SECURITY BANK Corp. expects its return on equity (RoE) to improve to around 10% this year, supported by continued revenue growth, reduced expenses, and lower credit costs.
“We expect continued growth in terms of our revenues above our peer group. That’s one. Second, we are slowing down the growth in terms of expenses — that’s expected to translate to a better cost-to-income ratio. We also expect a reduction in terms of our credit costs in 2025 versus 2024. Those three factors, hopefully, will support our ambition to improve RoE,” Security Bank Chief Financial Officer Eduardo M. Olbes said at a media briefing on Thursday.
As of the third quarter of 2024, Security Bank’s RoE stood at 8.07%, up from 7.81% in the same period a year prior.
Mr. Olbes said the bank’s revenue growth will be driven by a resilient consumer segment, which will drive its home and auto loan portfolios and its credit cards business.
“The Filipino consumer looks still quite strong in the fourth quarter, and therefore, for us as a bank, our pillar is to continue to support their journey in terms of bridging their aspirations with their resources in 2025 as well,” he said.
Growth in its business banking segment (BBS), which caters to micro, small and medium enterprises, is expected to continue this year, Mr. Olbes added. As of the third quarter of 2024, BBS loans went up by 60% year on year.
On the other hand, the outlook for corporate loans will depend on the Philippine economy’s trajectory, he said, adding that their wholesale loans grew in the mid-teens as of the third quarter.
“Whether or not that continues in 2025, I would say we will see. It’s a little bit related to GDP (gross domestic product). So, where GDP goes this year will dictate the pacing of the amount of loans that will be required by the large companies,” Mr. Olbes said.
Meanwhile, the bank expects to spend less on technology this year, with capital expenditures for tech seen at 17% of its total revenues.
“The bank began to deploy a substantial increase in terms of our tech spending starting in 2023. That carried forward into 2024. What we would expect in 2025 is still nominal growth versus 2024, but at a slower rate than what you saw in 2024,” the official said.
Meanwhile, asked if they plan to issue bonds this year, Security Bank President and Chief Executive Officer Sanjiv Vohra said the lender will be “opportunistic.”
“The bank plans to grow. We will need to fund that growth. We have two main tools to fund it: either growth in our deposit base or accessing the markets for funding. We will always be opportunistic on both. I think initially we will probably fund that through the growth in our deposits,” he said.
“But as the interest rate situation clears up, meaning more clarity in terms of forward rates, we would definitely look towards issuing term funding, which would be through the bond market,” Mr. Vohra added.
The bank expects the Bangko Sentral ng Pilipinas (BSP) to cut rates by another 75 basis points (bps) this year, he said.
“Given the structure of our economy and where our currency is, we do have a little bit more room to cut even more than the US,” Mr. Vohra said.
Last year, the BSP cut benchmark borrowing costs by a cumulative 75 bps after it kicked off its easing cycle in August, bringing its policy rate to 5.75%.
BSP Governor Eli M. Remolona, Jr. has said the Monetary Board still has room to continue cutting rates this year as current benchmark borrowing costs remain “restrictive.”
It will hold its first policy meeting for this year on Feb. 13.
Mr. Vohra added that the peso may end at P58 versus the dollar this year.
“The expectation is that the dollar’s strength will erode later in 2025 as the inflation outlook changes in the US and the relative differential of interest rates between the US and the rest of the world, whether it’s Europe or Japan, changes as well,” he said.
The seasonal increase in remittances in the fourth quarter will also support the peso, he added.
Security Bank’s net income rose by 13.58% year on year to P3.01 billion in the third quarter of 2024 amid higher revenues.
This brought its nine-month net profit to P8.45 billion, up by 11.62% from a year ago.
Security Bank’s shares dropped by 90 centavos or 1.22% to close at P73.10 apiece on Thursday. — Aaron Michael C. Sy
