Kiwoom Securities struggling to stay afloat

Kiwoom Securities CEO Lee Hyun

By Jhoo Dong-chan

Kiwoom Securities has been one of the most active players in the nation's finance M&A market since CEO Lee Hyun took the office in March last year.

Citing the importance of diversifying the firm's revenue sources, Kiwoom has since eagerly looked for opportunities to extend its business into other financial sectors under Lee's leadership, but the task now seems somewhat unmanageable as the brokerage posted disappointing earnings over the past year.

According to the Financial Supervisory Service (FSS), Kiwoom Securities posted a 288.9 billion won ($258.4 million) operating profit in 2018, down 8.51 percent from a year ago. The brokerage's net profit dropped by nearly 20 percent to 193.2 billion won during the same period.

The firm's market share in stock trading on consignment stood at 15.3 percent in the fourth quarter of last year, down 1.2 percentage points from the previous quarter.

Despite the disappointing earnings, Kiwoom is actively seeking opportunities to widen its business portfolio.

It is currently engaged in a cutthroat race with Woori Financial Group to acquire Hi Asset Management. The move is aimed at strengthening its asset management subsidiary Kiwoom Asset Management.

Along with Kiwoom and Woori, three candidate firms, including Macquarie Investment Management Korea, were included in the shortlist for the Hi Asset Management bid, but market observers say it is a race between Kiwoom and Woori.

Hi Asset Management's assets under management (AUM) are currently estimated to reach about 11 trillion won, the nation's 20th-largest asset management firm.

Kiwoom Asset Management is the nation's seventh-largest firm in terms of AUM with 40 trillion. If Kiwoom manages to acquire Hi Asset, it will become the nation's fourth- or fifth-largest.

The takeover price is expected to reach 120 billion won.

Kiwoom is also displaying its interest in establishing Korea's third internet-only bank in a partnership with Hana Financial Group and SK Telecom.

It failed to launch an internet bank in 2015, but is doing its utmost to establish one this time.

“I think it has an investment bank model in mind,” said a Korea Investment & Securities official. “It has a strong presence especially in mobile-based trading systems. But an acquisition takes a lot of money.”

The brokerage's return on equity peaked at 18.7 percent in 2015, but has since declined to 10.7 percent as of last year.

“An internet-only bank isn't the ultimate answer in diversifying its portfolio,” said a KB Kookmin Bank worker. “The first internet-only bank, K bank, is experiencing difficulties in staying afloat. It will also take some time to make a profit even if Kiwoom manages to establish the bank.”