June 19, 2018, 7:56 pm
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Security Bank gets S&P upgrade

S&P Global Ratings (S&P) recently upgraded its credit rating on Security Bank to investment grade rating of BBB- (Stable outlook) from BB+ (Positive outlook). 

In its May 2018 report released in Singapore, S&P stated that its rating action on Security Bank followed its review of the Philippine banking sector which concluded that the credit risk facing Philippine banks has reduced with the establishment of credit bureaus and banks’ improving underwriting practices in the consumer loans segment.

S&P revised its Banking Industry Country Risk Assessment on the Philippines to group ‘6’ from group ‘7’ due to the sector’s improved credit fundamentals. 

S&P cited the positive role of the Credit Information Corp., a centralized credit registry, which has been collecting data on the credit history of borrowers. 

Participating financial institutions have access to this database and accredited credit bureaus will be able to dispense credit scores and reports. 

S&P believes that this will strengthen the underwriting standards in consumer lending and, over the long-term, better transparency should lower consumer non-performing loans closer to the overall banking system NPLs.

As a result, S&P upgraded its rating on Security Bank to BBB- (Stable outlook) because it expects the reduced credit risk in the Philippines to strengthen Security Bank’s capital position and provide a solid buffer against potential losses. 

The Stable outlook on Security Bank reflects S&P’s view that Security Bank will maintain its strong capital buffers and good asset quality over the next two years. S&P expects Security Bank’s risk-adjusted capital ratio to remain strong at 11 percent-12 percent over the next two years. S&P’s formula for risk-adjusted capital ratio is more stringent than the Basel III formula used in the Philippines.

S&P’s review of the Philippine banking sector and subsequent rating upgrade of Security Bank followed S&P’s earlier action last April of raising the outlook for the Philippines’ sovereign credit rating to Positive from Stable and affirming the sovereign credit rating at BBB. 

This move raised the possibility of a rating upgrade for the country on the back of solid economic growth, healthy external position, and improvements in policy-making.

Meanwhile, Security Bank’s Trust and Asset Management Group (TAMG) has completely adopted an international code of conduct which ensures that its asset managers adhere to ethical principles.  

The Asset Manager Code is a voluntary code of conduct set by the Chartered Financial Analyst (CFA) Institute that outlines the ethical and professional responsibilities of firms that manage assets on behalf of clients.  

The principles and provisions address six broad categories, namely: (1) loyalty to clients, (2) investment process and actions, (3) trading, (4) risk management, compliance, and support, (5) performance reporting and valuation, and (6) disclosures.

“It is the responsibility of asset managers to invest responsibly and with honesty and integrity in the financial markets.  A higher ethical standard will boost consumer trust and protect the hard-earned investments of our clients,” explained Security Bank’s President & CEO, Alfonso L. Salcedo, Jr.

The CFA Institute, which launched the Asset Manager Code in 2005, is present in around 150 countries.  Since 2016, Security Bank has worked towards adopting the Code in its internal policies and requiring its fund managers to abide by the Code. 

“We will support initiatives and policies that uphold the highest professional standards in banking and finance.  Trust and confidence are the most valuable assets in our industry,” said Salcedo.

Security Bank’s TAMG is among three asset management firms in the Philippines that have adopted the global standards set forth by the CFA Institute.  

The Bank’s Unit Investment Trust Funds (UITFs) have been recognized by the CFA Society Philippines as Best Managed Funds.  

In 2016, the SB Peso Asset Variety Fund won “Best Managed Fund for Balanced Fund Category”.  

In 2017, the SB Peso Bond Fund was awarded “Best Managed Fund for Peso Long-Term Bond Fund”.  

Also in 2017, the SB Peso Equity Fund ranked first in terms of highest return among UITFs in the same category.
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