rising interest rates are expected to boost most banks’ flat net interest margins, but analysts say that DBS will emerge as the runaway winner as rates head north.

According to Maybank Kim Eng, DBS should benefit the most from rising rates, thanks to its much stronger deposit franchise than UOB and OCBC. DBS has a much higher proportion of CASA, or current and savings accounts, compared to UOB and OCBC.

This claim is supported by a report from CIMB, which states that DBS has the biggest pool of CASA which will enable its funding costs to be sticky downwards when rates rise.

“On a 100bp move in interest rates, our earnings sensitivity for DBS/OCBC/UOB is +13.8%/+6.8%/+6.3% respectively. Clearly, DBS will benefit the most when rates move though whether we get a 100bp move this year is open to debate, when global economies are weakening,” states CIMB.