Banking and real estate sector boost SMIC’s second-quarter profit to P21.8 billion

By means of Revin Mikhael D. Ochave, News reporter

SM Investments Corp. (SMIC) reported a 13% increase in its net profit for the second quarter (Q2) to P21.8 billion, mainly driven by strong performance in the banking and real estate sectors, which offset the impact of lower retail figures. sale.

“[O]Our banks, real estate and portfolio investments continued to deliver results,” Frederic C. DyBuncio, president and CEO of SMIC, said in a statement Wednesday.

“We remain cautiously optimistic for the remainder of the year,” he added.

Consolidated revenues in the second quarter rose 6% to P157.7 billion, SMIC said.

SMIC saw a 10% increase in its first-half consolidated net profit to P40.2 billion, compared to P36.5 billion last year.

Consolidated sales from January to June rose 5% to P301.4 billion from P286.7 billion in 2023.

The conglomerate’s banking segment accounted for 50% of total net profit, followed by real estate at 27%, retail at 14% and the share of portfolio investments at 9%.

Asked for comment, Alfred Benjamin R. Garcia, head of research at AP Securities, Inc., said. that SMIC is expected to have another “top year”, with performance in the first half of the year meeting expectations.

“It corresponds to the estimates. It is only slightly behind the P40.4 billion we expected for the first half,” he said in a Viber message.

“Given that the seasonality of SM’s revenues is heavily skewed towards the second half of the year, we can safely assume that the company is heading for another banner year,” he added.

However, he also said SMIC’s real estate segment is at risk due to the recent government ban on Philippine offshore gaming operators (POGOs).

“The biggest risk would be the effect of the POGO ban on SMIC’s ownership arm. Granted, they have limited exposure to POGOs, but they have a significant portfolio of office spaces in the Bay Area. That’s one of the areas where we expect office vacancies to rise as a result of the POGO ban, which could translate directly into lower rents. There could also be a knock-on effect on the housing market in terms of vacancy rates,” he says.

“Another potential risk is the return of weakness in consumer spending if the latest rise in inflation rates is not a one-off as we expected,” he added.

The conglomerate’s banking operations led by BDO Unibank, Inc. grew first-half net profit 12% to P39.4 billion, driven by momentum from core lending and fee-based services.

Net interest income rose 11% to P99.6 billion. Gross customer loans increased by 13% across all market segments, while total deposits increased by 13%.

China Banking Corp. posted a 6% increase in its first-half net profit to a record P11.4 billion, driven by improved core lending and deposit taking activities.

Net interest income rose 19% to P30.4 billion as higher interest income offset the increase in interest expense. Gross loans rose 10% to P817 billion, led by higher demand across all market segments, while deposits rose 14% to P1.3 trillion.

SMIC’s real estate unit, SM Prime Holdings, Inc., generated P22.1 billion in consolidated net profit in the first half, up 13% from P19.4 billion in 2023.

Consolidated revenue increased 8% to P64.7 billion from P59.9 billion in 2023.

SMIC said its retail business, led by SM Retail, saw first-half net income decline 9.5% from P8.4 billion to P7.6 billion due to a “high base effect from the impact of the lifting of mobility restrictions on consumption in 2023.”

SM Retail grew its revenue by 4% to P196.9 billion in the first half, up from P188.5 billion in 2023.

“The second quarter reflected higher growth of 6% in retail revenues and 2% in net profit, indicative of spending on discretionary items such as appliances, beauty and fashion. Turnover from specialty stores increased by 5%. Food retail turnover grew by 7%,” said SMIC.

At the end of June, SM Retail added 355 stores, bringing the total network to 4,208 stores.

Of its portfolio investments, SMIC said Atlas Consolidated Mining and Development Corp. its first-half net profit more than doubled to P2.07 billion, while revenue rose 23% to P12.5 billion on higher copper metal prices.

The Philippine Geothermal Production Co., Inc. has recently begun the exploration and development of new geothermal energy resources in various parts of Luzon. This aims to support energy security in Luzon and promote the country’s renewable energy goals.

Logistics company 2GO Group, Inc. launched the 2GO M/V Masigla and 2GO M/V Masikap ships in the second quarter, which will sail from Manila to destinations in Visayas and Mindanao. Both ships will transport container freight and rolling freight to companies and consumers.

On July 18, SMIC listed $500 million in debt securities on the Singapore Exchange Securities Trading Ltd. The issuance came out of the conglomerate’s $3 billion Medium-Term Notes program established in May.

Final demand for the issue was $1.6 billion, making it SMIC’s largest offshore bond issuance since 2014.

“We were also pleased with the demand and positive feedback on our recent maiden issuance of Euro Medium-Term Notes, which highlighted the quality of our financials and the investability of strong Philippine companies,” said Mr. DyBuncio.

In a separate disclosure to the stock exchange, SMIC said its board also completed a real estate-for-equity swap with its subsidiary Intercontinental Development Corp. (ICDC) had approved. The transaction involves ICDC land holdings in Muntinlupa City in exchange for new SMIC shares.

The conglomerate provided no further details about the deal.

On Wednesday, SMIC shares rose 1.14% or P10 to P890 each.