Security Bank eyes 20% profit growth this year

Security Bank Corp. (Security Bank) hopes to expand its net profit by up to 20 percent from P631 million last year to around P757 million this year. The medium-sized commercial bank registered net earnings of P508 million the year before that.

In the first semester alone, SecurityBank reported a net income of P476 million, almost 80 percent better than the P269 million recorded in the first six months of 2002.

"We are still on track for our 15- to 20-percent growth rate target for the year," Joven Hernandez, Security Bank senior vice president said.

One reason for the enthusiasm is the anticipated growth of its common trust fund. From P700 million in 2003, the commercial bank is forecasting its common trust fund to reach P3 billion by end December.

First semester income translates to an annualized return on equity (ROE) of 9.7 percent, better than the 6.4 percent last year. The bank’s net interest income reflected a quarterly increase of 14 percent as a result of expanded asset volumes and improved margins. It also had higher income from its portfolio of investment securities.

Bank officials said collection from non-performing loans (NPLs) resulted in interest income recoveries, thus shrinking the SecurityBank’s NPL ratio to 7.8 percent, from the 8.6 percent in the first quarter, one of the lowest in the industry. Likewise, provisioning for ROPOA (real and other properties owned and acquired) grew by P232 million.

Controlled operating expenses allowed the bank to post a cost-to-income of 54 percent from April to June, better than the 58 percent in the first quarter of the year.

Growth in net margins was supplemented with fee-based income, which improved by 18 percent over the first quarter level due to higher foreign exchange earnings and recoveries from non-performing assets (NPAs). The NPAs include the bank’s NPLs and ROPOAs.

Consumer and corporate banking business are tracking their three-year strategic plan with several initiatives and new products geared towards growth in low-cost deposits.

Security Bank has launched a P3 billion, Tier 2 capital notes to raise funds for expansion and funds for provisioning. It also launched the dollar-denominated common trust fund, long-term time deposits, cash management system for middle market accounts, and several high-interest checking accounts.

Recently, Security Bank forged an alliance with Travelex Money Transfer, a global leader in the remittance business. Earnings from the alliance would reflect in its fee-based earnings although officials believe that positive gains will only reflect in the 2005 operations.

But more than just the remittance business from overseas Filipino workers (OFWs), the bank sees other opportunities including interbank transactions, credit cards, and bancassurance.