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' robust Q3 profit increases rely on investment banking
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By Anna J. Park
By Anna J. Park
While major securities firms successfully exceeded the 1 trillion won ($840 billion) mark in their accumulative operational profits until the end of the third quarter of this year, the investment banking (IB) sector turned out to have led the growth of their quarterly profits in the third quarter.
Most securities firms recorded a fall in their brokerage commissions, as the entire amount of stock trading transactions has declined lately, compared to the market boom early this year.
For instance, NH Investment's third quarter profit from brokerage commissions stood at 152 billion won, a 10.58-percent reduction from the previous quarter. Samsung Securities raked 204 billion won in the third quarter in brokerage fees, which is a 7.1-percent fall from the second quarter. Mirae Asset Securities and Korea Investment also each logged a decline of 4.1 percent and 1.4 percent in their brokerage commission profits, respectively, compared to the second quarter.
However, their third quarter performances fared well despite the fall in the brokerage commission, as profits from the corporate finances offset the diminished part of the profits.
NH Investment's profit from investment banking has soared by 26.6 percent from the previous quarter, as their earnings from the equity capital market (ECM) as well as the debt capital market (DCM) both increased. Korea Investment renewed its record-high earnings from investment banking in the third quarter, partly due to their participation as an underwriter for Kakao Pay's IPO. Other brokerages also raked in solid profits for their involvement in the equity or debt markets in the IB sector.
During the first half of this year, Korea Investment logged its biggest increase of 76.82 percent in its investment banking profits, compared to last year, followed by Samsung Securities' 61.8 percent, KB Securities' 31.18 percent, Kiwoon Securities' 22.16 percent and NH Investment's 19.55 percent.
Despite such performances, the decreasing amount of daily stock trading transactions among retail investors is shadowing the firms' future prospects in brokerage commission profits. The securities firms are expected further to diversify their profit sources beyond stock trading commissions, especially in expanding prop trading and wealth management, as well as the equity and debt market.
Market insiders say now that the core business of securities firms will further shift towards investment banking from the brokerage business.
In terms of accumulative operational profits by the third quarter this year, four major local securities firms ― Mirae Asset, NH Investment, Samsung Securities and Korea Investment ― each logged over 1 trillion won of operational profits, with Mirae Asset at the front of the pack.
Mirae Asset Securities recorded an accumulative revenue of 10.78 trillion won by the third quarter, with an operational profit of 1.25 trillion won and a net profit of 993 billion won, largely owing to increased profits from global portfolios. It was a 52.5-percent increase from the previous year.
Samsung Securities logged an accumulative operational profit of 1.1 trillion won at the end of the third quarter, a 116.94-percent jump from the same period last year. Korea Investment & Securities recorded 1.063 trillion won, a 121.1-percent increase from last year, followed by NH Investment's 1.06 trillion won with an on-year increase rate of 50.6 percent.
Kiwoom, Daishin, Meritz and KB Securities are all expected to reach the one-trillion-won mark in their cumulative operational profits, including fourth quarter performance.