DBS most positively geared to rising US interest rates

It has the highest deposits base.

According to Barclays, banks benefit most when short-term interest rates rise. The majority of loans are typically priced on Sibor/SOR/Libor (with the exception of some fixed rate products like credit cards).

Interest rates have remained low since 2008 and our economics team does not expect any change until 2015.

Here's more from Barclays:

Based on our sensitivity analysis, DBS is most positively geared to rising US/Singapore interest rates. In Figure 23 and Figure 24, we show that as Sibor and Libor rise on expectations that interest rates will rise, there is a positive impact on margins and pre-tax profit.

If we assume that margins return to pre-crisis levels in 2007, at which time 3M Sibor averaged ~2.8%, we estimate that FY13E earnings would be 26% to 44% higher than our current estimates.

DBS is most positively geared to rising US interest rates as it has a high proportion of S$/US$/HK$ interest earning assets and the highest current and savings deposits base.

DBS has the lowest S$ loan-to-deposit ratio, but when we include US$ and HK$, its combined S$/US$/HK$ loan-to-deposit ratio is higher than that of OCBC and UOB.

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