Friday 6 May 2016

"Financial Stupidity" is enriching DBS

The latest financial results for our local banks are out! And a comparison among their deposit interest rates reveals something interesting.

Fig 1: DBS 1QFY16 results

Fig 2: OCBC 1QFY16 results

Fig 3: UOB 1QFY16 results

Comparing the 3 figures, DBS is paying its customers an average deposit rate of 0.56%, while OCBC is paying a weighted average of 1.14% and UOB 1.15%. DBS is paying only half the rate of OCBC and UOB and has the most deposits among the local banks! What's more, DBS net interest margin is the highest among them. There must be a lot of "stupid money" lying around for this to happen.

For individual savers like us, getting 1+% for our money is easy. Just credit your salary through OCBC 360 account to enjoy a rate of 1.25% or a CIMB Fast saver account for 1%. So why are people settling for 0.56% or less with DBS?

How much is DBS saving?

If DBS were to pay its customers OCBC's rate of 1.14%; based on DBS's current deposit amount of $313 billion, DBS will have to pay out an additional s$1.81 billion annually. That is 39% of its net profit.

To those who park a significant amount of money in a DBS/POSB account, thank you for your contribution towards nation building by contributing to our nation's coffers through the DBS dividends received by Temasek.

However as a financial blogger, I question if that is a smart money management decision.


  1. Could it be that most of that money come from big companies?
    Personally I always keep a few thousands in DBS (unfixed) for "working capital".
    If companies do the same, the total could be substantial.

    And big companies with large sums can't take advantage of things like OCBC 360, since a total of 50,000 is too little.

  2. That's a remote possibility. If you notice, the deposits in UOB and OCBC is almost identical, which shows DBS has 70 billion in deposits more than them. Large companies parking money with DBS may be able to explain this 70 bil gap; however, this also means that there is still a significant amount of savers putting money with DBS instead of OCBC and UOB.

  3. I applaud your scathing blog title, haha! Thanks for highlighting this, I skimmed through this part in their financial statements, but what a valuable and interesting gem of information!

  4. I think it can be seen from the long queue at DBS/POSB ATMs also. Personally, I never understood how people can accept lower interest rates while tolerating the queues. Somehow I always found OCBC ATMS to be quite empty.

  5. Interest is so low that nobody even bothers to make the effort to switch. Not worth the effort I suppose!

  6. For normal folks the amount of money inside the accounts will not make any impact at all with the difference in interest earned.

    1. The average bank balance (fixed Dep and ordinary acct) many of us, normies, is in the region of s$30,000. If you are able to switch to earn 0.5% more interest annually, that means a cool $150 more.

      $150 is equal to either: 1) 1 month transport expense, 2) 1 year expense for term insurance, 3) 12 movie tickets , 4) 4 months of handphone bills and many more.