Fourth-quarter earnings increased 16% year-on-year to Php 2.4 billion
Makati City, Philippines – Security Bank Corporation’s (PSE: SECB) 2019 net profit increased 17% to Php 10.1 billion. Total revenues increased 33% to Php 33.9 billion as core business income continued its growth momentum. Net interest income from customer loans and deposits/peso bond issuance grew 43% to Php 22.5 billion. This was driven by the continued growth of retail loans and low-cost deposits.
Retail loans grew 56%, and now account for 29% of total loans versus 20% a year ago. Wholesale loans decreased 2% due to tempered loan demand and disciplined pricing. Total loans grew 9% to Php 456 billion. Low-cost deposits increased 19% and grew to 45% of total deposits, up from 38% in 2018. Net interest spread on loans and deposits/peso bond issuance in 2019 improved to 5.53%, up 112 basis points year-on-year.
Total net interest income increased 29% to Php 26.8 billion. Net interest margin in 2019 improved to 3.93%, up 66 basis points year-on-year.
Service charges, fees and commissions grew 40% to Php 4.1 billion. Fee income was driven by credit cards, loan fees, deposit charges and bancassurance. Securities trading gains amounted to Php 1.5 billion, up 320% from Php 366 million in 2018. Total non-interest income increased 49% to Php 7.1 billion.
The Bank set aside Php 4.2 billion for provision for credit losses in 2019, an increase from Php 714 million in 2018, driven by the rapid growth in retail loans and provisions for select commercial sectors. Pre-provision operating profit was Php 16.6 billion, up 41% from a year ago.
Excluding gross receipts and documentary stamp taxes (GRT and DST), the cost-to-income ratio improved by over five percentage points to 42.2% from 47.5% in 2018. Operating expense grew by 18% driven primarily by manpower cost which increased 13%. Headcount increased by 722 primarily to support growth of the retail banking business and transformation of the Bank’s infrastructure, processes and culture. Manpower now stands at 6,625.
Including GRT and DST, the cost-to-income ratio improved by over two percentage points to 51.1% from 53.9% in 2018 even as operating expense grew 26%. A key driver of expense growth was GRT and DST which caused taxes and licenses to increase by 79%.
Return on shareholders’ equity increased by 80 basis points to 8.9% from 8.1% in 2018.
Fourth-quarter earnings up 16% from year ago
Q4-2019 net profit increased 16% from a year ago to Php 2.4 billion.
Total revenues rose 43% year-on-year to Php 9.8 billion, driven by core income. Net interest income from customer loans and deposits/peso bond issuance increased 50% to Php 6.6 billion. This drove total net interest income to grow 44% to Php 8 billion.
Net interest spread on loans and deposits/peso bond issuance in Q4-2019 improved to 6.14%, up 142 basis points year-on-year and 43 basis points quarter-on-quarter.
Net interest margin in Q4-2019 improved to 4.52%, up 114 basis points year-on-year and 47 basis points quarter-on-quarter.
Service charges, fees and commissions increased 28% to Php 1.2 billion.
Provision for credit losses was higher at Php 2.4 billion in Q4-2019 versus Php 487 million in Q4-2018.
Pre-provision operating profit was Php 5.3 billion, up 65% from a year ago.
Excluding GRT and DST, operating expense grew 21% year-on-year. Including GRT and DST, operating expense increased 24%.
Fourth-quarter net profit 12% below previous quarter
Compared to the previous quarter, Q4-2019 net profit was 12% lower due to higher provisions for credit losses of Php 2.4 billion in Q4-2019 versus Php 1.1 billion in Q3-2019, driven by the growth in retail loans and provisions for select commercial sectors.
Pre-provision operating profit was Php 5.3 billion, up 28% from a quarter ago.
Total revenues increased 11% quarter-on-quarter to Php 9.8 billion. Net interest income from customer loans and deposits/peso bond issuance grew 12% to Php 6.6 billion. Total net interest income was up 14% to Php 8 billion.
Service charges, fees and commissions grew 19% to Php 1.2 billion.
Excluding GRT and DST, operating expense decreased 2% quarter-on-quarter. Including GRT and DST, operating expense decreased 3%.
Balance sheet remains strong
Asset quality remains healthy. Non-performing loans decreased by Php 1.2 billion or 18% from Php 6.5 billion in Q3-2019 to Php 5.3 billion in Q4-2019. The gross NPL ratio decreased to 1.17% in Q4-2019 from 1.4% in Q3-2019 due to payments and recoveries. The Bank’s gross NPL ratio of 1.17% was lower than banking industry’s 2.09% as of December 2019.
NPL reserve cover was at 106% versus 110% a quarter ago and 111% a year ago. Inclusive of reserves in Retained Earnings, NPL reserve cover was 160% versus 146% a quarter ago and 216% a year ago.
Total deposits grew 2% year-on-year to Php 499.6 billion. During the year, the Bank issued a total of Php 8.37 billion in LTNCDs and Php 18 billion in peso corporate bonds to diversify its funding base, extend its liability tenors and support business expansion.
The liquidity coverage ratio of 115% and the net stable funding ratio of 113% were both above the regulatory requirement of 100%.
Security Bank continues to be among the country’s best capitalized private domestic universal banks. Common Equity Tier 1 Ratio was at 16.9% versus 17.1% a quarter ago and 16.4% a year ago. Total Capital Adequacy Ratio (CAR) was at 17.9% versus 18% a quarter ago and 18.7% a year ago. Leverage ratio of 13% was above the regulatory requirement of 5%. Total assets increased 3% year-on-year to Php 793 billion. Shareholders’ capital increased 8% to Php 118 billion.
Security Bank paid cash dividends of Php 1.50 per common share on November 28, 2019, representing regular semestral cash dividend of Php 1.00 per share and a special cash dividend of Php 0.50 per share. This brought total cash dividends paid during the year to Php 3.00 per common share for a dividend payout ratio of 26% of 2018 net income.
Security Bank has a total of 308 branches and 841 ATMs as of December 31, 2019.