Security Bank Corp. (philippines) · PSE:SECB
Security Bank Corp. (philippines) — Security Bank — Debt Investor Presentation (June 2014)
61 slides from Security Bank Corp. (philippines)'s debt investor presentation, Jun 19, 2014
Slide 1: Investor Presentation: Basel III Compliant PHP Tier 2 Issuance
Investor Presentation Basel III Compliant PHP Tier 2 Issuance 19 June 2014
Slide 2: Disclaimer
Disclaimer This presentation is for information purposes only and does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation or recommendation of an offer to buy or acquire securities of Security Bank Corporation (the "Bank", “Company”, “Securit
Slide 3: Table of Contents
Table of Contents 1 Overview of Security Bank 2 Investment Highlights 3 Introduction to Basel III 4 Indicative Terms of the Offering and Timeline 5 Offer Procedures 6 Q&A 3
Slide 4: Table of Contents
Table of Contents 1 Overview of Security Bank 2 Investment Highlights 3 Introduction to Basel III 4 Indicative Terms of the Offering and Timeline 5 Offer Procedures 6 Q&A 4
Slide 5: Security Bank Overview
Security Bank Overview Security Bank is an independent player in the Philippine banking industry with core businesses in Corporate & Investment Banking, Commercial & Retail Banking and Financial Markets, with a solid niche among the mass affluent Filipino-Chinese community • Provides money market, F
Slide 6: Security Bank Overview (cont'd)
Security Bank Overview (cont’d) Shareholding Structure(1) Branch Network(1) 204 branches 40 branches LUZON 47 Branches | 23% Dy 10 Branches | 25% Group 42.0% METRO MANILA Others 122 Branches | 60% 51.2% 29 Branches | 73% VISAYAS 17 Branches | 8% 1 Branch | 2% SSS MINDANAO 4.86% 18 Branches | 9% Secu
Slide 7: Key Subsidiaries and Affiliates
Key Subsidiaries and Affiliates 99.54% owned 100% owned 100% owned 100% owned through Thrift bank with 40 Pioneer in the Provides investment SB Capital branches in Metro Philippine credit card banking and financial One of the top Manila and Calabarzon industry services domestic brokerages in the cou
Slide 8: Rebranding
Wy) Rebranding 6 SECURITY BANK Anew symbol. A better banking experience from Security Bank. ® SECURITY BANK One day, | woke up and realized | deserve How No ir . fl _our award PRIORITY 4 SERVICE 3 is rewarding = for you. . SECURITY
Slide 9: Table of Contents
Table of Contents 1 Overview of Security Bank 2 Investment Highlights 3 Introduction to Basel III 4 Indicative Terms of the Offering and Timeline 5 Offer Procedures 6 Q&A 9
Slide 10: Investment Highlights
Investment Highlights 1 2 Stable Funding Core Franchise Sources and Pro- Strength Active Capital Management 6 3 Strategy for Industry Leading Sustainable Asset Quality Growth 5 4 Strong, Highly-Awarded Experienced and Well- Management Recognized Brand Team 10
Slide 11: Core Franchise Strength
1 Core Franchise Strength Security Bank has posted continuous growth in total assets and in its loan portfolio… Total Assets (in PHP bn) Loan and Receivables – net (in PHP bn) 400 9,000 4,500.00 180.00 350 8,000 4,000.00 160.00 7,000 3,500.00 140.00 300 6,000 3,000.00 120.00 250 5,000 2,500.00 100.0
Slide 12: Core Franchise Strength
1 Core Franchise Strength … supported by likewise continuous growth in deposits as well as in total capital Total Deposits (in PHP bn) Total Capital (in PHP bn) 6,500.00 220.00 45.00 1,000.00 6,000.00 40.00 900.00 200.00 5,500.00 180.00 35.00 800.00 5,000.00 160.00 30.00 700.00 4,500.00 140.00 25.00
Slide 13: Robust Profitability
1 Robust Profitability Security Bank’s unparalleled growth rate has translated into a robust income profile over the past years Revenues (in PHP bn) Net Income (in PHP bn) 14.0 7.5 7.2 12.9 12.3 6.7 11.7 5.0 7.9 3.1 3.6 1.4 2009 2010 2011 2012 2013 1Q14 2009 2010 2011 2012 2013 1Q14 13
Slide 14: Robust Profitability
1 Robust Profitability Prudent income and cost management has resulted to consistent double-digit ROEs topping other players in the industry Net Interest Margin (%) Return on Shareholders’ Equity (%) 4.4% 4.5% 35% 4.1% 3.9% 4.1% 4.1% 25% 21% 22% 3.5% 3.5% 13% 14% 3.4% 3.3% 3.2% 3.0% 2009 2010 2011 2
Slide 15: Above Industry Growth
1 Above Industry Growth Security Bank has significantly outperformed the industry in terms of loans and deposit growth in the past three years Loans and Receivables – net (% growth) SBC Universal Banks (UBs) 2011 – 13 CAGR: 38% 30% SBC: 34% 23% UBs: 17% 19% 15% 19% 2011 2012 2013 Total Deposits (% g
Slide 16: Diversified Income Base
1 Diversified Income Base Security Bank has a diversified income base with an increasing focus on core net interest income Revenues (in PHP bn) Net interest income Trading Gains Fees and Other Income Total Revenues Total Revenues Total Revenues 14.0 Total Revenues 12.9 Total Revenues 1.8 12.3 11.7 2
Slide 17: Loan Portfolio
1 Loan Portfolio Well diversified loan portfolio supports asset growth Loan Portfolio by Client Group Loan Portfolio by Industry 165.0 PHP 25.7bn PHP 41.7bn Manufacturing Others 17% 119.0 38% 23% 92.0 PHP 31.6bn 75.0 35% Wholesale, 70.0 38% Retail Trade 33% 38% PHP 15.4bn 20% 57% Financial 58% Inter
Slide 18: Loan Portfolio
1 Loan Portfolio Well diversified loan portfolio supports asset growth Loan Portfolio Geographical Distribution Luzon Visayas and Mindanao 34% 33% 31% 33% 36% 38% 67% 69% 67% 64% 62% 66% 2009 2010 2011 2012 2013 1Q 2014 18
Slide 19: Stable Funding Sources and Robust Capital Ratios
2 Stable Funding Sources and Robust Capital Ratios SECB’s funding is anchored by a sizable deposit base consisting of low-cost current and savings accounts (CASA). The Bank’s capital ratios are comfortably above BSP requirements Funding Sources Capital Ratios 21.8 PHP 41bn PHP 130bn 20.3 Capital CAS
Slide 20: Stable Funding Sources and Robust Capital Ratios
2 Stable Funding Sources and Robust Capital Ratios Capital Ratios of Philippine Banks Tier 1 Ratio Total CAR AUB 17.94% PNB 19.68% PNB 16.37% Union Bank 18.48% Union Bank 16.00% AUB 18.38% RCBC 15.95% East West Bank 17.03% Security Bank 15.08% Metrobank 16.65% Metrobank 14.98% RCBC 16.52% BDO 14.63%
Slide 21: Industry Leading Asset Quality
3 Industry Leading Asset Quality Amidst robust growth, Security Bank has significantly improved its asset quality over the years and leads the industry in terms of asset quality metrics Non-Performing Loans Ratio Non-Performing Assets Ratio 2.0% 1.4% 1.2% 1.1% 1.0% 1.0% 1.0% 1.0% 0.8% 0.8% 0.6% 0.6%
Slide 22: Strong, Experienced Management Team
4 Strong, Experienced Management Team Security Bank is helmed by a Board of Directors with significant experience in banking and financial services Jose R. Facundo Diana P. Aguilar Joseph R. Higdon Rafael F. Simpao Jr. Philip T. Ang Frederick Y. Dy 22
Slide 23: Strong, Experienced Management Team
4 Strong, Experienced Management Team Security Bank is helmed by a Board of Directors with significant experience in banking and financial services Anastasia Y. Dy James J. K. Hung Eduardo I. Plana Joel Raymond Ayson Alberto S. Villarosa Paul Y . Ung 23
Slide 24: Strong, Experienced Management Team
4 Strong, Experienced Management Team Strong management leadership consisting of officers with significant experience and track record in the banking and finance industry Ma. Cristina A. Tingson Anastasia Y. Dy Executive Vice President – Executive Director Retail Banking Over 20 years of banking exp
Slide 25: Strong, Experienced Management Team (cont'd)
4 Strong, Experienced Management Team (cont’d) Strong management leadership consisting of officers with significant experience and track record in the banking and finance industry Jeanette S. Keh Belen C. Lim Raul Martin A. Pedro SVP and Head of Banking SVP and Head of Branch SVP and Treasurer Cente
Slide 26: Strong, Experienced Management Team (cont'd)
4 Strong, Experienced Management Team (cont’d) Strong management leadership consisting of officers with significant experience and track record in the banking and finance industry Melissa R. Aquino Belen W. Au Maria Concepcion P. Cruz SVP, Chief of Staff and Head of SVP and Head of International SVP
Slide 27: Highly-Awarded and Well-Recognized Brand
5 Highly-Awarded and Well-Recognized Brand Security Bank is one of the most well-recognized and highly-awarded brand for financial services in the Philippines 2014 2014 2014 2014 2014 2013 Best Cash Best Service Best Investor Excellence in Management Provider / Best CEO (Investor Best Managed Relati
Slide 28: Medium Term Focus
6 Medium Term Focus Sustain Leading Return on 1 Shareholders’ Equity 2 Grow the Retail Banking Business Grow Our Core Strengths: Wholesale 3 Banking and Financial Markets 4 Expand Branch/Distribution Network 28
Slide 29: Table of Contents
Table of Contents 1 Overview of Security Bank 2 Investment Highlights 3 Introduction to Basel III 4 Indicative Terms of the Offering and Timeline 5 Offer Procedures 6 Q&A 29
Slide 30: Introduction to Basel III
Introduction to Basel III What is Basel III ? Basel III in the Philippines Global standards for banks BSP will adopt Basel III in stages Introduced by the Basel Committee on First component took effect on 1 Bank Supervision in December 2010 January 2014 (BSP Circular No 781) Developed in r
Slide 31: New Capital Requirements
New Capital Requirements Minimum Capital Requirement Capital Conservation Buffer Capital conservation buffer of 2.5% Common Equity Tier 1 composed of CET1 capital on top of the 6.00% (CET 1) minimum CET1 requirement Counted as part of the 10.0% minimum capital ratio Tier 1 (CET 1 and AT1) 7.50%
Slide 32: Elements of Bank Capital
Elements of Bank Capital What is Bank Capital ? Senior Debt (Not Capital) Bank capital serves as an important cushion against unexpected losses without the interests of depositors Increasing Tier 2 being adversely affected seniority Capital of Bank capital provides buffer for creditors depositor
Slide 33: Tier 2 Capital: What is Subordinated Debt?
Tier 2 Capital What is Tier 2 Capital or Subordinated Debt? Subordinated in right to payment vs Priority of Claims by Creditors deposits and senior debt, but ranks senior Secured Senior to Additional Tier 1 instruments, preferred Debt and shares and common shares Deposits Debt Not a bank deposit
Slide 34: Old Style vs Basel III
Old Style vs Basel III What is the difference between Old Style Tier 2, Basel III compliant Tier 2 and Tier 1? Old Style Tier 2 Notes BSP Basel III Tier 2 Notes Effective Jan 1, 2014 Under BSP Circulars 709, 716 and 768 Under BSP Circulars 781, 786 and 826 Maturity Minimum of five years Call Date
Slide 35: Old Style vs Basel III (cont'd)
Old Style vs Basel III (cont’d) What is the difference between Old Style Tier 2, Basel III compliant Tier 2 and Tier 1? Old Style Tier 2 Notes BSP Basel III Tier 2 Notes Effective Jan 1, 2014 Under BSP Circulars 709, 716 and 768 Under BSP Circulars 781, 786 and 826 Supervisory approval Exercising
Slide 36: Non-Viability and Loss Absorption
Non-Viability and Loss Absorption Non-Viability A deviation from a certain level of CET 1 Ratio Inability of the Bank to continue business or closure or any other event determined by BSP, whichever comes earlier The decision to impose non-viability rests solely with the BSP Loss Absorption Bas
Slide 37: Tier 2 Notes vs Alternative Instruments
Tier 2 Notes vs Alternative Instruments Tier 2 Notes LTNCD Time Deposit Corporate Bond Status / Credit Subordinated Senior Senior Senior Tenor At least 5 years At least 5 years Variable Variable (Typically 5 or 5.5 years) Pricing Benchmark 5-yr PDST-R2 5-yr PDST-R2 [•] PDST-R2 Coupon May have rate r
Slide 38: Table of Contents
Table of Contents 1 Overview of Security Bank 2 Investment Highlights 3 Introduction to Basel III 4 Indicative Terms of the Offering and Timeline 5 Offer Procedures 6 Q&A 38
Slide 39: Indicative Terms of the Offering
Indicative Terms of the Offering Issuer Security Bank Corporation (“SECB” or the “Bank”) Instrument Tier 2 Unsecured Subordinated Notes Issue Amount Up to PHP10 billion Tenor 10 years, callable on the first banking date following the 5th Anniversary from Issue Date or any Interest Payment Date after
Slide 40: Indicative Terms of the Offering (cont'd)
Indicative Terms of the Offering (cont’d) Reset Date and Rate The Tier 2 notes are resettable on the first banking date following the 5th Anniversary from Issue Date if not called by the Bank Reset rate will be the 5-year PDST-R1 (or the equivalent benchmark) plus the initial spread Early Redemption
Slide 41: Other Parties to the Offering
Other Parties to the Offering Joint Lead Arrangers Deutsche Bank AG, Manila Branch and Selling Agents The Hongkong and Shanghai Banking Corporation Limited Standard Chartered Bank Limited Selling Agents Security Bank Corporation Market Maker and Multinational Investment Bancorporation Sell
Slide 42: Important Dates to Remember
Important Dates to Remember 19 June Start of Offer Period 19 – 23 June Domestic Roadshows 3 July End of Public Offer Period 11 July Settlement and Issue Date 42
Slide 43: Redemption of the Notes
Redemption of the Notes Call Option Subject to the Redemption Conditions being satisfied, Notes can be redeemed on any Call Option Date Redemption Conditions mean: Security Bank is solvent at the time of any redemption Security Bank is not in breach of the Applicable Regulatory Capital Requireme
Slide 44: Taxation of the Notes
Taxation of the Notes Interest income on the Notes will be subject to the following Final Withholding Tax (FWT) rates: Type of Investor Tax Rate Qualified Individual Holders (if held for at least 5 years) Exempt Non-resident aliens not engaged in trade or business in the Philippines 25% Non-resident
Slide 45: Transferability of the Notes
Transferability of the Notes Transfers of the notes by a qualified individual holder prior to holding the instrument for at least five years will subject the holder to the following graduated rates of FWT on the entire income depending on their holding period: Holding Period Tax Rate Less than 3 yea
Slide 46: Table of Contents
Table of Contents 1 Overview of Security Bank 2 Investment Highlights 3 Introduction to Basel III 4 Indicative Terms of the Offering and Timeline 5 Offer Procedures 6 Q&A 46
Slide 47: Offering Procedures
Offering Procedures During offer period End of offer period Allocation Requirements: Deadline: Investors to be informed at Application to purchase form Cleared Funds: Issue Date the end of the offer period Risk disclosure statement Debit instruction or RTGS: Unapplied balance of and cert
Slide 48: Prohibited Noteholders
Prohibited Noteholders The Issuer or any related party Subsidiaries and affiliates of the Issuer, including the subsidiaries and affiliates UITFs managed by the Trust Department of the Issuer, its subsidiaries, and affiliates, or other related entities Other funds being managed by the Trust
Slide 49: Documentary Requirements
Documentary Requirements Individuals Application to Purchase (actual TIN numbers required) 4 originally signed copies Signature Cards 2 copies Photocopy of valid IDs (photo and signature bearing) 2 current and clear copies Risk Disclosure Form, Written Certification and Client Sustainability Questio
Slide 50: Registry Fee Schedule
Registry Fee Schedule Registry Confirmation Issuance for Primary Market and Maintenance Fees (Shouldered by Issuer) Account Opening Fee PHP80 per RC issued Registry Maintenance Fee 0.025% per annum Fees for Secondary Market and Other Fees Account Opening Fee (secondary market) PHP80 per RC issued Tr
Slide 51: Table of Contents
Table of Contents 1 Overview of Security Bank 2 Investment Highlights 3 Introduction to Basel III 4 Indicative Terms of the Offering and Timeline 5 Offer Procedures 6 Q&A 51
Slide 52: Q&A
6 SECURITY BANK O&A
Slide 53: Thank you
6 SECURITY BANK Thank you
Slide 54: SECURITY BANK
6 SECURITY BANK
Slide 55: Annex
6 SECURITY BANK Annex
Slide 56: Financial Summary
6 SECURITY BANK Financial Summary
Slide 57: Select Income Statement Items
Select Income Statement Items figures in PHP millions 2011 2012 2013 Interest income 10,696.1 11,573.1 12,331.3 Interest expense 3,137.4 3,475.5 3,947.3 Net interest income 7,558.7 8,097.6 8,384.0 Provision for credit losses 59.1 247.8 128.1 Net interest income after provision for credit losses 7,49
Slide 58: Select Balance Sheet Items
Select Balance Sheet Items figures in PHP millions 2011 2012 2013 Cash and other cash items 2,315.6 3,372.6 4,428.9 Due from BSP 15,936.2 21,779.3 45,584.0 Due from other banks 20,573.2 25,406.8 28,739.4 Interbank loans receivable and SPURA with the BSP 5,150.0 17,250.0 12,120.0 Financial assets at
Slide 59: Select Balance Sheet Items (cont'd)
Select Balance Sheet Items (cont’d) figures in PHP millions 2011 2012 2013 Deposit liabilities 119,306.4 142,393.3 205,950.3 Financial liabilities at FV through profit or loss 2,312.4 1,895.1 784.8 Bills payable and SSURA 52,207.5 64,978.3 90,112.9 Other liabilities 10,470.2 12,200.6 8,919.0 Total l
Slide 60: Select Financial Ratios
Select Financial Ratios figures in percentages 2011 2012 2013 Return on average assets 3.5% 3.3% 1.8% Return on average equity 24.6% 22.0% 12.9% Net interest margin 4.1% 3.9% 3.5% Cost to income ratio 37.2% 42.6% 54.8% Gross loans to deposits 74.8% 82.5% 78.7% Core capital ratio 18.2% 14.7% 15.1% To
Slide 61: SECURITY BANK
6 SECURITY BANK
Security Bank — Debt Investor Presentation (June 2014) on 6ix