Notes

Implications
Fluctuation in interest rates can be either a boon or a bane, depending on the magnitude and direction of the change. There are some implications that might arise due to the change in rates, which will be discussed below:
More default on loans (Default risk)
In periods of high interest rates, customers who are already holding an existing loan tend to be more unlikely to be able to repay their debt. This additional default to the bank increases the risk that the bank takes on while giving out loans. If the bank is unable to collect the amount of debt which they lent out, the net profit margin of the bank will be largely affected.
Banking costs (Interest rate risk)
Banking costs incurred due to the increase in interest rates can lead to a loss in profits for the bank. This is because of the mismatch in the maturity of the bank’s assets such as loans and liabilities such as deposits. If the maturity of the bank’s assets is shorter than that of its liabilities, the bank would face a decline in its expected income if interest rates were to rise. This is because if the liabilities come due before the assets, the bank would have to pay more to receive additional funding due to the rise in rates.
Managing risk
As there is an inverse relationship between producing profits and managing risk, banks have to be able to draw a balance between the two. If the bank were to give out more loans due to high interest rates, it will result in an intense competition between its competitors in the industry as there is pressure to lend more.
To support this point, DBS has a rising loan-to-deposit ratio (LDR) which has grown to 86.5% in March 2015, from 84% in 2014. In this case, although there is an increase in the profit margin for the bank, its capital buffers would be weakened. Therefore, if a financial crisis would to occur, DBS would be more vulnerable due to shortage of capital.
Internship experience
Allocated in the Finance department, I understood how important it is for the bank to produce results for its shareholders. In view with the changing interest rates, the department has to be able to produce profits without overlooking the risk and implications which might occur. With additional risk the risk the bank faces due to interest rates, actions have to be taken in order to produce results which would satisfy the shareholders.
https://www.fool.sg/2015/04/27/dbs-group-holdings-ltds-latest-earnings-cashing-in-on-a-record-quarter/