Why Singapore Banks Reported Profit Growth and Which Bank is the Best to place a Deposit

In the latest financial report given by our 3 local banks, they have reported a high growth in net profits. This is largely due to growth in net interest margin (NIM) banks are reporting. In layman term, it is the interest rate they are lending out as loans minus the interest rate they are paying for deposits.

Just look at the net interest margin growth across our 3 local banks

DBS: 1H2022 (1.52%), 1H2023 (2.14%), Growth in NIM of 0.62%

OCBC: 1H2022 (1.63%), 1H2023 (2.28%), Growth in NIM of 0.65%

UOB: 1H2022 (1.63%), 1H2023 (2.13%), Growth in NIM of 0.5%

Across all 3 banks, due to the rising SORA and global interest rates, the interest rates these banks charge to their customers, consumers and companies are higher; HOWEVER, the amount of interest they are giving depositors has not increased as fast. As a result, banks are announcing a large net interest margin

Which was the Stingiest Bank?

While all 3 banks have given a higher deposit rates to its depositors, the bank which gave the lowest increase to depositors was DBS bank, which likely explains why their net profits recorded the highest growth. Below is a snapshot of their increase in deposit rates:

Deposit Rates

DBS: 1H2022 (0.38%), 1H2023 (2.19%), Growth of 1.81%

OCBC: 1H2022 (0.52%), 1H2023 (2.64%), Growth of 2.12%

UOB: 1H2022 (0.55%), 1H2023 (2.70%), Growth of 2.15%

What it Means to Us Individuals?

From the above snapshot, we can infer that it is better to be a DBS and OCBC shareholders because they have been able to report a higher net interest margin and DBS in particular, gives the lowest rate to its depositors and yet seems to have a loyal fan base.

From the viewpoint of savers, UOB bank is the best bank to place your deposits. This to me is validated by the fact UOB has the best savings account called UOB one account which gives a realistic 4-5% interest for depositors who use their UOB one bank account, credit card and credit their salary into the UOB One account.

It is surprising till now, many Singaporeans have not maximised the benefits of UOB one account and there are a few parking large amount of cash in DBS which is giving them a low deposit rate. It is evident DBS is giving a lower deposit rate to depositors by about 0.5%. This is a lot of interest foregone by depositors.

<Not vested in any of the bank shares and this post is not sponsored by UOB>