For the July 1 to September30, 2019 period, Security Bank Corporation (PSE: SECB) posted P2.7 billion in net income, up 22 percent versus year-ago level. Total revenues grew 35 percent year-on-year to P8.8 billion.
The growth in revenues was driven by core business income. Net interest income from customer loans and deposits/peso bond issuanceincreased 49 percent year-on-year to P5.9 billion.
Key to this growth was the continued expansion of retail loans and low-cost deposits, and disciplined pricing in wholesale loans.
Retail loans increased 54 percent year-on-year. Retail loans now account for 27 percent of total loans versus 19 a year ago. Total net interest income grew 33 to P7 billion.
Total loans grew 11 percent year-on-year to P444 billion. Total deposits grew 4 percent to P487 billion. Total deposits and peso bond issuance combined grew 8 percent to P504 billion.
On September 23, 2019, the Bank raised P6 billion in Long-Term Negotiable Certificates of Deposit (LTNCD) with a tenor of 5 and-a-half years, in line with its efforts to tap cost-efficient funding source alternatives to short-term high-cost deposits, as well as todiversify its funding base.
Net interest spread on loans and deposits/peso bond issuance was 5.92 percent in Q3-2019, up 57 basis points quarter-on-quarter and 149 basis points year-on-year.
Net interest margin increased to 4.05 percent in Q3-2019, up 47 basis points quarter-on-quarter and 77 basis points year-on-year.
Service charges, fees and commissions increased 44 percent to P1 billion.
This was driven by credit cards, loan fees, deposit charges, bancassurance and stock brokerage. Securities trading gains in third quarter amounted to P369 million. Total non-interest income increased 43 percent to P1.8 billion.
For the January 1 to September30, 2019 period, net income was P7.7 billion, up 18 percent from year-ago level. Net interest income from customer loans and deposits/peso bond issuance rose by 41 percent to P15.9 billion.
Interest income from financial investments increased by 7 percent to P7.8 billion. Total net interest income grew 23 percent to P18.9 billion. Service charges, fees and commissions for the nine-month period increased by 45 percent to P2.9 billion. Securities trading gains totaled P1.4 billion. Total revenues amounted to P24.2 billion, up 29 percent.
Income before provision for credit losses and income tax in the nine-month period was P11.3 billion, up 31 percent versus year-ago level. Income before provision for credit losses and income tax was P4.2 billion, up 38 percent year-on-year.
Cost-to-income ratio was 53.3 despite operating expense in the first nine months growing by 27 percent year-on-year mainly due to gross receipts and documentary stamp taxes,followed by manpower costs to support growth of the retail banking business.
Excluding GRT and DST, operating expense grew by 17 percent and cost-to-income ratio was 43.9 percent.
Asset quality remained healthy, with gross non-performing loan ratio at 1.4 percent, lower than industry’s 1.7 percent as of August 2019. Under the new BSP regulations implemented last year requiring Expected Credit Loss (ECL) provisioning by banks, the bank set aside P1.1 billion for provision for credit losses. This brought provision for credit losses in the nine-month period to P1.75 billion. NPL reserve cover was 110
percent.Inclusive of reserves in Retained Earnings,NPL reserve cover was 146 percent.
Security Bank continues to be among the country’s best capitalized private domestic universal banks. Common Equity Tier 1 Ratio further increased to 17.1 percent from 16.8 percent a quarter-ago. Total Capital Adequacy Ratio was 18.0 percent, compared to 19.2percent a quarter-ago, after the bank exercised its option to call its P10 billion unsecured subordinated 10-year notes issued on July 11, 2014 with 5.375 percent coupon, callable on July 12, 2019, representing Tier 2 capital.
Return on shareholders’ equity increased to 9 percent from 8.1 percent in 2018.
Shareholders’ capital increased to P118 billion, up 8 percent year-on-year. Total assets increased 10 percent to P807 billion.
On October 29, 2019, the Bank’s Board of Directors approved cash dividends of P1.50 per common share, representing regular semestral cash dividend of P1.00 per share and a special cash dividend of P0.50 per share, with record date on November 13 and payment date on November 28 this year.
This will bring the total cash dividends for the year to P3.00 per common share for a dividend payout ratio of 26 percent of 2018 net income. The bank had earlier paid cash dividends for the first semester of P1.50 per common share on April 25, 2019.