Low-cost deposits from high CASA ratios lower funding costs for DBS, OCBC, UOB versus challenger banks reliant on wholesale funding.

The CASA Ratio Advantage of Singapore's Big Three

Singapore's three largest banks—DBS, OCBC, and UOB—consistently maintain current and savings account (CASA) ratios in the 50-65% range, a structural funding characteristic that sets them apart from most global peers and virtually all new market entrants. The CASA ratio, which measures the proportion of low-cost current and savings account deposits to total deposits, directly shapes a bank's cost of funds and competitive positioning.

Industry data from 2024 indicates that the three incumbents operate with an average CASA ratio of approximately 57.5%, with individual bank figures fluctuating within the 50-65% band depending on quarter-end balance sheet composition. This ratio reflects decades of accumulated customer relationships, extensive branch networks spanning the island, and the ingrained habit among Singaporean households and small businesses of parking operational cash in non-interest-bearing or low-interest accounts.

CASA Ratio (%) (%)Source: Orionmano Industries

Source analysis confirms that DBS, OCBC, and UOB maintain "high CASA ratios and strong all-currency liquidity coverage ratios," positioning them to navigate macroeconomic challenges with a stable deposit base (Source 2). This deposit stickiness is not accidental—it is the product of multi-generational banking relationships, extensive physical and digital service networks, and the banks' role as salary crediting and government payment distribution channels.

How CASA Ratios Lower Funding Costs

The mechanism linking high CASA ratios to lower funding costs is straightforward. Current and savings account deposits typically carry near-zero or very low interest rates, unlike fixed deposits, certificates of deposit, or wholesale funding instruments. When 50-65% of a bank's deposit base costs little to nothing to hold, the blended cost of funds drops materially below that of banks reliant on interest-bearing term deposits or interbank borrowings.

This cost advantage flows directly into profitability. Incumbents can offer competitive lending rates to borrowers while simultaneously maintaining higher net interest margins (NIMs) than peers with lower CASA ratios. During rate-cutting cycles, the advantage compounds: low-cost deposits reprice slowly downward, while loan book yields adjust more gradually, preserving spread. Conversely, in rising rate environments, the CASA base acts as a buffer, insulating net interest income from aggressive deposit repricing.

The capital strength of the three banks reinforces this funding advantage. DBS, OCBC, and UOB reported fully phased-in Common Equity Tier 1 (CET1) ratios of 15.2%, 15.6%, and 15.2% respectively in Q3 2024 (Source 3). These ratios, among the highest in Asia-Pacific banking, reflect earnings retention from stable net interest income and give the banks additional capacity to absorb credit costs or pursue growth without diluting shareholders. The combination of low-cost funding and robust capital creates a dual buffer that few competitors can match.

The Funding Challenge for New Entrants

New digital banks and foreign entrants face a fundamentally different funding equation. Without extensive branch networks, long-standing customer relationships, or established payroll and government payment linkages, these players struggle to build high CASA ratios. Their deposit franchises typically skew toward interest-bearing time deposits or promotional high-yield savings accounts, which carry significantly higher costs.

The funding cost disparity is structural rather than transitional. Building a CASA-heavy deposit base requires years—often decades—of customer trust, physical presence density, and integration into daily financial workflows. New entrants, including Singapore's digital bank licensees such as GXS Bank and MariBank, have focused on transactional accounts and partnerships to grow deposits, but their CASA ratios remain well below the incumbents' range. Consequently, they rely more heavily on wholesale funding sources—interbank borrowings, certificates of deposit, and institutional deposits—which are both more expensive and more volatile.

Safe-haven deposit inflows into Singapore have further widened the gap. Geopolitical uncertainties, particularly the Middle East conflict, have reinforced Singapore's status as a capital haven. "Heightened geopolitical uncertainties have reinforced Singapore's safe-haven appeal, driving deposit growth and wealth management inflows into local banks, particularly from Middle East-based clients reallocating assets away from perceived riskier jurisdictions in the Gulf region, such as Dubai," noted Jonathan Koh, analyst at UOB Kay Hian (Source 5). These inflows disproportionately benefit the incumbents, who already hold the primary banking relationships with high-net-worth individuals and family offices.

Implications for Profitability and Resilience

The structural CASA advantage translates directly into sustained profitability and resilience across economic cycles. In 2024, all three banks reported strong profit results supported by fee income growth and trading gains, with their low-cost deposit bases providing stable net interest income (Source 2). The Monetary Authority of Singapore's Financial Stability Review confirms that banks "continue to maintain adequate provisioning and capital buffers, aided by strong profitability" (Source 4).

This funding structure allows incumbents to absorb credit shocks more readily than wholesale-funded peers. When loan impairment provisions rise, the low cost of funds means a smaller net interest margin compression, preserving earnings capacity to rebuild provisions. The MAS review notes that the banking system has "strengthened precautionary buffers to guard against a potential rise in credit costs," a capacity enabled in part by the sustained profitability that high CASA ratios support (Source 4).

Looking ahead, the structural CASA advantage of DBS, OCBC, and UOB is likely to persist. Customer inertia in retail banking remains exceptionally sticky in Singapore, where switching costs—salary crediting, GIRO arrangements, insurance policies, and investment accounts—are high. Network density continues to matter: DBS alone operates hundreds of branches and ATMs, giving it a physical presence that digital-only entrants cannot replicate quickly. Simultaneously, Singapore's safe-haven status shows no signs of fading, with geopolitical volatility likely to continue funneling low-cost deposits to the incumbents.

The funding gap between incumbents and new entrants is not merely a temporary competitive imbalance—it is a structural feature of Singapore's banking landscape that will shape market share dynamics and profitability differentials for the foreseeable future.