Meritz set to shake up old rivalry in securities industry

The headquarters of Meritz Financial Group in Seoul / Yonhap

By Lee Min-hyung

Meritz Securities is set to emerge as the nation's most profitable brokerage firm this year, breaking through the long-standing leadership rivalry between Mirae Asset Securities and Korea Investment & Securities.

Meritz is forecast to achieve record earnings of more than 1 trillion won ($754.9 million) in operating profit in 2022, according to market tracker FnGuide. The company has generated an operating profit of 823.5 billion won during the first three quarters combined. Market consensus is that the firm will be able to register 197 billion won during the fourth quarter, which will enable it to generate the symbolically important 1 trillion won in earnings for the first time in its history.

The firm's stunning rise to a possible leadership position comes as a surprise to industry players, as the company was widely considered a mid-tier brokerage house here for the past few years. Mirae Asset Securities and Korea Investment & Securities have for the past five years maintained a neck-and-neck rivalry regarding earnings.

It remains to be seen whether the two top-tier securities firms will be able to generate an operating profit of more than 1 trillion won this year. Data from market tracker FnGuide showed that Mirae Asset will narrowly give its leading position to Meritz in this year's earnings results.

Meritz is also considered to be resilient against escalating fears about a possible liquidity crunch which is affecting some securities firms due to their poor management of real estate project financing. But most loans that the company has taken for the business consists of bonds with a lower risk of insolvency.

Shares of Meritz Securities are on the rise after the firm released its surprising third-quarter earnings report late last month at a time when rival firms suffered dismal performance amid widening stock market volatility, which was sparked by the U.S. Fed's consecutive giant rate hikes as well as due to the continued uncertainties caused by Russia's invasion of Ukraine.

Analysts say that the firm still has enough room for additional stock growth.

“Financial authorities' intervention has alleviated fears regarding the possible bankruptcy of securities firms and chances remain low that securities firms will become insolvent due to real estate exposure,” Yuanta Securities analyst Jeong Tae-joon said. “The current price levels of securities shares appear attractive enough for investors to purchase them from a long-term viewpoint.”