IPOs and trading fees drive record brokerage earnings

Finance

Published: 07 Dec. 2020, 17:16 Updated: 08 Dec. 2020, 19:55

IPOs and trading fees drive record brokerage earnings

Brokerage houses in Korea posted a record quarterly earning during July-Sept. period this year on the back of stock trading booms and major IPO deals. Big Hit Entertainment, an agency behind BTS, was one of major IPO deals this year. [YONHAP]

Brokers are reporting record earnings as a trading boom boosts commission income.

The 56 brokerage firms registered in Korea reported 2.16 trillion won ($2.0 billion) in net profit in the third quarter, which is 19.3 percent more than the same period last year, according to data released by the Financial Supervisory Service (FSS) Monday.

That is the highest quarterly earnings ever reported for the brokerages.

Net profit in the first three quarters of 2020 totaled 4.5 trillion won, a 17.5 percent year-on-year jump.

Encouraged by low interest rates and abundant liquidity, stock trading in Korea has been on a tear.

Brokerage commissions were 3.7 trillion won in the third quarter, a 41.2 percent year-on-year jump. That is a 16.7 percent quarter-on-quarter increase as well.

Of the commission income, those generated from stock transactions stood at 2.1 trillion won, which is a 61.3 percent year-on-year jump.

As of the third quarter this year, commission income came at 5.2 trillion won, which is 101 percent more than the same period last year.

"A bull market in the third quarter will lead to considerable profits for brokerages in Korea," the financial regulator said in a release Monday.

"But Covid-19-related uncertainties still remain, and the FSS will continue to monitor potential risk in the stock market as well as in substitute investments such as real estate."

Enthusiasm for stock trading is not confined to domestic stocks. It has extended to foreign stocks.

Commission income generated from transactions in foreign stocks increased by 35.6 percent in the third quarter compared to the quarter before. It now accounts for 8.1 percent of the total commission income from stock trades, a two-percentage-point increase year-on-year.

Investment bank commissions also grew, largely due to a number of initial public offerings (IPO). Commission income from investment banking came to 1.09 trillion won in the third quarter, a 14.9 percent quarter-on-quarter jump. Income generated from IPO deals alone was 41.9 billion won, 23.8 percent more than the previous quarter.

IPO hits include SK Biopharmaceuticals, Kakao Games and Big Hit Entertainment, though they have performed mixed since going public.

Kiwoom Securities reported the highest net profit in the third quarter, at 263.4 billion won, which is 295 percent more compared to the same period last year. Kiwoom is retail-focused.

Korea Investment & Securities reported 258.9 billion won in net profit, NH Investment & Securities 239.6 billion won and Samsung Securities 233.7 billion won.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]