Central bank nod for LTNCDs drives Security Bank stock

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Outlier

THE NEWS on Security Bank Corp. receiving regulatory approval to issue up to P20 billion worth of long-term negotiable certificates of time deposits (LTNCDs) last Tuesday drew interest for some investors, but it was heavily offset by the sell-off of Philippine equities that day following the performance of the Nasdaq index that drove market sentiment at home.

A total of 3.08 million Security Bank shares worth P524.77 million exchanged hands from June 3 to June 7, data from the Philippine Stock Exchange showed.

Week-on-week, its share price fell by 1.8% to P171.90 on Friday from its May 31 closing of P175 apiece. However, its share price was up by 11.2% for the year.

One of the factors that drove the stock’s movement was the Bangko Sentral ng Pilipinas’ (BSP) approval of Security Bank’s plan to raise up to P20 billion through LTNCDs.

“Security Bank traded in a wide range for two days [between P167.9 per share to P175 on June 4-5] when the news was disclosed, but it managed to close flat a day after the disclosure,” Timson Securities, Inc. Equity Trader Jervin S. de Celis said an e-mail.




“So, instead of buying [Security Bank] shares when the news about the long term notes were approved, investors waited for the stock to go a little lower…,” he added.

Like regular time deposits offered by banks, LTNCDs offer higher interest rates. However, it cannot be pre-terminated although it can be sold on the secondary market, making them “negotiable.”

Security Bank’s board of directors approved the issuance of up to P20 billion in long-term papers in multiple tranches.

In a previous press conference, outgoing Security Bank President and Chief Executive Officer Alfonso L. Salcedo, Jr. said the LTNCDs will likely be issued “within the second half” of this year.

The last time the bank issued LTNCDs was in May 2018 when it raised P5.8 billion, marking the second tranche of its P20-billion program and following the P8.6 billion raised in November 2017.

On the same day of the disclosure, however, Philippine stocks fell, following the 1.6% decline by the tech-heavy Nasdaq index, which was dragged by Alphabet, Inc., Facebook, Inc., and Amazon.com on worries that the companies are targets of US government antitrust regulators.

On the domestic front, the bellwether Philippine Stock Exchange index (PSEi) slumped 139.51 points or 1.72% to close at 7,945.37 that day. Prior to this slide, the main index had recorded gains for five straight days supported by heavy foreign buying.

“[The Security Bank stock] was not spared from the sell-off in the PSEi on June 4 when it opened at P175, which was its intraday high… then closed at P170, the lowest price of the day… A day after the disclosure, the stock went [to as] low as P167.90 which investors took as a chance to buy at a bargain until it closed at P172.10,” Mr. De Celis explained.

“Market players were probably a bit scared to take long positions on June 4 when they disclosed the news…It’s like catching a falling knife by taking a long position in a falling market,” he added.

The bulk of the stock’s trading activity happened on the next trading day following Security Bank’s disclosure on LTNCDs, with a volume turnover of 2.18 million shares and a value turnover of P369.07 million.

For China Bank Securities Corp. Research Director Garie G. Ouano, the LTNCD issuance is a “short-term concern.”

“Since this amount (P20 billion) would approximately double SECB’s outstanding LTNCDs, the concern could be its potentially negative impact on SECB’s net interest margin (NIM),” Mr. Ouano said in a separate e-mail.

“Over the longer term, the LTNCD issuance is likely to facilitate loan growth,” he added.

Security Bank’s attributable net income of P2.38 billion in the first quarter of the year was 1.5% higher than the P2.35 billion in the same period a year ago.

“In terms of earnings growth drivers, [Security Bank] is among the banks best positioned to benefit from easier monetary policy and declining yields since the risk to NIMs from repricing is minimal,” Mr. Ouano said, adding that the bank’s loan-to-deposit ratio is “the lowest among index banks.”

Timson Securities’ Mr. De Celis said due to the lower rates and bank reserve cut, Security Bank is seen to benefit from the expansion of its loan segment and earnings.

Mr. de Celis pegged the stock’s short-term support at P161 and resistance at P181 pesos.

For China Bank Securities’ Mr. Ouano, the stock’s support and resistance levels over a two-week horizon are at P165.05 and P181.7, respectively. — MAM

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