Security Bank Corporation (PSE: SECB) posted net income of PhP5.7 billion in the first half of 2020, up 14% from year-ago level. This is the result of growth in net interest income and trading gains coupled with proactive provisioning.
Total revenues increased 68% to PhP25.9 billion. Excluding trading gains, total revenues grew 30% to PhP18.7 billion from the same period last year.
Total net interest income grew 34% to PhP15.8 billion. Securities trading gains totaled PhP7.2 billion, significantly higher than the PhP1 billion in 1H-2019. Service charges, fees and commissions decreased 10% to PhP1.7 billion.
The cost-to-income ratio improved to 39.7% from 53.7% a year ago.
Pre-provision operating profit (PPOP) in 1H-2020 was PhP15.6 billion, 120% higher than 1H-2019 level. PPOP in 2Q-2020 was PhP7.6 billion, 109% higher than 2Q-2019 level.
The Bank set aside PhP11 billion as provisions for credit losses in 1H-2020, a significant increase versus PhP639 million in 1H-2019, which reflects the Bank’s proactive provisioning and anticipates a challenging economic environment brought about by the pandemic.
Gross non-performing loan ratio was at 1.58%. NPL reserve cover increased to 174% from 128% a quarter ago and 125% a year ago.
Return on shareholders’ equity was 9.2%, up 39 basis points from 8.8% in 1H-2019. Return on assets was 1.48%, up 20 basis points from 1.28% in 1H-2019.
For the April 1 to June 30, 2020 period, net income was PhP2.8 billion, up 8% from year-ago level. Total revenues increased 61% to PhP12.6 billion. Excluding trading gains, total revenues grew 20% to PhP8.9 billion from the same period last year.
Total net interest income in 2Q-2020 increased 27% year-on-year to PhP7.8 billion. Net interest margin in 2Q-2020 was 4.64%, up 103 basis points year-on-year. Total non-interest income increased 183% to PhP4.9 billion. Securities trading gains were PhP3.7 billion as compared to Php 376 million in 2Q-2019.
Operating expense decreased 3% quarter-on-quarter despite additional COVID-19 related expenses, as the Bank tempered expenditures and accelerated the initiatives in four priority areas: digital platforms for retail and wholesale clients, contact center and collection infrastructure.
Balance sheet remains strong
Total deposits increased 14% year-on-year to PhP511 billion. Low-cost savings and demand deposits grew 27% and increased to 48% of total deposits, up from 43% a year ago.
Total loans, excluding SB Finance’s portfolio, stood at PhP450 billion, up 7% year-on-year and down 2% quarter-on-quarter. Retail loans were up 25% year-on-year and down 3% quarter-on-quarter. Retail loans are 27% of total loans. Wholesale loans grew 4% year-on-year and decreased 1% quarter-on-quarter.
“We are carrying forward the momentum from 1Q-2020, taking advantage of market opportunities for trading gains, along with prudent growth in the underlying core businesses. As we expect the impact of the pandemic on our loan portfolio will continue to unfold over the coming quarters, we have adopted a proactive stance on our provisions. In spite of that, our balance sheet remains strong and allows us to invest in our transformation initiatives which help us deliver BetterBanking to our clients during these challenging times.” —Security Bank President & CEO, Sanjiv Vohra.
Security Bank continues to be among the country’s best capitalized private domestic universal banks. Common Equity Tier 1 Ratio was at 18.8%, compared to 16.8% a year ago. Total Capital Adequacy Ratio (CAR) was at 19.7% versus 19.2% a year ago. Total assets stood at PhP740 billion, down 5% year-on-year. Shareholders’ capital was at PhP127 billion, up 11% year-on-year.