Meritz Securities, Challenges as a Mega IB

Expiration of General Financial License in 3 Days... Restructuring Business Focused on Alternative Investments like Aviation and Shipping

[Asia Economy Reporter Ji-hwan Park] Meritz Securities will make a fresh start as Meritz Securities next week. With the expiration of its comprehensive financial business license on the 3rd of this month, the company will change its name from the 6th and transform into a mega investment bank (IB).

According to the financial investment industry on the 1st, Meritz Securities has been steadily preparing for the expiration of its comprehensive financial business license through name changes, conversion of comprehensive financial accounts, and business portfolio restructuring. In June 2015, it expanded its business scope by merging with IM Investment & Securities, which was strong in corporate finance, and increased its equity capital to the 3 trillion won level through continuous paid-in capital increases, leading to its designation as a comprehensive financial investment business operator in November 2017.

Meritz Securities has significantly reduced its comprehensive financial assets by stopping new subscriptions to comprehensive asset management accounts (CMA) and converting comprehensive financial accounts into securities accounts. The size of Meritz Securities' comprehensive financial CMA, which peaked at 2.3809 trillion won in 2015, decreased to 800.9 billion won as of the end of last year. Although the number of comprehensive financial CMA accounts has drastically decreased, the decline in profitability is expected to be minimal.

Meritz Securities achieved a record high net profit of 554.6 billion won on a consolidated basis last year. Net profit exceeded 100 billion won for seven consecutive quarters.

A Meritz Securities official explained, "Despite continuously reducing comprehensive financial accounts, we recorded strong performance by diversifying our business and achieving record-high results."

The issuance note business, which became impossible due to the expiration of the comprehensive financial business license, is also expected to resume soon. Since it is possible to reach 4 trillion won in equity capital by the end of the year, the company is expected to challenge becoming a mega IB as early as the beginning of next year and continue the issuance note business. With equity capital at 3.7843 trillion won at the end of last year, reaching 4 trillion won is assured solely through retained earnings without additional capital increases.

This year, the focus will particularly be on business diversification. This is because the real estate project financing (PF), which had been a strength, is expected to face difficulties due to government regulations. The company is expected to concentrate on expanding alternative investment areas such as aviation, shipping, and overseas real estate public REITs. While it previously generated profits mainly through high-quality loans, it is now shifting its business structure toward alternative investments.

Hyundai Motor Securities researcher Hyun-ki Kim analyzed, "This year, Meritz Securities is expected to see an increase in real estate PF sell-down volumes due to government regulations on real estate PF, leading to changes in its business structure. Growth is expected to focus on cash-rich overseas alternative investments."

This content was produced with the assistance of AI translation services.