MANILA, Philippines – SM Investments Corporation (SM Investments), the Philippines’ second-biggest conglomerate in terms of market capitalization, is marking its 20th listing anniversary (it was listed on March 22, 2005) with a ceremony in the Philippine Stock Exchange on Monday, March 24.
It commemorates two decades of relations between the company founded by the late Henry Sy Sr. and the investing public.
But the story of SM Investments goes back longer than this. It started in 1936 when a young Henry Sy, just 12 years old, boarded a ship from China and braved the rough seas to join his father in the Philippines in search of greener pastures.
It’s a story that is similar to the millions of Filipinos who have chosen to leave the country, hoping to earn enough for their children’s education, decent shelter, and a better future.
But while the socio-economic impact of the Filipino diaspora is still being debated, Henry Sy’s success story has become an inspiration to millions of Filipinos.
SM Investments, the parent firm of the SM group, has its roots in retail — a single shoe store. In the past 67 years, it has since branched out into property with SM Prime, and banking with BDO and Chinabank. These are its core businesses and these four companies make up 33.7% or one-third of the Philippine Stock Exchange Index’s (PSEi’s) market capitalization.
Pillars of growth
What made this growth possible?
The role of credit, particularly that of Chinabank, then owned by the Dee family, is worth recalling. After he put up his first Shoemart store in Quiapo, Henry Sy, at 25, wanted to expand, and it was a P1-million peso loan from China Bank (two words at that time) — his first credit line — that made this expansion possible.
But it wasn’t just about money; it was about establishing trust between lender and creditor. As Henry Sy, fondly remembered by many as “Tatang,” explained in the book The China Bank Story: “The loan facilities given to me by the Bank gave me ‘pinsin’, a Fujianese word meaning ‘trustworthiness’ or ‘credibility’, in the Chinese community. It established me as trustworthy. It built up my credit. It proved that I was considered a very trusted customer by the Bank, and that helped my business. If China Bank considered me a good credit risk, then other people would also. That’s why I appreciate that loan so much.”
Tatang would remember that loan and develop a soft spot for the bank. He would end up buying more shares through the years until he became its biggest shareholder in the mid-2000s and later its chairman.
Chinabank, last February 3, rejoined the PSEi, the scoreboard of the Philippine stock market, after 14 years. As the fifth-largest bank in the Philippines, It now stands alongside other banking heavyweights in the PSEi, including Metrobank, BPI, and BDO.
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That trust is also key to SM Investments’ relations with the investing public, for trust is at the root of investors’ decision on whether to buy stocks and become part owners of companies. SMIC is now among the most trusted publicly listed companies, allowing it to access capital from the public to further grow its businesses.
It has built that trust by practicing good corporate governance, including independence and diversity in its board (5 out of 9 seats are independent directors; 3 of the 9 are women). Former Bangko Sentral ng Pilipinas (BSP) chair Amando Tetangco Jr. became chairman of SM Investments in 2023, a first in the conglomerate’s history and a rarity in Philippine corporate history. SM’s core values and code of ethics are also inculcated to all employees.
“SM’s teams exemplify its founder Henry ‘Tatang’ Sy, Sr. ‘s entrepreneurship, drive, teamwork, leadership, and most of all, business integrity. What Tatang proved is that acting on one’s good corporate governance values can be a very good business strategy. And in this case, it was the philosophy that business growth and social growth go hand in hand,” SM Investments said in a release last year.
Trust has also been built on being able to deliver results. In the past 10 years (2015 to 2024), SM Investments’ market capitalization grew 5% per annum (p.a); BDO by 7% p.a.; and SM Prime by 2% p.a.
In terms of net income, it was 7% p.a. for SM Investments, 9% p.a. for retail; 5% p.a. for SM Prime; and 14% p.a. for BDO. In 2024, SM Investments’ consolidated net income reached P82.6 billion, a 7% hike from the P77 billion earned in 2023. Revenues grew 6%, from P616 billion in 2023 to P654 billion in 2024.
Heart of business
Aside from trust, there’s another principle behind SM Investments’ growth that is often overlooked.
Those who’ve built successful companies in retail, property, and banking agree on one common ingredient: customer focus and satisfaction, i.e. being attuned to customer needs and being able to satisfy them. In 2023, the theme of SM Investments’ Integrated Report was “Commitment to our Customers,” emphasizing how service to customers has been at the heart of its business for more than 60 years.
And Henry Sy’s reputation on this score is legendary. His tenants in his malls have attested to how he regularly visited his stores and malls, observed patrons’ behaviors, and analyzed how to serve them better. He was the pioneer in putting up air conditioning in his stores, for instance. Henry Sy was also updated on the latest innovations in shoes and retail from his travels abroad.
There are many other important lessons from Tatang, too many to include here but there’s one that should be recalled in relation to SM Investments’ 20th anniversary listing: seeing opportunities in times of crisis, and thinking big and long term.
As the Philippines faces uncertainties from new developments around the world, as well as political turbulence at home, it may be useful to adopt the strategy of many great businessmen, including Henry Sy, to see opportunities in times of crisis.
The SM group’s first mall, SM City North EDSA, was built during the political crisis that arose from the August 1983 assassination of Benigno “Ninoy” Aquino Jr., a time when interest rates were sky-high. When it opened in 1985, however, people flocked to it, and “malling” soon became part of Filipinos’ way of life. In 2024, SM Prime’s malls combined had a record-high of 5.2 million average daily visitors.
When it was listed in 2005 or 20 years ago, SM Investments had 19 malls. Today, it has 87 malls in the Philippines and 8 in China. It puts up an average of 2 to 3 malls per year. It also has 4,470 retail stores, and 2,441 bank branches. In an interview published in 2019, Tatang said, “You have to have a dream, whether big or small. Then plan, focus, work hard, and be very determined to achieve your goals.”
Building trust
As Henry Sy’s fortunes grew, he also did not forget his roots, and how it was important to give back to society. SM Investments’ work on corporate social responsibility and sustainable development has helped develop trust between the conglomerate and the public.
The SM group’s initiatives on education are particularly noteworthy. Tatang and his wife Felicidad set up SM Foundation in 1983 and has constructed 110 school buildings throughout the country. It has also financially supported more than 11,000 scholars (college and vocational-technical).
SM Investments has made sustainable development a key corporate principle, which it is undertaking through initiatives in areas such as energy efficiency and ramping up renewable energy (RE) sources to power its operations.
SM Prime operates 47 malls and properties with solar installations totaling 63 megawatts (MW) of capacity. The rollout of solar panels in SM malls and other property projects has cut carbon emissions by nearly 20,000 metric tons, equivalent to taking more than 4,100 cars off the road yearly.
BDO Unibank is one of the biggest funders of RE projects. As of December 2023, it had funded 59 RE projects with a total installed capacity of 2,377 MW, equivalent to around 930,000 passenger vehicles taken off the road. BDO Unibankl’s total sustainable finance projects to date have reached P781 billion.
In addition, SM Investments owns and operates Philippine Geothermal Production, which runs geothermal fields in Tiwi, Albay, and Makban, Quezon. SM Prime has also partnered with GUUN Co. Ltd. to reduce landfill impact by using technology that converts non-recyclable and hard-to-recycle packaging into alternative fuel.
SMIC also allocates 10% of its capital expenditures for disaster resiliency and sustainability.
Developing the regions
In recent years, SM Investments’ focus has been on helping drive growth in the country’s regions. For instance, the majority of SM Prime’s new mall openings are now outside Metro Manila, a sign of its commitment to inclusive economic growth. Three malls are set to open in 2025, all outside the capital region: SM City La Union; SM City Laoag, Ilocos Norte; and a new mall in SM City Zamboanga.
Moreover, 85% of SM Investments’ newly opened retail stores are outside Metro Manila, effectively creating new markets and meeting people’s desire for modern retail. The new bank branches of BDO and Chinabank, as well as SMDC residential projects, are now also mostly outside Metro Manila.
Being the Philippines’ largest mall operator and operator of several convention centers and trade halls, SMIC has been a key player in the growth of MSMEs. Its marketplaces allow around 100,000 MSMEs to connect with Filipino suppliers and consumers. Many of these MSMEs say their growth would not have been possible were it not for the break of getting space in SM malls.
Around 68% of the SM group’s mall tenants are MSMEs, with some P62 billion in loans released by its banking units to MSMEs.
Tatang’s legacy
As a country, our economic achievements are often attributed to national leaders and administrations, with scant attention to the role of the private sector.
While the PSEi is seen as the barometer of the Philippine economy, the SM group is recognized by many to be representative of the Filipino consumer, given the importance of consumer spending in the country’s economic development. Roughly 70% of the Philippines’ Gross Domestic Product is driven by consumer spending.
SMIC’s 20th-anniversary listing highlights its role as a key contributor to economic growth but also a major player in building communities and social relations that is the bedrock of who the Filipino is: citizens who want to connect in order to improve themselves, as shown by what Tatang did — and by the values he lived by. – Rappler.com