Mirae Asset, Korea Investment in cutthroat competition

By Jhoo Dong-chan

The nation's top two brokerages Mirae Asset Daewoo and Korea Investment & Securities are engaging in a cutthroat race to become the leading player in the securities industry.

Thanks to its strong earnings from the investment banking and trading sectors, Korea Investment & Securities has outperformed for three consecutive quarters from the third quarter of last year.

Mirae Asset Daewoo, however, managed to snap its losing streak against Korea Investment in the second quarter of this year as it posted an earnings surprise from the overseas sector.

Experts said the two securities firms' risk management capability will determine their second half earnings due to growing uncertainties in the global market.

According to the Financial Supervisory Service (FSS), Korea Investment & Securities posted a 408 billion won ($337 million) net profit in the first half of the year, up 42 percent from a year ago. This is the highest net profit ever for a domestic securities firm.

Mirae Asset Daewoo's earnings also jumped 8.3 percent year-on-year to post 387.6 billion won in the period. It was also the brokerage's record high semester earnings since the firm was established by the merger between Mirae Asset and Daewoo Securities in 2017.

The data demonstrates Korea Investment is still outperforming Mirae Asset Daewoo since the former enjoyed a higher net profit than the latter for the first six months, but the situation could change later this year as Mirae Asset Daewoo surprised the market by posting higher-than-expected earnings in the second quarter.

The market outlook expected Mirae Asset to post a 170 billion won net profit in the second quarter, but the brokerage said its quarterly earnings reached 219.4 billion won, up 30.4 percent from last year.

The securities firm's ROE also topped the 10 percent mark for the first time since the 2017 merger.

In the meantime, Korea Investment posted a 189.4 billion won net profit in the second quarter, down 13.4 percent from the previous quarter.

Mirae Asset Daewoo said the brokerage's strong presence overseas led its earnings surprise.

It has already outperformed its entire 2018 earnings of 84.5 billion won from the overseas sector since it posted an 87.2 billion won net profit there in the first half.

“Mirae Asset Group founder Park Hyeon-joo has stressed the importance of the global market for years,” said a Mirae Asset Daewoo official.

“He claimed Korea's financial market has already been too saturated so financial firms need to look to overseas markets to have a more resilient business portfolio.”

In opposition to Mirae Asset's strong overseas presence, Korea Investment has boasted its solid earnings in the investment banking sector.

Korea Investment & Securities CEO Jung Il-moon himself is a specialist in this field and has directly managed the brokerage's various projects. Thanks to Jung's leadership and expertise in the sector, Korea Investment posted a 140.3 billion won net profit in the first half of the year from the sector.

“It's difficult to forecast their second half earnings at this point, but Mirae Asset Daewoo is believed to be less vulnerable to mounting uncertainties since the brokerage has a more diversified business portfolio. This hedges unfavorable external factors,” said Meritz Securities researcher Kim Go-eun.