Connect with us

Hi, what are you looking for?


S&P sees Security Bank’s capital deteriorating as credit costs rise

SECURITY BANK Corp. said higher loan loss provisions will help protect its capital amid the ongoing pandemic. — BW FILE PHOTO

SECURITY BANK Corp. might see a deterioration in its capital strength over the next two years amid rising credit costs, S&P Global Ratings said.

“The bank’s performance in third-quarter 2020 was worse than our expectations due to continuously elevated credit costs amid high COVID-19 infection rates in the country,” the debt watcher said in a note on Monday.

“This level of credit costs is significantly higher than industry peers’, with annualized industry credit costs of 180 bps (basis points) for the first nine months,” S&P said.

Security Bank ramped up provisions for credit losses to P1.75 billion in the first nine months of the year, surging by 688% from the amount it set aside in the same period last year.

The bank’s non-performing loan ratio rose to 4.03% in the third quarter from 1.58% in the April to June period. NPL reserve cover stood at 122%.

S&P in June downgraded Security Bank’s stand-alone credit profile to ‘bbb-‘ from ‘bbb’ to reflect asset quality deterioration and heightened credit costs amid the coronavirus pandemic.

In October, the debt watcher revised its outlook on its rating for the bank to “negative” from stable”, which means a downgrade is possible in the next six months to two years.

“Our base case remains that the bank’s risk-adjusted capital (RAC) ratio would stay above 10% over the next two years. However, elevated credit costs will squeeze the capital position, as well as the rating buffer,” S&P said.

On the other hand, an offsetting risk to diminishing capital strength would be Security Bank’s “resilient net interest margin, S&P said. The lender’s net interest margin stood at 4.89% as of end-September, well above the industry average of 3.84%.

Another factor that could provide support to the bank’s capital base and bottomline performance, the debt watcher said, is its improving trading gains, which jumped to P9.2 billion at end-September, surging 557% from the year-ago level.

“Further windfall from the securities book will be difficult, in our view, given the significant shrinkage of the securities portfolio in amortized costs,” S&P said.

Sought for comment, Security Bank said its decision to beef up loan loss provisions is anticipatory and will, in effect, protect its capital. It said the provisions increased its accumulated total allowance for credit losses to 5% of its total loans.

“Fortifying the bank’s capital remains a top priority objective during this period of economic slowdown resulting from the pandemic,” Security Bank said in a statement sent to BusinessWorld.

Despite the crisis, Security Bank said it remains well-capitalized, noting that its common equity Tier 1 (CET1) ratio stood at 19.1% as of September from 17.1% a year ago. This is well beyond the minimum 6% regulatory requirement.

“Security Bank in fact now has the highest CET1 ratio among private domestic universal banks in the Philippines as of Sept. 30,” it said.

The lender’s net profit sank 62% to P1 billion in the third quarter from P2.7 billion a year ago.

This brought the bank’s net earnings in the first nine months to P6.7 billion, down 13% from the P7.7 billion logged in the comparable year-ago period, amid higher loan loss provisions.

Security Bank’s shares ended trading at P106.30 apiece on Tuesday, up by 2.31% or P2.40 from its previous close. — L.W.T. Noble

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!



THE PHILIPPINES lags regional peers in terms of the share taken up by solar and wind energy in its power mix, energy think tank...


THE PHILIPPINE government tempered its economic growth target for this year, as rising inflation and ballooning debt threaten to hamper the economy’s recovery from...


By Keisha B. Ta-asan SOURED LOANS held by Philippine banks declined for a third straight month in May, bringing the nonperforming loan (NPL) ratio...


THE NATIONAL Government is hoping local government units (LGUs) will channel their expanded budgets into raising agricultural output, Finance Secretary Benjamin E. Diokno said....


THE MARCOS administration should immediately address power supply shortages and high electricity rates, which are affecting businesses in the country, the Philippine Chamber of...


MANILA Electric Co. (Meralco) has confirmed receipt of an order from the Energy Regulatory Commission (ERC) directing the country’s largest power distribution utility to...

You May Also Like


Having a good Instagram marketing agency to back up your Instagram account is an absolute must going into the new year. With competition stronger...


Ivermectin, an existing drug against parasites including head lice, has had a checkered history when it comes to treating COVID-19. The bulk of studies...


Insomnia is the most common sleep disorder in the global population. Therefore, it is a problem that many people suffer or have suffered throughout...


As a traditionally rigid insurance industry becomes bogged down by antiquated processes and operations, a handful of industry leaders are seeking to shake things...

Disclaimer:, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2021 SmartRetirementReport. All Rights Reserved.