Securities firms rake in record-high Q1 net profits

The view of Seoul's financial district Yeouido / gettyimagesbank

By Anna J. Park

Ample liquidity globally and booming stock markets have benefitted local securities firms, which raked in record-high net profits during the first three months of the year.

Brokerages have been the biggest beneficiaries of market liquidity, following stimulus packages rolled out by governments around the world to address the COVID-19 pandemic. And the benchmark KOSPI and tech-heavy KOSDAQ both rallied in the first quarter.

Industry sources said Friday that the first-quarter net profits achieved by the country's seven major securities firms, including NH Investment & Securities, Korea Investment & Securities, Mirae Asset Securities and Samsung Securities, were estimated to have increased 14-fold year-on-year to around 1.63 trillion won ($1.46 billion).

The entire brokerage industry, including smaller securities companies, is estimated to have earned more than 2 trillion won ― almost equaling the entire annual net profit of the sector in 2016.

The largest portion of the record-high profits came from brokerage commissions ― the average value of daily transactions on the local stock markets soared to about 48 trillion won in January ― while they were also fueled by the frenzied trading of overseas stocks by retail investors.

The rate of year-on-year growth is expected to be even higher for some securities firms due to the base effect ― the distortion in comparison figures due to abnormally high or low levels in the comparative period. Samsung Securities particularly suffered from a huge loss from its hedging strategies in the first quarter of last year due to the unexpected global pandemic. Given that the firm's Q1 net profit last year stood at 15.4 billion won, it is expected to have achieved more than a 15-fold year-on-year jump, as analysts estimate its first quarter net profit at 246.1 billion won.

Kiwoom Securities is expected have pulled off the highest year-on-year increase in the industry, with a quarterly net profit estimated to have surged 3,244 percent year-on-year to 223.8 billion won.

An IPO frenzy amid the bullish stock markets is another contributing factor to the surge in profits. NH Investment & Securities, whose earnings have been finalized, achieved an all-time high first quarter result, with an operating profit of 374.4 billion won and net profit of 2574.4 billion won. Compared to the same period last year, operating profit jumped 596 percent and net profit surged 728 percent, partially due to the successful listing of SK Biosciences, one of the biggest IPOs during the first quarter.