Security Bank targets 12% ROE by 2029
Security Bank Corp. is targeting a return on equity of 12 percent by 2029 as it shifts its focus from balance sheet expansion to improving profitability, efficiency and the quality of its growth.
The banking giant Security Bank Corp. aims to achieve a return on equity (ROE) of 12 percent by 2029, according to its latest strategy. Currently, the ROE stands at approximately eight percent as of the end of June 2023. The bank's chief financial officer, John David Yap, anticipates the ROE to surpass double digits by the end of 2027, eventually reaching the target of 12 percent by 2029.
Security Bank's strategic focus is on three key areas: wealth management, entrepreneurial banking, and corporate and institutional banking. These sectors, where the bank already possesses substantial scale, enable the institution to deepen client relationships and enhance profitability. CEO Victor Lee emphasized that the bank is prioritizing returns over asset growth, aiming to restore ROE to double-digit levels.
In pursuit of this objective, the bank intends to raise its return on assets from the current 1.02 percent to 1.7 percent. Additionally, the cost-to-income ratio is projected to decrease from its present 58.5 percent to approximately 51 percent by 2029. The improvement in credit cost is expected to see a reduction from 180 basis points to around 140 basis points, while the CET1 ratio will be maintained within the range of 12.5 to 13 percent.
To boost returns, Security Bank plans to leverage its existing client relationships rather than relying solely on loan growth. This involves expanding operating deposits, transaction banking activities, fees, and investment offerings for the same customers. Within wealth management, the bank has seen its assets under management nearly quadruple over the past nine years.
The bank also intends to expand its reach among entrepreneurs by integrating loans with various business services like payments, payroll, and cash management. In the corporate sector, the bank aims to focus on project finance, trade finance, transaction banking, and capital markets.
As of end-June 2023, Security Bank's projected loan growth for 2026 is anticipated to increase in the second half of the year, following a flat performance in the first half. The bank currently expects loan growth in the range of three to five percent for the full year. Retail loans comprise roughly 33 percent of the loan portfolio, while micro, small, and medium enterprise loans account for about four percent, with the remainder primarily in corporate lending.
Lee stated that the bank does not anticipate a sharp deterioration in its loan portfolio, although rising geopolitical and economic risks have contributed to higher credit costs. For the full year, the bank aims for a cost-to-income ratio of 55 to 58 percent, a CET1 ratio of approximately 12.5 percent, and loan growth of up to five percent.
Despite the challenging economic climate, management remains optimistic, maintaining a cautious approach to new lending and closely monitoring borrowers exposed to inflation and weaker domestic demand.
Written by urgent.news from Philippine Star Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
