Security Bank Corp. (PSE: SECB) posted PhP8.6 billion in net income in 2018. A key component of the bank’s earnings is net interest income from customer loans and deposits, which increased by 30% to PhP15.7 billion. This was driven by the continued expansion of consumer loans and low-cost deposits. Consumer loans grew by 47% while low-cost deposits increased by 15%. Consumer loans now account for 23% of total loans versus 16% a year ago.
Total loans increased by 12% to PhP416 billion. Wholesale loan growth was 7%. Total deposits increased by 18% to PhP489 billion. Security Bank’s interest margins continue to improve. Net interest spread on loans and deposits further increased to 4.72% in Q4 2018, up by 29 basis points quarter-on-quarter and up by 48 basis points year-on-year.
Interest income from financial investments was lower by 11% or PhP1.2 billion mainly due to a lower level of investment securities at amortized cost. Total net interest income grew by 7% to PhP20.8 billion. Overall, net interest margin further improved to 3.4% in Q4 2018, up by 10 basis points quarter-on-quarter and up by 13 basis points on-year.
Service charges, fees, and commissions increased by 26% to PhP2.9 billion. This was driven by credit card, bancassurance, loan fees, and deposit charges.
The 85% decrease in trading gains and the increase in provisions for income tax by 47% or PhP790 million primarily accounted for the bank’s lower net income in 2018. Net income was lower by 16% or PhP1.7 billion compared to the previous year.
Operating expense growth was 10% (excluding provisions for credit and impairment losses). Cost-to-income ratio was 53.9%.
Asset quality remained healthy, with gross non-performing loan (NPL) ratio at 0.7%. Provision for credit losses was PhP714 million. NPL reserve cover was 112%, computed using the new BSP Circular 1011 guidelines on loan loss provisions, which the bank adopted in September 2018.
Security Bank continues to be among the country’s best capitalized private domestic universal banks. Common Equity Tier 1 Ratio increased to 16.4% from 15.5% a year ago. Total Capital Adequacy Ratio, likewise, increased to 18.7% from 17.7%. Return on shareholders’ equity was 8.1%. Shareholders’ capital increased to PhP109 billion, up 4% YoY. Total assets stood at PhP767 billion, up 10%.
Security Bank has a total of 305 branches and 760 ATMs as of December 31, 2018.