Security Bank: Q3 2026 profit fell 3.0% even as net interest income grew just 1.9%

In its Q3 2026 report, Security Bank Corporation posted operating profit of PHP 4,045.8m and net profit of PHP 3,114.4m. Net interest income grew 1.9% year on year after a 140.5% jump in Q2 – a sharp deceleration. Quarterly net profit fell 3.0% year on year, while trailing-twelve-month net profit reached PHP 11,757.1m at a P/E of 3.98 and ROE of 8.05%. Our conclusion: rather attractive – on the portal's model the share trades at a 26% discount to fair value. Our view: the share is rather attractive at the current price; upside on the portal model +26%.

Our view: is there upside

Our view in numbers

Key takeaways

— Net interest income grew just 1.9% year on year after 140.5% in Q2 – growth decelerated sharply

— Quarterly net profit fell 3.0% year on year to PHP 3,114.4m on operating profit of PHP 4,045.8m

— Over the last twelve months the bank earned PHP 11,757.1m of net profit on PHP 35,700.0m of net interest income

— A P/E of 3.98 and ROE of 8.05% – the bank is cheaply valued, but returns on capital are modest

— A trailing dividend yield of 4.73% remains the main support for a holder

— On the portal's model the share trades 26% below fair value

Key figures, PHP bn

Net interest income grew just 1.9% year on year after 140.5% in Q2 – growth decelerated sharply

In Q3 2026 Security Bank's net interest income was PHP 17,556.3m, just 1.9% above the same quarter a year earlier. In Q2 growth was 140.5% year on year – so the growth rate decelerated sharply. The swing reflects a low base in Q2 2025, while the Q2 2026 spike likely reflected one-off factors that did not repeat in Q3.

The slowdown in net interest income growth is the main signal of the report. The bank is growing interest income far more slowly than in the previous quarter, which limits profit growth. At the same time, the absolute level remains high – PHP 17,556.3m for the quarter, above the Q3 2025 figure of PHP 17,223.5m.

For a bank, such growth is more stabilisation than deterioration. But after 140.5% in Q2, the market might have expected stronger growth. The deceleration to 1.9% suggests the loan book is growing modestly and the margin is not expanding.

Quarterly net profit fell 3.0% year on year to PHP 3,114.4m on operating profit of PHP 4,045.8m

Security Bank's net profit in Q3 2026 was PHP 3,114.4m, 3.0% below the Q3 2025 level of PHP 3,211.3m. Operating profit for the quarter was PHP 4,045.8m, also below last year's PHP 4,131.9m. Profit falling while net interest income grew 1.9% means costs or credit-loss provisions grew faster than income.

The 3.0% decline in net profit is moderate, but it shows the bank could not convert income growth into profit growth. At the same time, profit remains positive and substantial – PHP 3,114.4m for the quarter. Over the last twelve months net profit was PHP 11,757.1m, which at a market cap of PHP 46,794.8m gives a P/E of 3.98.

Profit falling while income rises is a warning sign for asset quality. If credit-loss provisions are rising, it may point to deterioration in the loan book. However, without provision data in the report, we can only state that profit fell while income grew.

Over the last twelve months the bank earned PHP 11,757.1m of net profit on PHP 35,700.0m of net interest income

For the twelve months ended 30 September 2026, Security Bank earned PHP 11,757.1m of net profit on PHP 35,700.0m of net interest income. That implies a net margin of about 33% of net interest income – fairly high for a bank, but it also reflects high operating costs and credit-loss provisions.

LTM profit of PHP 11,757.1m is the valuation base. At a market cap of PHP 46,794.8m, the P/E is 3.98. Such a low multiple may indicate the market is pricing in asset-quality deterioration or slower growth. ROE of 8.05% is also modest – the bank earns less on capital than it could at a higher margin.

Comparing LTM profit with the quarterly figure shows Q3 2026 was not the strongest: PHP 3,114.4m for the quarter is about 26% of LTM profit. For a stable bank, quarterly profit should be roughly 25% of the annual figure, so Q3 is in line with the overall run rate but shows no growth.

A P/E of 3.98 and ROE of 8.05% – the bank is cheaply valued, but returns on capital are modest

A P/E of 3.98 is very low for a bank. With ROE at 8.05% and a price that gives such a return, the market values the bank's capital below book value. That may be justified if the market expects lower profit or deteriorating asset quality, but it may also mean undervaluation.

On the portal's model, which compares ROE with P/B, the share trades 26% below fair value. This is our own calculation, not a market consensus. It suggests that at current profit and capital the share has upside. However, the low ROE limits that upside: the bank does not show high returns on capital that could quickly close the discount.

We cannot compare the current P/E with its own three-year history – the facts contain no historical multiples. But the absolute level of 3.98 suggests the market values the bank very conservatively. For a holder, this means further multiple compression is unlikely, while profit growth or a higher ROE could lead to a re-rating.

A trailing dividend yield of 4.73% remains the main support for a holder

Security Bank's trailing twelve-month dividend yield is 4.73%. That is above the yield on many bank shares and provides a holder with regular income. However, the yield is based on past payments, and its sustainability depends on the bank's profit.

With LTM net profit of PHP 11,757.1m and a market cap of PHP 46,794.8m, a 4.73% yield requires about PHP 2,213m of dividends – roughly 19% of LTM profit. That payout level looks sustainable if profit does not fall significantly. However, the 3.0% year-on-year decline in quarterly profit may limit dividend growth.

Our estimate for the current year's dividend is our own, based on the facts. If the bank keeps its payout ratio near 19% of profit, the dividend should stay close to the current level. The risk of a cut is tied to a further fall in profit or to higher credit-loss provisions that would reduce the dividend base.

On the portal's model the share trades 26% below fair value

On the portal's model, which compares ROE with P/B, Security Bank's fair value is 26% above the current price. This is our own calculation based on current profit and capital. It suggests that if current metrics hold, the share has 26% upside.

However, the model does not account for possible asset-quality deterioration. If credit-loss provisions rise, profit and ROE will fall, and the model's fair value will drop. The model also ignores the dividend yield, which adds 4.73% to the share's total return.

For an investor, the combination of a 26% model discount and a 4.73% dividend yield makes the share attractive. But the low ROE of 8.05% means the bank is not growing fast, and the discount may persist. The key factor for narrowing the discount will be profit growth and a higher ROE.

Valuation on the latest reported figures

Bottom line

The report's strength remains profitability: PHP 3,114.4m of net profit for the quarter and PHP 11,757.1m over the last twelve months. However, net interest income growth decelerated to 1.9% year on year, and profit fell 3.0% – the bank is losing momentum. The 4.73% dividend yield and the 26% discount on the portal's model support the valuation, but the low ROE of 8.05% limits upside. Our conclusion: rather attractive – on the portal's model the share trades 26% below fair value. Our view: the share is rather attractive at the current price; upside on the portal model +26%.