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Each year is characterized by different
challenges. 2006 was an exceptionally difficult
one. The economic environment that unfolded was
one of a continued decline in domestic interest
rates and an appreciating peso. The banking
industry experienced further consolidation,
heightening competition among players in a market
that was only beginning to see a tentative pick-up
in the credit environment towards the end of the
year. Notwithstanding these conditions, the year
marked several important milestones for Security
Bank.
Our three year blue print called F.I.R.S.T.
Priorities, crafted in 2003, detailed a five
pronged approach to improve performance:
• Focus on customers and markets
• Innovation and speed to market
• Results-oriented quality and productivity
• Stakeholder value enhancement
• Teamwork
This year we have completed this first phase of
growth in grand fashion, making the commemoration
of our 55th year of corporate existence all the
more meaningful. We are proud to share the results
of our efforts:
Net income registered P1.9 billion, 65% higher
than 2005 and an annual compound growth
of 56% from the 2003 level of P506.0 million.
• Return on equity increased to a record 17.3%
versus the prior year’s 13.4%, and has registered
an annual compound growth of 45% over the 5.7%
level reflected in 2003.
• Total resources exhibited robust growth of 16%
versus 2005 to P122.0 billion by year-end 2006,
and has grown by a 19% annual compound growth
since 2003.
• Deposits increased by 34% to P88.8 billion,
significantly better than industry. Over the three
year period, total deposits have grown at an
annual compound rate of 21%. More important is
that the growth over the last three years occurred
primarily in our low cost current and savings
accounts as these increased 52% in the last year
to P62.9 billion and at an annual compound rate of
23% versus the 2003 level of P33.7 billion.
• Asset quality indices improved significantly to
among the industry’s best as the NPL ratio
improved to 4.2% from 5.6% the prior year, while
NPL cover increased to 156.0% from
142.0%. These are exceptional gains considering
that the NPL ratio and related cover
stood at 7.6% and 56% respectively, in 2003.
• Security Bank’s share price increased 90%
year-on-year to close at P65.50 per share, a 56% annual compound growth from the year-end 2003
share price of P17.25 per share.
In the light of the significant downward shift of
the peso yield curve, our Corporate Relationship
Group continued its selective stance of retaining
quality loans that met our target yields. More
emphasis was placed on managing yield compression
to our net interest margins and maintaining
positive returns on customer accounts. This meant
a focus on expanding from single product to
multi-product relationships.
We continued to use our cash management business
as a means to further entrench ourselves in our
relationships. This was ably supported by the
introduction of additional cash management
received yet again external recognition as the
bank was cited for a second year in a row as Among
the Best FX Domestic Providers
in Asiamoney’s 2006 FX Poll.
Our efforts at developing our institutional and
retail investor base experienced another year of
phenomenal growth as revenues in our Fixed Income
Securities Division more than tripled while
recurring volumes doubled. Meanwhile, volumes of
assets under management in our trust business,
comprising mainly unit investment trust funds,
increased 19% and related revenues improved 4%.
These efforts serve to increasingly entrench
ourselves with our customers, enhancing customer
loyalty and repeat business. Our stellar
performance in fixed income securities, spanning
the trading, balance sheet deployment and fixed
income distribution have resulted in
several external citations and underscore our
competency in this business. The Bureau of
Treasury recognized Security Bank as Among the
Best Government Securities Dealers in 2006. For a
second year running, the Philippine Dealing &
Exchange Corporation, the country’s fixed income
exchange, awarded Security Bank the Best
Securities Trading House. Finally, the Asset
Magazine cited Security Bank as being Among the
Best Banks in Asian Currency Bonds and Securities
Trading.
In line with our strategic direction and despite
intense competition, we continued to develop our
investment banking business. This is aimed at
shifting the very prime accounts, that begun debt
refinancing programs in the light of the very low
interest rate regime, to the capital markets. This
was a cooperative effort between the Corporate
Relationship Group, the Corporate Finance and the
Fixed Income Securities Divisions. In addition,
added focus was placed on developing financial
advisory and investment banking services for our
middle market accounts.
In tandem with the business segment endeavors, a
number of overall corporate goals were achieved.
We accelerated our branch rationalization
initiatives and development of alternative
distribution capabilities. We undertook a total of
six branch inaugurations and relocations within
the year which resulted in commendable improvement
to the business of these branches.
We continued to deploy the cardless bills payment
facility to our onsite ATMs, resulting in an
average monthly reduction of 8.5% in
over-the-counter bills payment transactions
coupled with an average 21.5% monthly increase in
cardless and ATM bills payment transactions. Our
telebanker, mobile banker and Bancnet online
facilities experienced an 11% increase in average
monthly transactions and a corresponding 36%
increase in average monthly enrollments. These
initiatives are in-line with our redirecting
transactions from the teller counters to the most
cost effective delivery channels, thereby freeing
up capacity at the counters for more value added
transactions and better customer service.
These outstanding achievements serve to add
greater relevance to the Bank’s 55th Anniversary
celebration. As we culminate our initial
three-year plan called F.I.R.S.T. Priorities, we
are proud to state that we have significantly
exceeded the ambitious targets we set for
ourselves. We view these accomplishments not
as a signal to rest on our laurels, rather as an
incentive to continue setting the performance bar
even higher.
We view 2007 with a measure of optimism as signs
of a possible pick up in the demand for credit are
evident. We have laid out the plans for the next
five years and have begun putting in place the
foundations for the next growth trajectory for the
bank. We expect that over the next five years,
Security Bank will emerge more entrenched in its
chosen middle market niche and build a more
significant consumer finance business. We
will propel growth of several businesses including
those services geared towards mass affluent
clients such as our fixed income distribution
business. All these efforts are predicated upon
the objective of building an even stronger base of
recurring earnings in the years ahead.
Needless to say, we are deeply aware that the
successes attained thus far were through the
combined efforts of our stakeholders. In
particular, the sound corporate governance and
unwavering trust of our Board of Directors
empowered Senior Management to confidently pursue
the targets and challenges laid before them. We
recognize the unfaltering determination and
tenacity that characterized the efforts of our
officers and staff as they eagerly set about
executing our strategies.
Ultimately, we express our sincere gratitude to
our customers; their continued patronage and
confidence in
Security Bank greatly enhanced the ability of its
people to deliver products and services of real
value. We most assuredly take the various
achievements to date as an inspiration in our
quest for even greater levels of value creation in
the years ahead.
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