Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Korea Investment retains top spot in brokerages' earnings
By Anna J. Park
Shinhan suffers 12% decrease in net profits
By Anna J. Park
Korea Investment & Securities maintained its top position in 2019 brokerages' earnings results for the fourth consecutive year, while Shinhan Investment suffered a major setback with a drop in net profits.
According to the Financial Supervisory Service, Korea Investment posted a record high net profit of 709.9 billion won ($598 million) in 2019, up more than 42 percent from the previous year.
An official from Korea Investment attributed the record-high number to a diversified revenue structure and synergy among business divisions.
“In particular, earnings from investment banking and wealth management have led the growth in performance. Return on equity (ROE) ― the standard index for measuring profitability ― was 14.3 percent, one of the highest in the industry,” the official said.
The remarkable performance was not only confined to the industry's frontrunner. Despite last year's KOSPI slump, eight major securities firms here saw their combined net profits increase by around 33 percent in 2019 compared to the previous year.
Mirae Asset Daewoo and Meritz Securities kept their second and third positions, with net profits of 663.7 billion won and 554.5 billion won, respectively.
Rounding out the top five were NH and Samsung at fourth and fifth with yearly net earnings of 476.4 billion won and 391.8 billion won. The rankings were the same as 2018.
Hana Financial Investment recorded an impressive 84.6 percent year-on-year growth in net profit. An official from Hana said the brokerage house's focus on expanding revenue through its core businesses, including big investment banking deals and the over-the-counter market, played an integral part in its earnings increase.
However Shinhan Financial Investment slipped to eighth from the previous year's sixth, with net profit decreasing by 12.1 percent. The firm is facing a series of lawsuits and a prosecution investigations due to links to the alleged fund fraud involving Lime Asset Management.
Besides the eight major firms, other smaller-sized firms, including Hanyang, SK and KTB, also recorded a sharp increase in their net profits last year, which grew 360.1 percent, 125.4 percent and 45.7 percent, respectively.
Market watchers say the profitability of securities firms in general has largely been enhanced, as its business model has transformed from a traditional brokerage-focused structure to that of a capital investment earnings structure, particularly in the areas of investment banking and wealth management.
However, some analysts warned that the strong growth will slow from this year because of the government's tightened regulations on real estate.
“The securities firms' net profits started to increase around 2016, as big investment banking deals related to real estate accumulated, leading to structural changes in the firms' business models,” Kang Seung-gun, an analyst at High Financial Investments told The Korea Times.
“But this increase is expected to slow, taking into account the government has intensified regulations on real estate,” he added.