Security Bank profits up 21% in Q1

MANILA, Philippines — Earnings of Security Bank Corp. jumped more than a fifth in the first three months of the year, putting it on strong footing against a likely build-up of bad debts from borrowers severely affected by the coronavirus disease-2019 (COVID-19) outbreak.

In a disclosure to the stock exchange on Tuesday, Security Bank said its net income rose 21% year-on-year to P2.9 billion in the first quarter on the back of “sustained core income growth and securities trading gains.”

Revenues surged 75% from a year ago, while expenses increased by a slower 28%, the listed lender said. Excluding gains from securities trading, revenues grew 41% on an annual basis to P9.5 billion.

Despite booking higher profits, the bank said it re-evaluating its strength to cope with a rise in loan defaults in the coming months, an indirect repercussion of movement restrictions and shuttered businesses from the Luzon lockdown.

“In view of the possible client impact of the pandemic, the bank has initiated portfolio reviews, reassessed its provisioning, and intensified client engagement during this period,” the company said in a statement.

On face value, Security Bank, the country’s seventh largest lender in asset terms last year, is facing potential headwinds with a healthy balance sheet. As of March, only 1.59% of its loan portfolio were non-performing or remaining unpaid 30 days after due date. Meanwhile, resources to cover potential losses were equivalent to 128% of soured loans.

As a whole, the bank’s loan portfolio went up 14% year-on-year to P468 billion in the first three months, fueled by a hefty 44% annual growth on retail loans.

“We enter this period of challenge arising from the COVID-19 pandemic with a strong balance sheet and healthy liquidity and capital positions,” said Sanjiv Vohra, the bank’s president and chief executive. 

“We have the resources to serve our clients, protect our employees, and do our part to support our communities while maintaining the safety and soundness of the bank,” he added.

Apart from closure of some branches, lenders were forced to extend due dates on loans after Luzon was placed under enhanced community quarantine, a drastic measure meant to halt the spread of COVID-19 last March 17. 

The quarantine had since been lengthened until May 15 for Metro Manila and neighboring areas, while other key areas like Davao de Oro will transition to a more relaxed general community quarantine. That said, payment relief to borrowers was still extended, removing one of banks’ vital sources of liquidity.

Last week, Ayala-led Bank of the Philippine Islands also flagged potential rise in bad loans due to prolonged COVID-19 outbreak and lockdown, although it was also clear it is capable of financing losses.