Security Bank seen to maintain high ROE

Security Bank Corp. expects returns for its investors to stay at healthy levels this year despite a slight drop in profits at the end of the third quarter due to lower trading gains.

The bank’s net income fell by nearly a third in the January to September period of 2014 to P4.2 billion. Its return on equity (ROE) also settled to 14.5 percent from over 20 percent the year before.

“Our net income this year has been affected by lower trading gains versus last year,” Security Bank CEO Albert Villarosa said in an interview.

He said that in the years 2010, 2011 and 2012, the company benefited significantly from higher trading gains. Despite the three consecutive years of high profits, he said the bank did not consider these gains as “recurring” income in its books.

“The problem we had with those nonrecurring gains is, because it happened ever year, the market thought it was recurring,” he said.

Villarosa said interest rates  fell from 5-6 percent last year to about 1.8 percent this year, reducing the margins of banks. In the first three quarters of the year, Security Bank’s net interest margin narrowed to 3.6 percent from 3.96 percent the year before.

Despite this, he said the bank still expects to keep its ROE for investors at around 15 percent, which, although lower than the over 20-percent ROE levels last year, was still considered healthy given the low interest rate environment.

The bank’s core revenues rose 13 percent to P2.7 billion in the third quarter alone, and 8 percent to P8 billion in the nine-month period ending September.

He said the bank also intends to boost its profit growth by strengthening its consumer and retail banking businesses.

The bank also expects to benefit from an expected increase in infrastructure spending next year, which would result in higher demand for loans from local corporations taking on state-sponsored projects.

“There will be a lot of infra spending. We have to [spend]. We can’t sustain the country’s growth if businessmen don’t invest in infrastructure,” Villarosa said. “And because of more than adequate liquidity, investors are looking for [marketable securities] to buy,” he added.