Security Bank Corp. expects to end 2016 as another banner year, with net profits seen to exceed last year’s record-high level on the back of stronger-than-expected growth in lending.
“As long as there’s no ‘black swan’, we should outperform last year,” SBC president Alfonso Salcedo said in an interview last week.
The bank racked up a record net profit of P7.7 billion last year, rising by 7 percent year-on-year, on the back of strong growth in core revenues. This translated to a return on equity (ROE) of 15.2 percent.
In the first half of this year, the bank booked a 4-percent growth in six-month net profit to P4.9 billion, driven by a strong growth in earnings from core lending activities.
Salcedo said the 29-percent growth in loan book seen by the bank in the first semester was faster than expected, with wholesale lending—or those catering to top corporate clients—growing stronger than the original forecast. For the full year, he said total loan book would likely expand by 23-28 percent.
In the first semester of the year, the bank’s total loan portfolio amounted to P268 billion. Corporate and commercial loans jumped by 27 percent year-on-year in the first semester while key consumer loan portfolios grew by 61 percent.
To date, about 11 percent of the bank’s loan book is devoted to the higher-margin consumer lending, or those lent to help households buy a house or car or for everyday purchases using the credit card. Such retail banking is a new growth driver that the bank wants to build up.
Salcedo said he had originally wanted retail banking to account for 18-22 percent of total lending business by 2020. “I think it’s going to end up at 15-18 percent—not because it’s slowing down but because the wholesale pipeline is quite strong.”
The bank also expects to return to a mid-teen ROE level by 2020. Last April, the bank got a P37 billion equity investment from The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU), boosting its total capital to P94 billion. The bank has been an outperformer when it comes to ROE in recent years but with the recent equity infusion, such ratio is expected to initially moderate until more funds are converted into earning assets.
“We’re not after size. We’re not after market share. We want a good ROE. That’s how we manage the bank and we want to be back to mid-teens by 2020. That’s our objective,” Salcedo said.