Security Bank posts 71% profit growth

Mid-sized commercial bank Security Bank Corp. (SBC) posted a 71-percent growth in net income to P408 million in the first five months of the year, although the huge gain was largely due to bigger provisioning for losses undertaken last year.

"In fact, it is equivalent to 80 percent of net earnings for the whole of 2002," SBC president and chief executive officer Rafael F. Simpao Jr. said yesterday.

Simpao said they have set a "conservative" full year net income growth target of between 20 to 25 percent in 2003, or from P508 million last year to roughly P635 million.

The bank official said that several strategic initiatives, which started last year would help achieve its full year earnings.

These include forging strategic alliances, deepening customer relationships, proper distribution channels, operating at an efficient level, and making wise and profitable investments.

However, the "conservatism" was based on the continued "threats"that have been keeping Asian economies, including the Philippines, depressed.

"The threats have not diminished making the year as challenging as last year," the bank’s chief executive said. "The National Government’s fiscal deficit, poor global economic conditions especially the Japanese and US economies, the negative impact of the SARS outbreak and depressed interest rates are conditions that make it challenging for the bank."

Simpao said that as long as the feeling of stability is present in the market, corporates and banks are unable to program its initiatives.

SBC reported that its non-performing loans (NPLs) ratio stood at 10.7 percent of total loan portfolio after adjustments for fully provisioned loss accounts. The NPL cover remained a comfortable 52 percent after the setting up of P355 million in provisions for the first five months.

Last year, its total resources stood at P69 billion, up from P65 billion in 2001 while its deposit base stood at P45 billion at end-2002, from P40 billion a year ago. Operating income before provisioning rose to P1.5 billion in 2002 from P1.4 billion the year before.

"Efforts to keep operating expenses under tight control have also been achieved, with operating expenses down by four percent from the comparable level in 2002. The bank’s cost to income index has been steady at 50 percent while efforts to improve efficiency by rationalizing distribution channels and products continue," Simpao added.