Security Bank third quarter net profit falls on sharp rise in provisions

Security Bank Corp. said net profit fell sharply in the third quarter to P1.0 billion from P2.7 billion a year earlier after it raised loan loss reserves “proactively” to P10.1 billion to account for the likely impairment of loan assets due to the pandemic.

In the nine months to September, net profit fell 13% to P6.7 billion on provisioning of P21.1 billion, according to a bank disclosure to the bourse Friday.

Third-quarter operating income was up 64% at P14.4 billion while provisioning rose nine times to P10.1 billion, as net interest income rose 7.6% to P7.6 billion. Net trading gains during the quarter amounted to P5.2 billion, up sharply from P369 million a year earlier.

During the nine months, operating income rose 66% year-on-year to P40.2 billion as net interest income grew 24% to P23.4 billion. Net trading gains amounted to P9.2 billion from P1.4 billion a year earlier.

The loan portfolio at the end of September was P431 billion against P449 billion at the end of 2019.

In the nine months to September, interest income on loans rose to P26 billion from P24 billion. The corresponding total for the third quarter was P8.2 billion against the year-earlier P8.8 billion.

The share of retail loans fell to 26% of the total at the end of September from 27% a year earlier.

The gross non-performing loan (NPL) ratio rose to 4.03% during the third quarter from 1.58% at the end of June. NPL cover was 122%.

Total deposits at the end of September declined to P436 billion from nearly P500 billion at the end of 2019, with the share of low-cost savings and demand deposits rising to 59%.

“While revenue, margins, and capital are resilient, the bank has maintained proactive credit provisioning given economic challenges arising from the pandemic. We are prudently supporting our clients, continuing vigilance in managing risks, and investing in initiatives to fortify our services,” Security Bank President & Chief Executive Officer Sanjiv Vohra said.

The capital adequacy ratio rose to 19.9% at the end of September from 18.0% a year earlier. Total assets declined to P651 billion from P793 billion at the end of 2019.

The return on shareholder equity was 7.3%, and the return on assets 1.23%.

Security Bank added that it recently entered into a partnership with Thailand’s Bank of Ayudhya Pcl to develop loan products and reach more customers through digital channels.

Security Bank closed at P105.50 on Friday, down 1.4%.

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