MANILA, Philippines – Standard & Poor’s Ratings Services (S&P) has raised the outlook for Security Bank Corp. to positive from stable after the P36.9-billion deal with Japan’s largest bank.
Ivan Tan, credit analyst at S&P, said the fresh equity infusion by The Bank of Tokyo – Mitsubishi UFJ Ltd (BTMU) in exchange for a 20 percent stake would boost Security Bank’s capital base.
“The outlook revision reflects Security Bank’s improved capital position after BTMU acquired a 20 percent stake in the bank. The deal will increase the bank’s capital by P36.9 billion on a pro-forma basis from P52.4 billion as of Sept. 30, 2015,” Tan said.
Tan said the transaction is expected to close within the first half of the year subject to regulatory approval and other conditions by various entities including the Bangko Sentral ng Pilipinas (BSP).
“We believe that Security Bank will use the additional capital to pursue more rapid growth, particularly in the retail sector, to complement its strengths in corporate and wholesale banking. We believe the bank’s retail growth plans are ambitious,” he said.
S&P affirmed the ‘BB+’ long-term and ‘B’ short-term issuer credit ratings and ‘axBBB+’ long-term and ‘axA-2’ short-term Asean regional scale ratings on the Philippines-based bank.
The debt watcher also affirmed the ‘BB+’ long-term issue rating on Security Bank’s outstanding notes.
Tan explained the retail sector offers higher yields but also presents greater delinquency risks that could lead to an increase in the bank’s credit costs.
Tan warned the rapid use of capital combined with incremental operating costs could gradually reduce Security Bank’s enhanced capital ratios over the next 18 months to 24 months.
“The alliance with BTMU will enhance Security Bank’s products suite, collaboration opportunities, and global banking know-how, and help accelerate the bank’s growth strategy in Philippines,” Tan said.
Tan said Security Bank would also leverage BTMU’s relationships to access Japan-related business opportunities.