May 08, 2015

Security Bank earns P3.4b in 1Q15

In a disclosure to the Exchange, Security Bank (SECB) said that it earned P3.36b in 1Q15. This represents a135% YoY growth and an annualized RoE of 28%. The bank’s loan portfolio expanded by 20% YoY to P199b while deposits grew 17% YoY to P247b, resulting in a loan-to-deposit ratio of 81%. Meanwhile, total assets grew 8% YoY to P409b.

These enabled net interest income to grow 4% YoY and 7% QoQ to P2.9b, as net interest margin came in at 3.3%, slightly lower than the 3.4% average for 2014. Non-interest income for 1Q15 was at P3.4b, boosted by extraordinary trading gains of P2.1b which resulted from the sale of investment securities.

Excluding this, non-interest income was at P1.4b, 72% higher YoY. Fee-based income and asset management fees posted a 20% YoY growth to P482m. The bank also said that its core revenues grew 9% YoY to P3.6b. Operating costs grew 46% YoY and 14% QoQ due to the increase in taxes and licenses, as well as intensified advertising and marketing expenses. This brought cost-to-income ratio to 40%. Provisions for impairment and credit losses were at P188m, even as the bank maintained an NPL ratio of 0.08% and NPL cover of 198%.

Our take: SECB’s 1Q15 earnings came in better than expected and already accounted for 50% of 2015E consensus estimates. The earnings beat was primarily caused by an extraordinary trading gain of P2.1b, which resulted from the profitable disposal of investment securities. However, though the bank continued to grow its balance sheet, its net interest income only grew at 4%. Moreover, operating expenses jumped significantly vs. the same period last year. We shall review SECB’s 1Q15 results once it releases its detailed financial statements. – WealthSec