For the July 1 to September 30, 2019 period, Security Bank Corporation (PSE: SECB) posted Php 2.7 billion in net income, up 22% versus year-ago level. Total revenues grew 35% year-on-year to Php 8.8 billion.
The growth in revenues was driven by core business income. Net interest income from customer loans and deposits/peso bond issuance increased 49% year-on-year to Php 5.9 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% year-on-year. Retail loans now account for 27% of total loans versus 19% a year ago. Total net interest income grew 33% to Php 7 billion.
Total loans grew 11% year-on-year to Php 444 billion. Total deposits grew 4% to Php 487 billion. Total deposits and peso bond issuance combined grew 8% to Php 504 billion.
On September 23, 2019, the Bank raised Php 6 billion in Long-Term Negotiable Certificates of Deposit (LTNCD) with a tenor of 5 ½ years, in line with its efforts to tap cost-efficient funding source alternatives to short-term high-cost deposits, as well as to diversify its funding base.
Net interest spread on loans and deposits/peso bond issuance was 5.92% in Q3-2019, up 57 basis points quarter-on-quarter and 149 basis points year-on-year. Net interest margin increased to 4.05% in Q3-2019, up 47 basis points quarter-on-quarter and 77 basis points year-on-year.
Service charges, fees and commissions increased 44% to Php 1 billion. This was driven by credit cards, loan fees, deposit charges, bancassurance and stock brokerage. Securities trading gains in Q3-2019 amounted to Php 369 million. Total non-interest income increased 43% to Php 1.8 billion.
For the January 1 to September 30, 2019 period, net income was Php 7.7 billion, up 18% from year-ago level. Net interest income from customer loans and deposits/peso bond issuance rose by 41% to Php 15.9 billion. Interest income from financial investments increased by 7% to Php 7.8 billion.
Total net interest income grew 23% to Php 18.9 billion. Service charges, fees and commissions for the nine-month period increased by 45% to Php 2.9 billion. Securities trading gains totaled Php 1.4 billion. Total revenues amounted to Php 24.2 billion, up 29%.
Income before provision for credit losses and income tax in the nine-month period was Php 11.3 billion, up 31% versus year-ago level. Income before provision for credit losses and income tax in Q3-2019 was Php 4.2 billion, up 38% year-on-year.
Cost-to-income ratio was 53.3% despite operating expense in the first nine months growing by 27% year-on-year (excluding provisions for credit and impairment losses) mainly due to gross receipts and documentary stamp taxes (GRT and DST), followed by manpower costs to support growth of the retail banking business. Excluding GRT and DST, operating expense grew by 17% and cost-to-income ratio was 43.9%.
Asset quality remained healthy, with gross non-performing loan ratio at 1.4%, lower than industry’s 1.7% as of August 2019. Under the new BSP regulations implemented last year requiring Expected Credit Loss (ECL) provisioning by banks, the Bank set aside Php 1.1 billion for provision for credit losses in Q3-2019.
This brought provision for credit losses in the nine-month period to Php 1.75 billion. NPL reserve cover was 110%. Inclusive of reserves in Retained Earnings, NPL reserve cover was 146%.
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% from 16.8% a quarter-ago.
Total Capital Adequacy Ratio was 18.0%, compared to 19.2% a quarter-ago, after the Bank exercised its option to call its Php 10 billion unsecured subordinated 10-year notes issued on July 11, 2014 (with 5.375% coupon, callable on July 12, 2019) representing Tier 2 capital.
Return on shareholders’ equity increased to 9% from 8.1% in 2018. Shareholders’ capital increased to Php 118 billion, up 8% year-on-year. Total assets increased 10% to Php 807 billion.
On October 29, 2019, the Bank’s Board of Directors approved cash dividends of Php 1.50 per common share, representing regular semestral cash dividend of Php 1.00 per share and a special cash dividend of Php 0.50 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 Php 3.00 per common share for a dividend payout ratio of 26% of 2018 net income. The Bank had earlier paid cash dividends for the first semester of Php 1.50 per common share on April 25, 2019.