DBS Group: A Fortress in Volatility—Why Its Deposit Engine and Defensive Franchise Signal a Buying Opportunity

Amid global macroeconomic turbulence—from U.S.-China trade wars to Fed policy uncertainty—DBS Group stands out as a rare defensive growth story. With its fortress balance sheet, industry-leading deposit dynamics, and undervalued equity, the Singapore-based banking giant is poised to outperform peers in 2025. Here’s why investors should act now.

The Deposit Engine: Fueling NII Resilience

Citi’s research highlights a critical advantage for DBS: its low-cost deposit inflows, which are reshaping its net interest income (NII) trajectory. In Q1 2025, the bank’s CASA (Current & Savings Account) ratio surged to 52.6%, up from 46.3% in early 2024. This shift toward low-cost deposits reduces funding costs, enabling DBS to maintain net interest margins (NIM) even as global rates fluctuate.

While competitors scramble to manage rising deposit costs, DBS’s strategy of prioritizing relationship-based, low-beta deposits (e.g., CASA) has insulated its margins. For instance, its Singapore dollar loan book—50% hedged and one-third on fixed rates—buffers against interest rate volatility. This structural advantage is why Citi notes that NII could remain stable even if rates drop further, unlike asset-sensitive peers.

Valuation: A Discounted Defensive Play

Despite its strengths, DBS trades at a 12% discount to its five-year average P/B ratio of 1.4x, currently at 1.23x versus the FTSE Straits Times Index (STI). This undervaluation is puzzling given its superior capital management:
- Strong CET-1 ratio: Maintained above 14%, well above regulatory requirements.
- Prudent provisioning: General allowances rose by $205 million in Q1 2023 to guard against macro risks.

Citi’s “sell” rating, which targets a $26.60 price (vs. current $31.25), overlooks the bank’s strategic positioning in Asia’s growth corridors and its dividend resilience (a 40% payout ratio despite tax headwinds). The STI’s 1.0x P/B multiple for regional peers underscores DBS’s mispricing: it’s a premium franchise at a discount.

Macros and Geopolitics: Why DBS Wins

The U.S.-China trade war and emerging market instability are top risks for banks, but DBS’s geographic diversification and asset quality mitigate exposure:
- China loan exposure: 30% of total loans, but hedged via onshore/offshore balance sheets.
- Wealth management dominance: Assets under management grew 37% YoY in Q1 2025, shielding fee income from trade volatility.

Meanwhile, the Fed’s rate-cutting cycle (projected at 25–50 bps in 2025) benefits DBS’s CASA-driven model, as lower rates reduce deposit costs faster than loan yields decline. This “beta advantage” is why Citi’s analysis shows DBS’s NII could expand even in a slowing economy.

Call to Action: Close the Valuation Gap

DBS’s combination of deposit-driven NII resilience, defensive asset quality, and undervalued equity creates a compelling risk/reward trade. Investors should:
1. Buy DBS shares: Target entry at $29–30 to capture the 1.4x P/B mean reversion.
2. Sell STI ETFs: Underweight the index, as it’s overexposed to banks with weaker deposit dynamics.
3. Monitor CASA trends: A further rise in CASA above 55% could trigger a rerating.

The market has yet to price in DBS’s strategic moat: its digital-first platform, regional dominance, and fortress balance sheet. With geopolitical risks likely to persist, this is no time to ignore Asia’s premier bank.

Act now: DBS is a rare blend of growth and safety in a volatile world.

Data sources: Citi Research, Maybank Analysis, S&P Global Market Intelligence.