Security Bank’s ratings affirmed

MOODY’S INVESTORS Service has affirmed its investment-grade rating for Security Bank Corp., also maintaining its “stable” outlook.
In a statement on Monday, the global debt watcher said it has maintained Security Bank’s long-term local and foreign currency deposit and issuer ratings of Baa2, a notch above the minimum investment grade.
Moody’s likewise maintained its short-term local and foreign currency deposit and issuer ratings at P-2, while baseline credit assessment (BCA) stood at baa3.
Counterparty risk assessments were also affirmed at Baa2(cr)/P-2(cr).
Moody’s said its ratings are based “on its assessment that “the bank will receive moderate support from the [g]overnment of the Philippines (Baa2 stable) in times of need.”
The credit rater added the baa3 BCA rating of Security Bank was underpinned by its “above-industry-average asset quality and strong capital buffers,” boosted by a capital infusion made by its partner MUFG Bank, Ltd.
In April 2016, Security Bank received an additional capital of P36.9 billion from the Japanese lender. In turn, the local bank issued the foreign lender 150.7 million common shares and 200 million preferred shares, representing MUFG Bank’s 20% ownership of the bank.
“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,” the debt watcher noted.
The baa3 BCA grade also took into account Security Bank’s modest funding, owing to its small deposit franchise and branch network in the Philippines as well as its higher reliance of on market funds.
Moody’s said it is unlikely to raise Security Bank’s deposit rating ahead of the Philippines’ rating, “given the high correlation of risks between the bank and the sovereign.”
For Security Bank’s BCA to be raised, Moody’s said the lender must have the ability to maintain low levels of non-performing assets, evidence that it can increase the contribution of its core commercial banking business to overall profitability as well as higher loss-absorption capacity.
Last month, Security Bank President and Chief Executive Officer Alfonso L. Salcedo, Jr. said the bank will grow its digital presence this year, which will take precedence over setting up branches.
It is also considering putting up more branch-lite units to expand its network to untapped and unbanked areas and to complement its existing full-service branches.
Currently, the bank has 171 branches in metro Manila and another 130 in the provinces.
Security Bank’s net profit was P2.35 billion in the first quarter, down 16.6%, due to lower trading gains.
Security Bank shares declined 40 centavos or 0.20% to close at P198.60 apiece on Monday. — K.A.N. Vidal