By Kim Tae-jong
Local securities companies saw a substantial setback in their performance in their fiscal first quarter with profits more than halved due to fallout from the deepening eurozone debt crisis.
According to a report by Hyundai Securities and financial information provider FnGuide, operating profits at four major brokerage houses ― Woori, Daewoo, Samsung and Mirae Asset ― plunged by 54 percent on average between April and June. Securities firms normally close their books in March.
The report, which estimated the results for the brokerage houses, concluded that a rapid reduction trading in the volatile market was the main reason behind the disappointing results.
The daily trading volume last month stood at just 6 trillion won on average, lower than the break-even point.
“In the brokerage business, trading volume should be at least over 8 trillion won to make profits,” said David Rhee of Hyundai Securities. “No one knows when the situation will get better, and until then, securities firms need to go into crisis management mode.”
The four brokerage houses posted total sales and operating profits of 672 billion won and 120.4 billion won, respectively, down 16.6 percent and 53.8 percent from the same period last year. The report estimated their net profits fell by 55.9 percent to 162.3 billion won.
Of them, Mirae was hit hardest, with its operating profit dropping 67.9 percent, followed by Samsung (67.0 percent).
The results can be seen as particularly serious for the two brokerage houses because they also posted huge losses on overseas markets.
Mirae Asset recorded a 20 billion won loss from the operation of its Hong Kong subsidiary last year.
Some brokerage houses have already launched restructuring and reshuffling after the daily trading volume dropped once to 4 trillion won last month.
Korea Investment and Securities early this month declared the launch of emergency management because it expected to post the worst earnings.
The firm asked employees via its intranet to reduce the use of electricity and other expenses in order to survive the financial crisis.
Korea Investment Holdings is now expected to record 42 billion won in net profits in the first quarter, the highest among 60 securities companies, but this is a 45 percent drop, compared to last year.
Meanwhile, the report also showed the banking sector suffered a huge drop in operating profits in the April-June period.
According to the report’s estimates, seven major banks including Woori, KB Kookmin, Shinhan and Hana recorded sales and operating profits at 10.2 trillion won and 3.6 trillion won, down 20.5 percent and 45.5 percent, respectively, from a year ago. Their net profits also dropped by 47.7 percent to 2.5 trillion won.
In the insurance sector, nine companies said their sales increased by 15.6 percent to 18.8 trillion won in the same period. Their operating profits decreased by 1.2 percent while net profits increased by 1.6 percent.