Moody’s affirms Security Bank’s rating

MANILA, Philippines — Moody’s Investors Service has affirmed the credit rating of Security Bank Corp. on the back of the bank’s above-industry-average asset quality and strong capital buffers, boosted by a capital infusion from its strategic partner.

The debt watcher said in a statement it has affirmed Security Bank’s Baa2 deposit rating, a notch above minimum investment grade, while its outlook was maintained at stable.

Security Bank’s ratings incorporate a one-notch uplift from the bank’s Baa3 Baseline Credit Assessment (BCA) to reflect Moody’s expectation that the bank would receive support from the Philippine government in times of need.

Security Bank’s Baa3 BCA is underpinned by the bank’s above-industry-average asset quality and strong capital buffers, boosted by a capital infusion from MUFG Bank Ltd.

Japan’s largest bank pumped in P37 billion in fresh equity in April 2016 in exchange for a 20 percent stake in the listed bank owned by the family of businessman Frederick Dy.

At the same time, the BCA takes into account Moody’s expectation that following the capital infusion, the bank’s asset quality and capital profile will moderate over time because of its higher-than-industry growth plans.

It also takes into account Security Bank’s modest funding, owing to its small deposit franchise and branch network in the Philippines and its higher reliance on market funds than that of its domestic peers.

“The bank’s overall liquidity remains comfortable, with sufficient liquid resources to meet near-term obligations,” Moody’s added.

Moody’s assumes a moderate likelihood of government support for Security Bank’s depositors and senior unsecured creditors, driven by the bank’s significance to the Philippine banking system.

The country’s sixth largest bank in terms of assets has a four percent share of total system deposits and sizable share of the domestic corporate and capital markets.

Earnings of Security Bank contracted 18 percent to P4.3 billion in the first half of the year from P5.2 billion in the same period last year due to the sharp drop in trading gains amid the volatile markets as well as the higher provision for income tax.

Security Bank said trading gains plunged 59 percent to P655 million from January to June this year while provision for income tax jumped 55 percent or P424 million.

Loans booked a double-digit growth of 12 percent to P383 billion as consumer loans surged 50 percent and wholesale loans inched up seven percent. The bank’s deposit base rose 17 percent to P443 billion as of end June due to the 15 percent rise in low cost deposits.