Security Bank eyes 12% ROE in 2014
Security Bank Corp. FILE PHOTO
MANILA, Philippines—Security Bank Corp., the only one among the country’s largest banks that chalked up higher profits in the first quarter compared to 2013, aims to sustain a return on equity (ROE) of at least 12 percent in 2014.
The bank is currently offering as much as P10 billion worth of debt notes that will qualify as supplementary or tier 2 capital under the Basel 3 capital adequacy framework at an indicative interest rate of 5.375 percent per annum. The notes will have a tenor of 10 years but Security Bank has the option to redeem them after five years.
“The target for the full year is somewhere within the 12 percent area in terms of ROE,” Security Bank executive vice president Eduardo Olbes said in an interview after the bank’s roadshow for the tier 2 offering on Monday.
Based on an equity base of about P42 billion at present, a 12-percent ROE suggests a prospective full-year net profit of at least P5.04 billion, matching last year’s attributable profit at the minimum.
The bank posted 17 percent year-on-year growth in net income to P1.43 billion in the first quarter of 2014, with a return on shareholders’ equity of 13.8 percent, among the highest in the industry. Other big banks have mostly reported lower net profits for the first quarter in the absence of large trading gains that buoyed industry-wide profits last year.
The tier 2 notes were likewise recently offered to investors in Visayas and Mindanao. “The interest of the public offering in Cebu and Davao highlights the investors’ preference towards the notes that are offered by Security Bank. Despite the most recent increase in interest rates by the Bangko Sentral ng Pilipinas, we believe that market acceptance in Metro Manila would also exceed expectations,” said Security Bank senior vice president and treasurer Raul Martin Pedro.
The notes may be purchased in denominations of P500,000 and in increments of P100,000.
The issuance is in line with the more prudent capital regulations implemented by the Bangko Sentral ng Pilipinas under the Basel 3 framework, which requires a complex package of reforms designed to improve the ability of banks to absorb losses. It also extends the coverage of financial risks and requires stronger firewalls to protect banks especially during periods of stress.
The local bank has mandated Deutsche Bank, The Hong Kong and Shanghai Banking Corporation Ltd., and Standard Chartered Bank as the joint lead arrangers of the offering and as selling agents. Security Bank acts as a limited selling agent and Multinational Investment Bancorporation is the market maker and a selling agent.
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