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Security Bank Corporation (PSE:SECB) disclosed its first semester results reporting an annualized Return on Equity of 22.04% for the period, sustaining its track record of successive improvements in ROE beginning 2002.
Despite the exceptional ROE, the challenging high inflationary environment, increasing interest rates and lower bond prices did affect earnings as net income of Php 1.3 billion registered 8.0% lower than the record high earnings for the comparable period in 2007. Nonetheless, net interest income remained flat versus the previous year at Php 2.3 billion as income resulting from the 32% growth in loan portfolio volumes covered for the reduction in contribution from trading and investment securities as the Bank had substantially lightened its balance sheet of these securities. As a result, net margin spreads increased to 3.9% from 3.6 % 2007. Meanwhile, other income of Php 1.43 billion was down 13.1% year-on-year primarily on account of the decline in securities trading gains.
Security Bank Corporation President and Chief Executive Officer, Mr. Alberto S. Villarosa remarked on the first semester 2008 results: “It has been a very challenging period for the industry; the net income performance was better than we had anticipated in spite of the year-on-year decline. With the expectation of the challenges inherent in the current economic environment, we have invested a significant amount of focus in streamlining our business and developing our core revenues. This resulted to better than forecasted outcome, we have improved our net interest margins despite the lighter balance sheet coupled with the exceptional growth in our other income lines, certainly instrumental in our ability to consistently deliver outstanding returns to our shareholders.”
Operating expenses at Php 1.8 billion were flat to the prior year.
Mr. Carlos M. Borromeo, Security Bank Corporation Chief Financial Officer, discussed the bank’s balance sheet against the backdrop of its revenue performance: “Our balance sheet stood at Php 127.7 billion, lower than the prior year by Php 18 billion, reflecting a marked shift in asset allocation as securities decreased by Php 20 billion and now accounts for only 35.4% of total assets from the previous level of 45.0%. More significantly, our loan portfolio stood at Php 54.9 billion, a Php 13.3 billion year-on-year increase. With loans now accounting for 43.0% of the balance sheet as opposed to 28.6% the previous year, we were able to maintain net interest income despite the lighter balance sheet.”
Security Bank’s year-to-date income performance and balance sheet complexion have been accomplished without compromising asset quality as its non-performing loans ratio is pegged at 1.38%, a continued improvement from the 3.6% registered in the first semester of 2007. NPL cover was at 298% versus the previous year’s 139%.
Queried on the prospects for the rest of the year, Mr. Villarosa added: “While the environment will still continue to be defined by a great deal of uncertainty, we are guardedly optimistic that we will see a slight recovery in performance over the next six months.”
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