Small brokerage, large earnings

An unanticipated, smaller brokerage firm took the crown as the top earner in the first quarter as other major players were boosted by the rally on the main bourse Kospi.

Korea Investment & Securities, which ranks fifth by capital, posted a record high net profit of 130.1 billion won ($115.5 million), a whopping 104.5 percent increase compared to the same period last year.
The main driver was hefty profit from its investment banking unit, dividends and healthy returns of its fund and bond products.

“The company benefited from both onetime gains such as acquisition of dividends and selling of assets as well as favorable market conditions,” said Kim Ji-young, an analyst at IBK Investment & Securities.

A spokesperson of Korea Investment & Securities cited its efforts to diversify investment, as shown in the purchase of NASA’s headquarters in Washington last year.

The brokerage began selling a fund tied to the property jointly with Hana Asset Management. The lease runs through 2028, and target investment is 156.4 billion won.

Analysts also attributed the stellar performance to the investment banking business.

Korea Investment & Securities led five initial public offerings during the first quarter with a combined offering worth 14 million won.
The result is in line with the company’s strategy to focus on more lucrative business units such as investment banking and asset management.

To be entitled to a wider range of businesses, the company raised its capital to 4 trillion won in November.

Under the measures announced last year by the Financial Services Commission, securities firms with more than 4 trillion won in capital will be allowed to issue one-year promissory notes and provide wider corporate financing services while those with 8 trillion won can handle the Investment Management Account, which deals with different financial instruments, including bonds and promissory notes.

Mirae Asset Daewoo, the country’s largest firm by capital, was second for earnings between January and March.

It reported 110.2 billion won in net profit as it swung to a profit in the latest period following the merger between Mirae Asset Securities and Daewoo Securities.

“The net profit is 28.9 percent higher than the market consensus,” said Won Jae-woong, an analyst at NH Investment & Securities. “To offset the costs used for the merger, the company managed to reduce other expenses. Also, it could reap huge benefits from overseas bonds and U.S. bank debentures.”

KB Securities, the second largest brokerage player, took the third spot with 108.8 billion won in net profit as it tried to quickly settle down after merging with Hyundai Securities.

The securities industry, in general, saw combined operating profit soar more than 70 percent, helped by favorable market conditions, according to Korea Exchange.

The trade market operator said that the profit of 15 listed securities companies stood at 505.4 billion won on average, up 71.2 percent over a year ago.

The benchmark Kospi has been on an uptrend since March following the Supreme Court of Korea’s decision to impeach then-president Park Geun-hye.

Analysts project that securities firms will see strong earnings in the second quarter as the Kospi continues to rally.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]