Global debt watcher Standard & Poor’s Rating Services has revised the credit outlook for Security Bank Corp. from stable to positive, following the 20-percent stake acquisition in the local lender by Bank of Tokyo-Mitsubishi UFJ Ltd.
“At the same time, we affirmed our ‘BB+’ long-term and ‘B’ short-term issuer credit ratings and ‘axBBB+’ long-term and ‘axA-2’ short-term Asean regional scale ratings on the Philippines-based bank. We also affirmed our ‘BB+’ long-term issue rating on SBC’s outstanding notes,” S&P said.
“The outlook revision reflects SBC’s improved capital position after Bank of Tokyo-Mitsubishi UFJ Ltd. acquired a 20-percent stake in the bank… The deal will increase SBC’s capital by P36.9 billion on a pro-forma basis from P52.4 billion as of Sept. 30, 2015,” S&P said.
The transaction is expected to be closed in the first half of 2016, subject to regulatory approval and other conditions.
Security Bank officials said in a briefing last week the additional capital would be used to pursue more rapid growth, particularly in the retail sector to complement strengths in corporate and wholesale banking.
“We believe the bank’s retail growth plans are ambitious… In our opinion, the retail sector offers higher yields, but also presents greater delinquency risks, which could lead to an increase in the bank’s credit costs. Rapid use of capital combined with incremental operating costs could gradually reduce SBC’s enhanced capital ratios over the next 18 to 24 months. We continue to assess SBC’s capital position as adequate,” S&P said.
The credit rating agency said the alliance with BTMU would enhance SBC’s products suite, collaboration opportunities and global banking know-how and help accelerate the bank’s growth strategy in Philippines.
“We could raise the ratings on SBC if its Standard & Poor’s risk adjusted capital ratio sustains above 10 percent in the next 18 to 24 months despite the growth plans,” it said.
The credit rating firm also said the outlook could be revised downward to stable if SBC grew aggressively and asset quality deteriorated, causing its capital to weaken substantially, particularly if there were missteps as the bank ramped up retail ambitions.
“We could also revise the outlook to stable if SBC’s deposit mobilization fails to keep pace with loan growth, leading to deterioration in the bank’s funding and liquidity profile,” S&P said.
