Security Bank’s buffers decline on loan growth and upcoming stake acquisition

Its capitalisation is expected to fall below 13% in 2025.

Security Bank’s capitalisation is expected to remain under negative pressure on declining buffers from loan growth and an upcoming acquisition.

The Philippine-based bank’s tangible common equity as a percentage of risk-weighted assets (TCE/RW) declined to 13.7% in December 2024, from 17% a year earlier. Moody’s blamed this on the bank’s loan growth rising to 25% in 2024 from just 7% in 2023.

TCE/RWA is expected to further decline to below 13% in 2025, with the upcoming acquisition of a minority stake in Home Credit Philippines, a consumer finance company.

“Meanwhile, loan growth outpaced return on equity (ROE) in 2024 and the bank's capital ratios will continue to decrease if rapid credit growth continues over the next 12 to 18 months,” Moody’s Ratings said in its latest ratings report of the bank, where it changed its outlook from stable to negative.

For 2025, Security Bank’s loan growth is expected to be about 10%.

Security Bank's funding structure reportedly “deteriorated modestly” in 2024 as market funds as a percentage of tangible banking assets increased to 14.2% as of December 2024 from 12.3% a year earlier, Moody’s said.

This reflects an increase in reliance on market funds to support loan growth and protect margins.

At the same time, the proportion of current and savings account (CASA) deposits declined to 52.4% from 59.9% over the same period.

“Nonetheless, the bank maintained sufficient liquidity to meet short-term funding obligations. As of December 2024, liquid banking assets as a percentage of tangible banking assets was at 31.1% while the liquidity coverage ratio was 181.9%,” Moody’s noted.