Security Bank face higher funding costs, lower margins in 2023

Loan growth is expected to fall by 9% year-on-year.

Philippine-based Security Bank will face higher funding costs in 2023, which will reduce its net interest margins (NIM) in 2023, according to a report by Maybank Securities.

NIM is estimated to decline by 8bps compared to 2022 with funding costs remaining elevated.

Whilst the bank saw its earnings rise in the 2022 fiscal year, Security Bank did not raise its payout ratio, noted Maybank analyst Rachelleen Rodriguez.

Rodriguez expects Security Bank to open more branches to increase its deposits, given that the lender has a low current account/ savings account ratio, at 57.8%. This, however, will lead to a rise in operational expenses.

“To factor these in, we lower our FY2023 net income forecast by 3%,” Rodridguez said.

Loan growth is expected to fall by 9% during the year, with high interest rates likely tempering demand.