Security Bank Corporation reported a 21 percent drop in net income to P4.9 billion in the first half of 2023 from the P6.2 billion earned in the same period last year due to higher expenses and provisioning.

In a disclosure to the Philippine Stock Exchange, the bank said it saw growth in core businesses, increase in quarterly net interest margin, and normalized credit provisions during the period under review.

Net interest income increased nine percent year-on-year to P15.7 billion as total non-interest income was at P4.9 billion, up two percent. Service charges, fees and commissions grew seven percent to P2.8 billion.

First half operating expense was 16 percent higher, driven by investments in manpower and technology. Cost-to-income ratio was 60.4 percent compared to 55.9 percent a year ago.

Pre-provision operating profit was P8.2 billion. The bank set aside P1.6 billion as provisions for credit losses in the first half of 2023, a 300 percent increase versus year-ago level of P408 million. 

Gross non-performing loan ratio decreased to 3.06 percent from 3.28 percent a year ago. NPL reserve cover increased to 100 percent from 92 percent a year ago.

Total deposits stood at P525 billion. Low-cost savings and demand deposits as percent of total deposit increased to 63 percent, up from 59 percent a year ago. The bank shed high-cost deposits, resulting in a 13 percent year-on-year decrease in time deposits.

Net loans stood at P485 billion. Retail and MSME loans combined increased 19 percent year-on-year while wholesale loans decreased nine percent. 

The growth in retail and MSME loans was driven by home loans which grew 15 percent, credit cards which rose 33 percent, auto loans which grew 13 percent, and MSME loans which increased 62 percent. 

On a sequential quarter-on-quarter basis, retail and MSME loans combined increased 5 percent. 

Retail and MSME loans as percent of total loans increased to 28 percent, up from 26 percent a quarter ago and 23 percent a year ago. 

Total investment securities grew 32 percent year-on-year to P220 billion.
 

“We are encouraged with the progress made in the second quarter on both net margins and other income, while we continue with investments in technology and people to better serve our clients’ needs,” said Security Bank President and CEO Sanjiv Vohra.

Security Bank’s second quarter 2023 results improved across the board on a sequential quarter-on-quarter basis. Second quarter 2023 net profit was P2.6 billion, up eight percent quarter-on-quarter. 

Pre-provision operating profit was P4.5 billion, 23 percent higher than quarter-ago level due to higher revenue growth of 10 percent compared to operating expense growth of three percent.

Net interest income grew 11 percent over the quarter to P8.3 billion. Net interest margin in the second quarter 2023 increased to 4.58 percent, up 53 basis points quarter-on-quarter and up 22 basis points year-on-year. 

Total non-interest income likewise increased 8 percent to P2.5 billion. Service charges, fees and commissions grew 13 percent to P1.5 billion. 

In the second quarter of 2023, the Bank set aside P983 million as provisions for credit losses.