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.
Securities firms post robust profits in Q2 from stock market rebound
By Anna J. Park
Local brokerage houses post earnings surprises, despite occurrences of mis-selling fraudulent financial products
By Anna J. Park
Local brokerage houses posted earnings surprises for the second quarter, as stock trading volumes surged among retail investors during the market rebound period.
Among the firms that have announced their Q2 results so far, NH Investment & Securities logged the highest operating profit of 296.3 billion won ($247 million), which is a whopping 94 percent year-on-year increase. What is interesting is that its quarterly revenue of 1.97 trillion won during the period saw a year-on-year decrease of 46.5 percent, yet its profits skyrocketed.
The firm's net profit stood at 230.5 billion won ― far higher than analysts' previous market consensus of about 181.5 billion won. In terms of net profit, the brokerage house garnered a 114.3 percent increase from the same quarter last year, and a 641.6 percent jump from the previous quarter.
“NH Investment's Q2 net profit is an earnings surprise, exceeding the firm's estimates and a market consensus by 78.5 percent and 43.8 percent, respectively. The robust earnings came mainly from increased brokerage commissions and a valuation recovery of the firm's various investment products, including ELS products that turned back into the black again from the rise of global indices,” said Park Hye-jin, analyst at Daishin Securities, adding that the brokerage's profit saw an increase of 36.4 percent from the previous quarter, as the firm's average daily stock trading amount increased by 44.1 percent from the first quarter.
The analyst added that NH Investment's forte in investment banking (IB) also maintained a sturdy level, as it successfully led multiple initial public offerings (IPOs) like SK Biopharmaceuticals and project financing (PF) deals.
KB Securities also posted a huge leap in profits during the second quarter. The securities firm raked in 230.2 billion won in operating profit, which is a year-on-year increase of 129 percent. The firm's revenue also decreased by 40.35 percent compared to the same period last year, yet its operating profit and net profit increased by 129 percent and 62.67 percent, respectively.
Hana Financial Investment followed suit; the securities firm logged an operating profit of 147 billion won during the second quarter, which is up nearly 40 percent year-on-year. The firm's net profit for both the Q1 and Q2 stood at 172.4 billion won, which is a 13 percent jump from last year's first half. This is also the firm's all-time high record for a half-year period.
“The rapid surge in the amount of stock trading amid the market's volatile rebound is attributed to the increase of brokerage profits,” an official from Hana Financial Investment said. “Big deals from the IB sector in both local and overseas markets, as well as increased earnings from overseas departments, also led to the solid earnings.”
Kyobo Securities joined the rally with the brokerage house logging 54 billion won in operating profit, a 50 percent jump from the same period last year. The firm's net profit stood at 43.4 billion won, up 52.7 percent year-on-year.
“Despite the impact from COVID-19, the firm posted balanced profits in various business sectors,” an official from Kyobo said. “In particular, profits from the wealth management (WM) department continued. The real estate IB sector also logged a sound performance in the second quarter.”
However, Shinhan Financial Investment was directly hit by a string of scandals involving the mis-selling of private equity funds (PEFs).
Due to 76.9 billion won worth of quarterly costs incurred from the firm's involvement in selling Lime Asset products, the brokerage firm logged a loss of 2 billion won to its operating profit, a plunge from the first quarter's 58 billion won. In terms of net profit, the firm posted 10.4 billion won, a 77 percent fall from the same quarter last year. Combining the first and second quarter this year, the firm recorded a total of 57.1 billion won of net profit during the first half of this year, a year-on-year 60 percent decrease.
Considering the ardent zeal among retail investors in the nation, market analysts predict a rosy outlook for the third quarter for local securities firms, despite remaining shocks from some firms' involvement in the mis-sellings that have been so prevalent.
Since the market crash in mid-March due to the COVID-19 pandemic, the stock markets continued to move in a general upward trend and the average daily stock trading amount surged to 18.2 trillion won during the first half, which is up 96.4 percent from the previous year. In the second quarter alone, the average daily trading amount stood at 21 trillion won, a 45.5 percent jump from the previous quarter.
“The brokerage profits dwindled over the past 10 years from the weak performances of local stock markets, yet they have once again become the primary source of income for securities firms,” said Jang Hyo-sun, analyst at Samsung Securities. “Factors like a rise in the popularity of exchange-traded funds (ETFs), diversification of investment products and strengthened platforms of asset trading will influence an increase in the firms' brokerage profits.”