Security Bank: Overvalued Bank

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Sound balance sheet and profitability admired by investors

Matching the general decline in share prices of its peers, Security Bank’s (SECB) stock has fallen 2.7% so far this year.

The Philippines’ fifth largest bank by assets recently stated that it had 22% rise in net interest income and a 20% increase in profits in 2017.

The bank ended with a book value of 105.1 billion giving it a price-book value multiple of 1.76x compared to its industry’s 3x.

According to its press release, the bank had a net interest margin of 3.3% in the fourth quarter compared to 3.1% a year earlier.

SECB’s non-performing loan ratio, meanwhile, improved to 0.02% from 0.11% a quarter earlier.

The bank’s Total Capital Adequacy Ratio was at 17.7% as of year end.

In the past three years, SECB raised 167.9 billion in financing activities while having provided 5 billion in shareholder dividends.

The bank ended with 139.7 billion in cash in 2017.

COL Financial rated SECB as a hold with 242/share value compared to 244.60/share at the time of writing.

Personal estimates indicated a per share figure of 156/share.

Disclosure: No shares in SECB.