Standard Chartered to slowly 'chip away' at DBS' advantage

DBS remains the 'king of savings deposits,' says CIMB.

Here's more from CIMB:

DBS has the largest S$ deposit base in Singapore, thanks to its acquisition of POSB in 1998 and its huge ATM and branch network. We think that its recent fixed deposit rate hike is more likely a move to stem fixed deposit outflow than to recapture market share as DBS merely increased fixed deposit rates to match that of local peers.

DBS continues to be the king of savings deposits, which are stickier than fixed deposits. In the nearterm, we think that DBS should be relatively unscathed by the competition in the fixed deposit space. We shave our FY12-14 earnings estimates by a mere 0.4-1% for its recent rate increase.

Efforts to increase deposit stickiness

We think that aggressive foreign banks like Standard Chartered could slowly chip away at DBS’s savings deposit advantage. Standard Chartered has been very active in capturing savings deposits through attractiveinterest rates (1.88% p.a.), circumventing its small ATM network via Internet transactions, etc. It is cheaper to retain existing customers than to attract new ones.

To increase deposit stickiness, DBS has introduced its own lifestyle branch, Remix, aimed at young adults. It also recently introduced its mobile app One.Tap which allows banking transactions on customers’ mobile phones. Only time will tell if DBS is successful in defending its savings deposit advantage.