{"id":324508,"date":"2023-08-17T00:05:00","date_gmt":"2023-08-16T16:05:00","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=324508"},"modified":"2023-08-17T01:05:50","modified_gmt":"2023-08-16T17:05:50","slug":"stock-in-focus-security-bank-corp-secb-17-aug-2023-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-security-bank-corp-secb-17-aug-2023-by-ap-securities\/","title":{"rendered":"Stock in Focus: Security Bank Corp. (SECB) – 17 Aug 2023 by AP Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>SECB<\/td><\/tr>
Company Name<\/strong><\/td>Security Bank Corp.<\/td><\/tr>
Broker<\/strong><\/td>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>15 June 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 119.02<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

The overall encouraging progression in SECB\u2019s performance has improved our outlook on SECB. Provisioning remains a slight risk though given the bank\u2019s relatively low coverage. Nevertheless, given the bank\u2019s significant upside, we would recommend a BUY.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

SECB\u2019s profits for the first half of the year remained below consensus expectations (44.9%) as the period saw steep year-on-year (YoY) increases in provisioning. When zooming in on the 2nd quarter (Q2) 2023 however, we note that sequential performance has been gaining steam with the quarter now being up to par with the street\u2019s figures. Q2 earnings accounted for 23.4%, slightly higher than its historical contribution of 22.6%.<\/p>\n\n\n\n

Major benefits from slowing interest expenses<\/strong><\/p>\n\n\n\n

One of the primary drivers for the solid performance of Q2 was the flattish uptick in interest expenses, rising by only 0.2% relative to Q1. We attribute this to the growth in the bank\u2019s CASA ratio which rose sequentially by 40bps, a development which runs contrary to what we have seen from most of SECB\u2019s peers whose CASA ratios saw some downtick. As a result, net interest income grew double digits QoQ at 11.2%, outpacing the expansion in interest income.<\/p>\n\n\n\n

Strong leverage, but provisions remain a hindrance<\/strong><\/p>\n\n\n\n

Along with the impressive net interest income growth, non-interest income also strengthened by high single digits versus Q1. This further magnified the bank\u2019s total operating income, and in turn allowed it to grow faster than operating costs. As a result, we estimate that cost-to-income in Q2 actually fell to 58.4% from 62.5% in Q1.<\/p>\n\n\n\n

Despite this, the spike in provisioning held SECB back from an outperformance this quarter as the expense would jump by 59.7% QoQ. To add to this, the bank would also see a 4.4ppt rise in its effective tax rate compared to Q1.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>