Security Bank revenue strength tempered by higher provisioning

From AB Capital's The Opening Bell: Three Moves

Event

SECB’s 4Q25 net income hit P2.6 billion, -7% YoY and -20% QoQ, taking FY25 net income to P11.6 billion, +3% YoY. This is behind expectations at only 95% of street and AB Cap’s 2025E. Loans only grew 3% YoY, but retail was up +14% YoY. Provisions nearly doubled to P12.8 billion with NPL ratio at 2.9% and cover at 86%.

View

In our view, core operating momentum is improving, particularly in margins and fee normalization, but elevated credit provisioning continues to weigh on returns. NIM at 4.66% and improving cost discipline are encouraging, though 7.9% ROE remains below larger peers.

Catalyst

Key variables include credit cost trajectory and retail loan scaling. If provisions normalize by 20% in 2026, earnings leverage could be meaningful. Conversely, sustained provisioning at current run rates would cap ROE expansion despite margin resilience and steady deposit growth.

Action

SECB remains our least preferred bank in our coverage. Balance sheet metrics remain solid, with CET1 at 12.3% and strong liquidity buffers, but valuation upside likely depends on clearer evidence of credit cost peaking and sustainable double-digit earnings growth.

Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.