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Security Bank Corporation

Disclaimer: The research and recommendation below were generated by Claude Fable. Please treat this as one input for your own research — not as the sole basis for any decision to buy or sell a stock.

Last checked
Price
63.5000
Trading status
Normal
Recommendation
Hold (cheapest bank on the board, but the discount is earned)Hold
Committee call
Sell
Indices
MidCap

Analysis

SECB - Security Bank Corporation

One-line summary: the cheapest bank in PSE coverage on both P/E (4.2x) and P/B (0.32x), but the discount is largely earned by a structurally lower, choppy high-single-digit ROE, and the freshest asset-quality data point (NPL ratio ticking up, coverage sliding) is turning mildly negative right as a new CEO takes over.

Snapshot
Reviewed July 19, 2026
Index membership PSE MidCap
Price at review P63.50 (July 17, 2026 close; 52-week range P60.50 to P79.80)
Recommendation Hold (cheapest bank on the board, but ROE and asset-quality trend do not yet earn a Buy)
Market cap P47.85B (754M shares outstanding)
Trailing P/E ~4.16x (FY2025: 4.26x)
Forward P/E ~3.53x per stockanalysis.com; analyst consensus carries a Strong Buy rating with an average 12-month target of P98.75, about 55% above the review price
Dividend P3.00/share annual (P1.50 paid semi-annually), ~4.72% yield at P63.50
P/B ~0.32x
Capital (in place of D/E) CAR 13.1%, CET1 12.2% (company, Q1 2026); BSP parent-only figures run slightly lower at CAR 12.87%, CET1 12.02%. Both comfortably above BSP minimums of 10% CAR / 6% CET1

Revenue and earnings trend

Security Bank's core engine, net interest income, has grown from a P31.5B revenue base in 2021 to P54.4B in 2025 (stockanalysis.com "Revenue" series, which bundles NII and non-interest income). Net income has been choppier than the revenue line: P6.9B (2021), P10.6B (2022), then a step back to P9.1B (2023) despite revenue growth that year, before recovering to P11.2B (2024) and a record P11.6B (2025), up about 3% year on year. EPS followed the same path: P9.17, P14.00, P12.08, P14.91, P15.42. FY2025's headline "record" profit was helped by a 47% jump in non-interest income (P16.5B, boosted by trading and FX gains), a market-dependent line that will not repeat every year, while net interest income itself grew a steadier 15% to P50.5B.

Q1 2026 shows the same push and pull: net income of P2.7B was up 6% quarter on quarter but down 3.6% year on year (from P2.8B in Q1 2025), even as pre-provision operating profit rose a strong 24% to P7.5B and net interest income grew to P15.2B from P11.9B. The gap between rising core profitability and a flat-to-down bottom line is credit provisioning: P3.9B in Q1 2026, up year on year, following a near-doubling of full-year 2025 provisions to P12.8B from P6.6B in 2024. Management (outgoing CEO Sanjiv Vohra, succeeded by incoming CEO Victor Lee Meng Teck, a former CIMB Singapore executive, as of January 2026) has explicitly framed this as "disciplined growth" and prudent risk management rather than a growth story, which shows up in loan growth that trails peers (net loans +3% in FY2025, +5% year on year in Q1 2026, versus roughly 9% at MBT and 14% at EW).

The one area of genuine strength: retail lending, the higher-margin consumer push referenced in this review's brief, grew faster than the overall book in 2025: auto loans +24%, credit cards +16%, home loans +9%, lifting retail to 32% of total loans. Cost discipline is also improving, with the cost-to-income ratio falling from 61% to 56% year on year in Q1 2026 (58.75% for full-year 2025, down from 60.23% in 2024), evidence that the operating leverage from the retail push is starting to show up below pre-provision profit.

Net interest margin, asset quality, and capital adequacy

Free cash flow is not a meaningful metric for a bank; the equivalent health checks are margin, credit quality, and capital.

  • Net interest margin: 4.66% for full-year 2025, roughly in line with the sector and below EastWest's consumer/credit-card-heavy 7.8%+ NIM, reflecting Security Bank's more balanced corporate-plus-retail loan mix.
  • Asset quality: gross NPL ratio has been drifting up: 2.85% (FY2024), 2.89% (FY2025), 3.08% (Q1 2026, company-reported; BSP parent-only data agrees at 3.08% gross, with net NPL at 1.40%). NPL reserve coverage has slipped alongside it, from 85.6% at end-2025 to about 81% (company) or 80.66% (BSP) in Q1 2026. The absolute level is still moderate for the PH banking sector and nowhere near the double-digit NPL ratios some peers saw post-pandemic, but the direction (rising NPL ratio, falling coverage, provisions nearly doubling in 2025) is the same shape of warning EastWest flagged more loudly this quarter: a bank leaning into consumer/retail growth just as credit costs start rising. It is a milder version of that story here, not a repeat of it, since Security Bank's NPL ratio moved a few tenths of a point while EastWest's jumped 80 basis points in one quarter.
  • Capital adequacy: CAR and CET1 have been broadly stable and comfortably above regulatory minimums: 13.21%/12.33% (company, FY2025) easing slightly to 13.1%/12.2% (company, Q1 2026), or 12.87%/12.02% on BSP's parent-only basis. No near-term solvency concern.
  • Funding: total deposits P930.5B at end-2025 (+16% year on year), P938.0B in Q1 2026 (+12% year on year), with CASA (the cheap funding) at 51% of the total. Liquidity metrics are strong: Liquidity Coverage Ratio 198%, Net Stable Funding Ratio 145%. Moody's affirmed an investment-grade Baa2 rating with a stable outlook alongside the Q1 2026 results.

Dividend sustainability

Security Bank has held its dividend flat at P3.00/share annual (P1.50 paid each April and November) through the entire five-year window while EPS climbed from P9.17 (2021) to P15.42 (2025). That combination has pushed the payout ratio down from 32.71% (2021) to about 19.5-19.7% today, the same "flat dividend, rising retention" pattern seen at Metrobank, just starting from a much lower payout base. The dividend is very well covered (retaining roughly 80% of earnings) and looks safe given capital ratios well above minimums, but at a 4.61% yield it is meaningfully lower than MBT (7.5%) or EW (6.8%) precisely because management is choosing to retain more of a lower-ROE earnings base to fund the retail loan build-out and shore up capital, rather than returning cash.

ROE

This is the number that explains the valuation discount. ROE has been choppy and structurally below the PSE bank peer set for the full five-year window: 5.57% (2021), 8.41% (2022), 6.95% (2023), 8.11% (2024), 7.87% (2025), and 7.74% on a trailing basis; BSP's parent-only Q1 2026 figure is lower still at 6.84%. ROA has similarly hovered in a narrow 1.0-1.4% band with no clear trend. By comparison, Metrobank has settled into a 12-13% ROE band and EastWest has climbed from under 8% to nearly 12% over the same period. Security Bank's ROE is not being flattered by thin equity or unusual leverage (capital ratios sit comfortably above minimums, in the same range as peers); it genuinely reflects lower structural profitability, most likely a legacy of a more corporate-weighted, lower-margin loan book that the retail pivot is only partially offsetting so far, combined with the credit-cost step-up from 2025's provisioning build. The 4.66% NIM and the improving 56% cost-to-income ratio suggest room for ROE to climb if the retail mix shift continues and provisions normalize, but that has not shown up in the actual ROE print yet.

Capital allocation

Ownership is split between a strategic foreign partner and the founding family: MUFG Bank (formerly Bank of Tokyo-Mitsubishi UFJ) has held 20% since completing a P36.9B ($773 million) strategic investment in April 2016, the largest foreign equity investment in a Philippine financial institution at the time, with two board seats. Frederick Y. Dy (Chairman Emeritus, the bank's controlling shareholder since 1991) holds 19.39% and his son Daniel S. Dy (Chairman of the Executive Committee) holds 12.96%, for a combined Dy family stake of about 32.35%; Cirilo P. Noel became Chairman of the Board in May 2024. Public float is about 24% (as of February 2025 disclosure), with the remainder held by other institutional investors. This is a controlled company between the Dy family and MUFG; minority shareholders do not drive capital allocation, though the record (flat, well-covered dividend, no dilutive raises, no reckless acquisitions) has been conservative.

Capital is going toward: (1) funding the retail/consumer loan push (auto, credit cards, home loans) and continued branch expansion (390 branches at end-Q1 2026, 9 opened in the quarter), (2) building credit reserves after the 2025 provisioning step-up, and (3) the flat P3.00/share dividend that consumes a shrinking share of a still-modest profit base. There are no disclosed buybacks and no major acquisitions in the recent record. The January 2026 CEO transition to Victor Lee Meng Teck, an outside hire with a multi-decade CIMB Singapore/regional banking background, is itself a capital-allocation signal worth watching: new leadership at a bank whose ROE has lagged peers for years is either the catalyst for a turnaround or a sign the board saw the same underperformance this review flags.

Verdict at P63.50 (July 19, 2026)

Still no new quarterly disclosure; Q2 2026 results remain due in early August, so the Q1 2026 NPL/coverage/provisioning picture is still the freshest hard data point. The week's news flow was entirely non-financial: a 75th-anniversary milestone piece, nine sustainable-infrastructure-finance awards (including Asia-Pacific Deal of the Year for the P150B Terra Solar loan), a BSP-mandated waiver of interbank transfer fees for all customers starting July 10, and the refinancing of a 17.4MW solar plant in Bataan. None of it bears on the CEO-transition thesis or the asset-quality drift this page is watching. Price drifted down slightly to P63.50 from P64.20, still inside the same range. None of the buy or sell triggers below have fired; the call stands unchanged.

Hold. Security Bank is the cheapest name in this bank coverage set on both valuation yardsticks: a P/E of about 4.2x versus 5.9x at Metrobank, 5.4x at Chinabank, and 5.9x at AUB, and a P/B of about 0.32x versus 0.72x, 0.79x, and 1.06x at those same three names. On paper that looks like the deepest value in the group. But it is cheap for a reason that is visible in the numbers, not just a liquidity discount: ROE has been stuck in a choppy 6-8% band for five years, roughly two-thirds of what Metrobank and EastWest generate, and it is not a leverage or thin-equity artifact since capital ratios sit in a similar range to peers. A bank earning structurally lower returns on equity deserves to trade at a lower multiple of that equity; the market is not obviously mispricing this one the way a screen built purely on P/E and P/B might suggest.

The other reason this stops short of a Buy: the freshest asset-quality data point moved the wrong way in the same quarter management pivoted to "disciplined growth" language, echoing (in a much milder form) the caution flag raised at EastWest this cycle. Gross NPL ratio drifted from 2.85% (2024) to 2.89% (2025) to 3.08% (Q1 2026), while reserve coverage slipped from 85.6% to about 81%, and full-year 2025 credit provisions nearly doubled to P12.8B. None of this is alarming in isolation (the NPL ratio is still moderate by PH standards and nowhere near this bank's own pandemic-era peak), but combined with loan growth that is running well below peers (3-5% versus 9%+ at MBT and EW) and a leadership transition just completed in January 2026, there is more uncertainty here than the headline multiples advertise. The offsetting positives (a sharply improving cost-to-income ratio, a genuinely growing higher-margin retail mix, an investment-grade Moody's rating, and a well-covered, if modest, dividend) keep this from being a Sell.

What would change the call:

  • Buy trigger: the gross NPL ratio stabilizes or reverses back toward 2.85% or below for two consecutive quarters with coverage rebuilding above 85%, confirming the Q1 2026 uptick was noise, or ROE breaks out of the 6-8% band and holds above 9-10% for two consecutive quarters, confirming the retail mix shift and cost discipline are translating into structurally better returns under the new CEO, or the stock falls further while these metrics hold steady, widening the margin of safety on an already-cheap valuation.
  • Sell trigger: gross NPL ratio keeps climbing past roughly 4% with coverage falling below 75%, provisions grow faster than pre-provision operating profit for two or more consecutive quarters (pulling ROE toward 5% or lower), CET1 drifts toward the high single digits forcing a capital raise or a cut to the flat P3.00/share dividend, or loan growth stays stuck in the low single digits for a full year, signaling the retail push has stalled rather than merely paused for credit discipline.

This is a controlled company (Dy family plus MUFG combined near 52% of shares); minority shareholders have no real say in strategy, though the record so far has been conservative rather than value-destructive. PSE bank re-ratings play out over years, not quarters; this is a watch-and-wait situation, not a trade.

Analysis, not financial advice.

Committee review (July 19, 2026)

Five investor lenses judged this page's facts independently, each confined to its own framework. No new financial disclosure has landed since the last run, so the underlying facts are the same Q1 2026 data set; the price is a touch lower.

Lens Signal Confidence Core argument
Ben Graham Bullish 78 P/E x P/B still works out to roughly 1.33, well inside Graham's 22.5 ceiling, and five straight years without an earnings deficit (P6.9B to P11.6B) satisfy his stability test, with CAR 13.1%/CET1 12.2% and a conservative 19.5% payout showing the equity claim sits behind well-covered senior obligations.
Warren Buffett Bearish 65 A moat is proven by consistent returns on capital, not a statistical bargain, and SECB's 7.74% trailing ROE trails Metrobank (12-13%) and EastWest (~12%) while credit quality turns (NPL 2.85% to 3.08%, coverage down to ~81%) and a controlling family declines to buy back stock even as it gets cheaper (0.32x book).
Michael Burry Bearish 58 The 0.32x P/B and 4.16x P/E look like statistical value, but the 2025 "record" profit leaned on a 47% jump in low-quality trading/FX income while NPL coverage fell from 85.6% to ~81% and provisions nearly doubled, exactly the accounting-versus-reality gap this lens hunts for.
Nassim Taleb Bearish 62 Banks are structurally short volatility, and SECB is stacking fragility behind a robust facade: NPL ratio rising for three straight periods, coverage falling to 81%, and a retail push (auto +24%, cards +16%) adding tail exposure exactly where the industry is already bleeding credit costs.
Stanley Druckenmiller Neutral 45 Valuation alone is not a catalyst, and the one real catalyst on the table (the new CEO) still has no data point since Q2 2026 results remain a couple weeks out; this week's news (anniversary piece, finance awards, fee waiver) is noise, not a trigger.

Conferred call: Sell (3 bearish, 1 bullish, 1 neutral). Unchanged from the last run: three of five lenses still read the same asset-quality drift (rising NPLs, falling coverage, doubling provisions) as a deteriorating credit book rather than a cheap bank, and Druckenmiller still sees no live catalyst to hold for until the CEO's first full quarter prints. That squares with the rulebook's warning against low-quality setups bought purely because a name looks cheap on a screen ([[stock-trading-strategy-and-rules]]); this page keeps the softer Hold because the balance sheet (capital, liquidity, investment-grade rating) is not in danger, but the disagreement is worth sitting with before adding to a position.

Review history

Date Price Recommendation
July 10, 2026 64.30 Hold (cheapest bank on the board, but ROE and asset-quality trend do not yet earn a Buy)
July 12, 2026 64.20 Hold (no new data since last review; committee runs Sell on the same asset-quality drift)
July 19, 2026 63.50 Hold (still no new data; committee runs Sell on the same asset-quality drift)

Sources