05 November 2018, Makati, Philippines – For the July 1 to September 30, 2018 period, Security Bank Corporation (PSE: SECB) posted P2.25 billion in net income, up 5% from year-ago level and up 15% from quarter-ago. A key driver for the earnings growth was the continued expansion of the Bank’s consumer loans and low-cost deposits. Consumer loans grew 48% year-on-year while low-cost deposits increased 18%.
Total loan growth moderated to 8% as wholesale loans slowed to +2%. Excluding a large short-term corporate bridge loan in Q3-2017, wholesale loans would have grown 9% and total loans, 15%. Total loans stood at P401 billion. Consumer loans now account for 19% of total loans, up from 14% a year ago. Total deposits improved 9% to Php 468 billion, with high-cost deposits inching up 3%.
Net interest income from customer loans and deposits for the quarter increased 23% year-on-year. Net interest spread on loans and deposits increased to 4.43% in Q3-2018, up by 16 basis points quarter-on-quarter and up by 11 basis points year-on-year. Service charges, fees and commissions grew 38%, driven by bancassurance, credit card, deposit charges and loan fees. Operating expense growth (excluding provisions for credit and impairment losses) was 13%. Provision for income tax for the quarter was higher by 118% or P345 million due to growth in income from regular banking unit.
For the January 1 to September 30, 2018 period, net income was P6.5 billion, 11% lower than year-ago level primarily due to the decrease in trading gains by 57% or P627 million and the increase in provision for income tax by 73% or P769 million. Net interest income from customer loans and deposits increased by 30% or P 2.6 billion to P11.3 billion. Interest income from financial investments was lower by 13% or Php 1.1 billion due to a lower level of securities portfolio which decreased by 18% year-on-year. Total net interest income grew by 7% to Php 15.3 billion. Overall, net interest margin increased to 3.3% in Q3-2018, up by 11 basis points quarter-on-quarter and up by 7 basis points year-on-year. Service charges, fees and commissions for the nine-month period increased by 23% to P1.98 billion. Operating expense growth was 13% (excluding provisions for credit and impairment losses). Cost-to-income ratio was 54%.
Asset quality remained healthy, with gross non-performing loan (NPL) ratio at 0.7%. Provision for credit losses was P227 million for the nine-month period. NPL reserve cover was 120%, computed using the new BSP Circular 1011 guidelines on loan loss provisions which the Bank adopted in September 2018.
Common Equity Tier 1 Ratio increased to 16.3% from 16.2% a year ago. Total Capital Adequacy Ratio likewise strengthened to 18.6% from 18.5%. Security Bank is among the country’s best capitalized private domestic universal banks. Return on shareholders’ equity was 8.1%. Shareholders’ capital improved to Php 109 billion, up 6% year-on-year. Total assets stood at Php 733 billion.
On September 17, 2018, the Bank successfully issued US$ 300 million of five-year senior unsecured fixed rate notes. The order book reached a peak of 3.7 times of the intended issue size. 55% of the issue was taken up by global fund and asset managers, 25% by banks, and 20% by insurance companies. By geography, 73% was from Asia and 27% from Europe. The issuance enabled the Bank to extend its term liabilities and diversify its investor and funding base.
During the quarter, three new branches were opened in the high-growth Mindanao area: Davao City-Matina IT Park, Cotabato City and General Santos City. Security Bank has a total of 302 branches nationwide.
On October 30, 2018, 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 P 0.50 per share, with record date on November 19 and payment date on November 29 this year. This will bring the total cash dividends for the year to P3.00 per common share. The Bank had earlier paid cash dividends for the first semester of P 1.50 per common share on April 26, 2018.
