Securities arms of banking groups draw optimism to lead in non-banking sectors

A view of Seoul's financial district in Yeouido, where many Korean securities firms are based / Korea Times file

The brokerage arms of four of the country’s five major banking groups are optimistic about regaining their position as the most profitable affiliates in the non-banking sector, having previously fallen behind their insurance subsidiaries.

The four are KB, Shinhan, Hana and NongHyup, excluding Woori, which will soon launch its brokerage business on Aug. 1.

The regulatory filings of the four groups last week showed that the combined net income of their securities companies totaled 1.13 trillion won ($815.5 million) in the first half of the year.

The amount was 152 billion won more than the combined net income of the four banking groups’ insurance arms, which stands at 985.2 billion won.

“The outperformance of the brokerage firms over insurance companies is noteworthy considering their net income stagnated for more than the past two years,” a market observer said.

In 2021, KB Securities, Shinhan Securities, Hana Securities and NH Investment & Securities posted a net income of 235.8 billion won to outpace their insurance peers, who posted 71.3 billion won in net income.

The securities companies then earned 104 billion won, falling behind insurance companies’ 137.1 billion in 2022.

In 2023, such an earnings gap widened, with securities companies reaping 752.9 billion won against the 1.75 trillion won of the insurance subsidiaries.

The outperformance by securities firms comes as the banking groups push to expand non-banking businesses to nurture future growth.

Market observers assessed the brokerage houses are expected to outperform insurance companies as the volume of stock transactions abroad has been increasing.

Additionally, the international investment banking industry has been bouncing back, while securities firms have been increasingly having a presence in the industry.