SM group profit falls on weak banking units

MANILA, Philippines (UPDATED) – SM Investments Corporation (SMIC), the holding firm of the country's richest man Henry Sy, reported lower earnings in the first quarter due to a decline in the incomes of its banking units.

In a statement Wednesday, May 14, SMIC said its net income in January to March reached P6.24 billion, down nearly 16% from P7.42 billion in the same months last year.

The group said its net income in 2013 "reflected exceptional trading gains in the banking businesses." Minus these gains, SMIC's net income, on a recurring basis, grew 11%.

SMIC said its revenues went up 12% to P53.71 billion.

"We are pleased with our performance in the first quarter, having delivered double digit underlying top and bottom line growth. Retail started the year with strong revenue growth even as the intensifying competition puts pressure on margins. The newly formed property group has begun operating as a more cohesive integrated unit, and the banks continue to deliver strong profit growth. The environment will continue to be challenging, but we are focused on strengthening our core businesses to build our markets," SM President Harley Sy said.

Banks accounted for the largest share of SMIC's consolidated net income, contributing 41%. The property business accounted for 40%, and retail, 19%.

Main banking unit BDO Unibank Inc., the country's largest bank by assets, recorded a first-quarter net income of P5.5 billion, significantly lower than the P10 billion it booked the previous year.

Despite challenges in its trading business, BDO said its core loan and deposit operations posted solid gains. The company had a net interest income of P12.2 billion in the first quarter, up 27% year on year.

BDO is bullish about its growth prospects especially with the 2015 ASEAN economic integration, which is expected to open up more cross-border business for local banks and expand their client base.

Property group SM Prime Holdings Inc. enjoyed an 11% jump in net income to P4.58 billion, as revenues inched up 3% to P15.35 billion. 

Rental revenues, which accounted for 56% of the consolidated revenues, grew 12% to P8.56 billion. The increase was primarily due to the new malls opened in 2012 and 2013.

Real estate sales contributed 33% to total revenues at P5.02 billion in the first quarter of 2014. SM cited "volatility" in real estate sales and said this was "reflective of normal cycles."

Other SM group revenues came from malls, residential, commercial business, hotels and convention centers and leisure properties contributed 11%, at P1.77 billion.

In terms of retail operations, SMIC said it experienced "greater competition." It recorded sales of P42.2 billion, up 16%, and a net income of P1.2 billion. It did not provide a comparative figure for the earnings. –