By Kim Tae-jong
The number of employees at securities firms has dropped to the lowest level since the financial crisis in 2008.
The result came as brokerage houses have been dramatically laying off employees to restructure organizations and weather falling profits in the past few years. The problem is that there is no sign that things will soon rebound despite those drastic retooling efforts.
According to data compiled by financial information provider Chaebul.com, the number of employees at the top 25 brokerage firms dropped to 32,225 at the end of last year from 34,919 a year earlier.
Securities firms conducted massive layoffs during the 2008 financial crisis when the number of employees stood at 31,534, but they gradually increased the number in the following two years ― 32,235 in 2009 and 35,204 in 2011.
But they have been laying off employees again, mainly due to falling profits from 2012 when the number of employees dropped to 34,919.
They have also closed branches as part of plans to realign their business operations. The total number of branches reached 1,476 last year, a sharp drop from 1,779 a year earlier, the data showed.
“There seem no other options but to cut staffs and close branches to reduce costs," said a Seoul analyst. “The priority is to survive the hard time, but no one is sure when the market will rebound.”
In fact, brokerage houses have geared up their restructuring efforts to cope with poor performances.
Most securities firms have suffered major setbacks in earnings due to sluggish trading amid lingering market uncertainties.
Samsung Securities post 38.7 billion won in operating profit in 2013, down 83.71 percent from the previous year, while Hyundai Securities’ operating loss jumped to 73.8 billion won from 24 billion won in the same period.
The daily trading volume fell to 5.8 trillion won last year, lower than the breakeven point, which stood at 6.9 trillion won in 2012 and 9.1 trillion won in 2011, according to industry data. Experts say that trading volume should be at least over 8 trillion won to make profits.
Small and medium-sized securities firms have laid off larger numbers of employees.
For example, KTB Securities cut down the number of employees by 31 percent to 358 in 2013 from 519 in 2012. Hanwha Securities, after taking over Prudential Investment & Securities in 2010, also cut staff through a volunteer retirement program, with the number of employees dropping to 1,308 from 1,704 in the same period.
Golden Bridge Securities, SK Securities, Yuhwa Securities, HMC Securities and Eugene Securities saw the number of employees drop by 19.1 percent, 15.8 percent, 14.9 percent, 9.6 percent and 7.9 percent, respectively.
Major securities firms also joined the move to accept applications for volunteer retirement programs.
Samsung Securities recently announced it was starting to accept voluntary retirement from its workers, for the first time in three years, and Hana Daetoo Securities and Daishin Securities also said they will soon run similar programs to cut their workers.
“Given its market leading position, Samsung’s decision is expected to lead a series of massive layoffs at other brokerage houses,” an official from a securities firm said.
Woori Investment & Securities and NH Investment & Securities are also said to be planning a voluntary retirement program to cut down the number of employees by 10 percent before they are merged in the near term.
The belt-tightening efforts at brokerage houses are expected to continue for a while unless there are major breakthroughs in their profits, which is very unlikely given current market conditions.
Market researcher FnGuide said most securities firms will see disappointing results in the first quarter based on the initial estimation for their sales with only a few succeeding in turning things around.
For example, Samsung Securities is expected to post 36.8 billion won in net profit, a 42.5-percent drop from the same period last year, and 49.7 billion won in operating profit, a 38.3-percent drop.
KDB Daewoo Securities is expected to see its net profit and operating profit drop by 52.5 percent and 47.4 percent, respectively, to post 19.3 billion won and 23.8 billion won.
“Only a few firms may show improved performances, but that was just because the industry has suffered a prolonged slump in the past two years,” an analyst said. “Unless they diversify and develop new sources for incomes, things will never get better soon.”
FSS Governor Choi Soo-hyun also stressed earlier this month that noncompetitive financial firms should be forced to leave the market, saying “I will let market forces play a role for a more aggressive restructuring.”