This result was driven by healthy growth in the bank’s core businesses, with loan growth of 20% year-on-year to PhP207 billion and deposit growth of 18% to PhP257 billion, which fueled a 15% year-on-year increase in total assets to PhP442 billion. Loan growth was broad-based, with corporate/commercial loans growing by 18% while consumer loans surged by 90%. The loan-to-deposit ratio was 81%. The return on assets (ROA) was 2.2%.
Interest income on loans increased by 17% year-on-year, which contributed to total interest income growth of 11% year-on-year. Interest expense increased by 46% year-on-year, reflecting the expected effect of the longer-term funding that the bank issued such as the PhP10 billion Basel III compliant Tier 2 capital in July 2014 and the $300 million senior unsecured notes in February 2015. As a result, net interest income was at PhP5.8 billion, same level as year-ago. Net interest margin was 3.2% in 1H 2015, versus the 3.4% average in 2014.
Non-interest income increased by 69% to PhP4.4 billion, which included extraordinary trading gain of PhP2.1 billion. Excluding extraordinary trading gain, non-interest income was PhP2.3 billion, 58% increase year-on-year. Trading gains from trading portfolio and customer flows amounted to PhP906 million in 1H 2015. Fee-based income inclusive of asset management was PhP947 million, 11% increase year-on year.
Security Bank’s total operating income increased by 22% year-on-year to PhP10.2 billion. Operating expense (excluding provisions for credit losses and impairments) grew by 28% due to taxes incurred from the sale of securities in Q1 2015, and marketing and advertising expenses in support of the Bank’s retail banking strategy. Security Bank had a network of 257 branches and 532 ATMs as of 30 June 2015.
For the three-month period ended June 30, 2015, Security Bank earned PhP1.3 billion in net income. Interest income on loans increased by 4% quarter-on-quarter which contributed to the 2% quarter-on-quarter growth in total interest income. Interest expense increased by 3% quarter-on-quarter. Net interest income during the quarter was PhP2.9 billion, up 1% quarter-on-quarter. Non-interest income was PhP998 million, which included trading gains of PhP315 million from trading portfolio and customer flows business. Operating expense (excluding provisions for credit losses and impairments) was down 10% quarter-on-quarter.
The bank’s asset quality remained healthy, with net NPL ratio at 0.14% as of June 2015 compared to 0.25% a year ago, among the lowest in the banking industry. The Bank provided PhP392 million in allowance for probable loan losses in 1H-2015. The NPL reserve cover was at 196%, among the highest in industry.
After the PhP1.00 per share in semestral cash dividends to shareholders in June 2015, Security Bank’s shareholders’ capital was at PhP51 billion, 16% increase year-on-year.
Security Bank President and Chief Executive Officer Alfonso L. Salcedo Jr. said, “We are focused on the execution of our strategy aimed at growing our retail banking business into a strong third pillar complementing our strengths in wholesale banking and financial markets businesses. Retail banking is a steady-growth, sustainable and higher margin business which is less volatile than cyclical businesses.”
Security Bank Chief Financial Officer Joselito E. Mape said, “Our cost-to-income ratio is at 47% in 1H 2015. Our capital adequacy ratios under Basel III are sustained at healthy levels, with Common Equity Tier 1 (CET 1) at 13% and Total CAR at 16.5%.”