In addition, the Singapore dollar is being increasingly viewed as a haven currency.
Singapore’s status as a wealth hub has become a crucial earnings lever, given subdued loan demand and declining interest rates as banks use their excess liquidity to deploy into securities and to cross-sell wealth products, Goldman argues.
“In this rate cut cycle, this strategy has allowed DBS to achieve 8% y-o-y growth on net interest income (NII) from securities volume in 1H2025, OCBC 6% and UOB 4%. This translates to 4% y-o-y growth in overall NII for DBS and flat for UOB, while OCBC saw -4% due to weaker loan and deposit repricing,” the Goldman report says.
“Our analysis shows a 1 percentage point (ppt) increase in deposits could add 0.2%-0.4% of operating income from gapping (when deposits are placed in investment securities to earn NII) and 0.6% to 0.7% of additional operating income if deposits were sourced through AUM. While earnings contribution is low, it is highly ROE accretive; for each 1ppt of deposit growth, we estimate 1-4 basis points (bps) ROE uplift from gapping and 4-8 bps uplift from wealth, as ROE from gapping in our analysis is around 15%-33%, while from wealth it is 30%-60%,” Goldman estimates.
Gapping, coupled with wealth management carries lower risk weights than loans, making the strategy highly ROE accretive and scalable given limited capital consumption, Goldman argues.
Singapore’s banking industry’s deposits rose by 8.7% y-o-y for the first eight months of the year, up from a growth of 4.9% for the same period in 2024. This growth was driven by a +11.8% y-o-y/+7.3% year-to-date (ytd) growth in SGD deposits.
Foreign currency deposits were a more modest +6.1% y-o-y/ +1.5% ytd this year, which Goldman attributes to the SGD's appreciation.
See also: This is how the STI gets to 5,000 and then 6,000, JP Morgan says
“Assuming that a majority of these FX deposits are denominated in USD, our estimate indicates that the FX deposit growth on a constant-currency basis would be at 7.7% y-o-y ytd. The total nominal increase of total deposits in 2025 ytd is already higher than the 2024 increase,” Goldman estimates.
By segments, residents led the nominal deposit for the January-August period with an increase 36%, followed by non-bank financial institutions (29%), Singapore government and statutory boards (19%), and non-residents (16%), whose contribution was likely diluted by SGD appreciation. By deposit type, Casa grew by 17.6% y-o-y, while total deposits declined 1.7% yoy due to falling Sora
The contribution to operating income from a 1ppt growth in deposits for the three Singapore banks is positive for earnings when deployed into securities and even more so when accompanied by AUM inflows that generate fee income, the report points out.
“We raise our deposit growth by up to 3ppt for 2025 and 2026 for the banks. Among the three Singapore banks, we see DBS as likely to benefit the most, given its robust funding franchise, which allows it to gather deposits at a lower cost than peers, resulting in better earnings and ROE accretion. Hence, we revise our 2025 to 2027 earnings by -2% to +7% for the three banks, baking in higher deposit growth, and also adjusting for lower Sora and higher Hibor,” the report states.
Separately, Great Eastern Holdings reported 3QFY2025 net profit of $372 million, up 50% q-o-q and 36% y-o-y. JP Morgan estimates that OCBC’s share of earnings accounts for 20% of 3QFY2025 earnings for OCBC versus a 15% average in the last two quarters.
“This suggests around 5% upside risk to OCBC 3QFY2025 earnings, to be released on Nov 7. This set of results suggests likely strength in non-interest income in OCBC’s 3Q2026 results, which could potentially offset NIM weakness,” JP Morgan says.
JP Morgan’s Great Eastern update also points out that treasury income has been firm at global banks. “We believe all three Singapore banks will benefit from broader capital markets-related income. The hawkish cut from the Fed potentially lowers the pressure on Sora for now, and may be a net positive for rates/NIM outlook for next three to six months,” the report says.
JP Morgan has an "overweight" on DBS, "neutral" on OCBC and "underweight" on UOB.
