Security Bank to boost loans, earnings with MUFG capital boost

Security Bank Corp. expects profit will triple in five years as the Philippine lender uses a 36.9 billion capital infusion from Mitsubishi UFJ Financial Group Inc. to boost loans.

“We will have stronger capital that will allow us to leverage and accelerate our expansion," said Joey Mape, chief financial officer at the Manila-based bank. Net income may climb to 22.6 billion by 2020 while loans net of provisions will quadruple to 981 billion, he said in an interview Friday.

The investment from Japan’s biggest bank will boost Security Bank’s capital to 89.3 billion, making it the fifth largest among Philippine lenders, leapfrogging China Banking Corp., Rizal Commercial Banking Corp. and Union Bank of the Philippines. The deal, scheduled for completion in the first half, will be the biggest equity investment in a Philippine financial institution by a foreign lender, Security Bank said .

MUFG is getting a 20 percent stake in Security Bank, and its investment is equivalent to 70 percent of the lender’s 52.4 billion in capital. That provides the Philippine lender with ammunition to double its deposit and loan market share to 8 percent to 9 percent by 2020, Mape said. It gives Security Bank the resources to expand its branch network to 500 to 600 instead of 400 without the investment, he said. Security Bank has 262 outlets now.

“We can build more branches and this will have an impact on our consumer business,” Mape said. He also said the ties with MUFG will help it develop relations with Japanese companies.

The purchase price of 245 pesos a share, an 81 percent premium over Security Bank’s 135 peso closing price before the announcement, reflects the “great potential and synergy" of the partnership, Mape said. Tokyo-based MUFG will appoint two directors to the board.

“The transaction is a good deal for both parties," said Ghia Paula Yuson, an analyst at First Metro Securities Brokerage Corp., who has a hold rating on Security Bank. “We could see dilution in earnings per share initially but Security Bank is getting a lot of capital to pursue growth more aggressively."