Security Bank plans issuance of 1B voting preferred shares

Security Bank Corp. is seeking leeway to beef up its capital stock through an offering of preferred shares ahead of the implementation of stringent capital adequacy requirements under Basel 3.

In a disclosure to the Philippine Stock Exchange (PSE) on Tuesday, Security Bank has unveiled plans to increase its core or tier 2 capital with the issuance of one billion voting preferred shares.

The issuance of preferred shares will be subject to approval from shareholders, which will be convened in a special meeting on Nov. 26. The proposal has been approved by the bank’s board of directors.

Security Bank is also seeking authority to increase its authorized capital stock by P100 million in order to gain leeway to issue the preferred shares. This will require an amendment in the bank’s articles of incorporation. The bank has an authorized capital of P10.1 billion.

Meanwhile, Security Bank has also decided to redeem ahead of maturity P3 billion worth of debt notes qualifying as tier 2 capital that were issued in 2008. These notes will mature in 2018 but under Basel 3, these will no longer be eligible as capital.

The Bangko Sentral ng Pilipinas has required universal and commercial banks to adopt by January 2014 the capital adequacy standards under Basel 3, which introduces a complex package of reforms designed to improve the ability of bank capital to absorb losses, extend the coverage of financial risks and have a stronger firewall against periods of stress.

Security Bank posted a 66-percent decline in first semester net profit to P1.7 billion compared to the level in the same period last year when earnings were boosted by extraordinary trading gains. However, core revenues rose 6 percent year-on-year to P5.3 billion.

Net interest income was steady at P4 billion as net interest margin declined to 3.5 percent compared to 4 percent in the prior year, reflecting the country’s highly liquid financial system that, in turn, resulted in cutthroat competition among lenders. Volume growth, however, compensated for the margin squeeze.

The bank’s loan book grew by 21 percent year-on-year to P133 billion as the bank supported power, utilities, infrastructure, wholesale and retail trade, food and agriculture, consumer goods and other key sectors of the economy. Non-interest income declined to P1.3 billion compared to P4.2 billion a year ago due to a lower securities trading gain of P279 million versus the P3.2 billion in the previous year.

Unlike most of its peers, which booked hefty trading gains this year, Security Bank locked up gains from investment securities last year, citing the need to fund its growing lending business.