Global debt watcher Moody’s Investors Service assigned an investment grade rating to the $1-billion medium-term note program of Security Bank Corp., the country’s sixth-largest lender in terms of assets.
Moody’s said in a statement Thursday the rating was underpinned by Security Bank’s “baa3” baseline credit assessment and incorporated one notch of uplift to reflect Moody’s expectation of a moderate probability of support for the bank from the Philippine government in times of need.
“Security Bank’s ‘baa3’ BCA is underpinned by the bank’s above-industry-average asset quality and strong capital buffers, boosted by a capital infusion from its new strategic partner, MUFG Bank Ltd.,” it said.
Moody’s said the BCA took into account expectation that following the capital infusion, the bank’s asset quality and capital profile would moderate over time because of its higher-than-industry growth plans.
“The notes issued under the program constitute the issuer’s direct, unconditional, unsubordinated and unsecured obligations, and will rank pari-passu with the bank’s other senior unsecured obligations,” Moody’s said.
It said the assessment also took into account Security Bank’s modest funding, owing to its relatively smaller deposit franchise and branch network in the Philippines compared to that of large domestic banks and its higher reliance on market funds than that of its domestic peers.
“The bank’s overall liquidity remains comfortable, with sufficient liquid resources to meet near-term obligations,” Moody’s said.
Security Bank’s medium-term note program rating of Baa2 is at the same level as the Philippines’ sovereign rating.
“It is unlikely that the bank’s ratings will be higher than the sovereign rating because we view the
correlation of risk between the bank and the sovereign as high. If the sovereign’s rating or the bank’s BCA [or both] is upgraded, Security Bank’s ratings could be upgraded,” it said.
Security Bank posted an 18-percent decline in net income in the first half to P4.3 billion from a year ago, pulled down by lower trading gains.
The bank’s trading gains declined 59 percent or P655 million while provision for income tax increased 55 percent or P424 million.
Loans grew 12 percent while deposits increased 17 percent. Net interest income from customer loans and deposits jumped 34 percent or P1.8 billion to P7.4 billion.
Asset quality remained healthy, with gross non-performing loan ratio down to 0.6 percent in the first half from 0.7 percent a year ago.
The bank remained among the country’s best capitalized private domestic universal banks with the highest capital adequacy ratios.