[Click eStock] Samsung Securities, Sharp Decline in Net Profit Due to ELS Management Losses... "Q2 Rebound Expected"

[Asia Economy Reporter Minji Lee] Korea Investment & Securities maintained a buy rating and a target price of 42,000 KRW for Samsung Securities on the 18th. Although net profit significantly declined due to losses from equity-linked securities (ELS) operations, it is judged that corporate finance (IB) and financial product sales revenue could rebound in the second quarter.

Samsung Securities reported a controlling net profit of 15.4 billion KRW in the first quarter, a sharp drop of 83% compared to the previous quarter. Operating income and financial losses amounted to 74 billion KRW, decreasing by 162.5 billion KRW from the previous quarter.

Baek Doosan, a researcher at Korea Investment & Securities, said, “The operating profit and loss came out worse than expected,” adding, “Significant losses occurred in the ELS hedge segment due to the sharp decline in global stock indices and volatility in the capital markets.”

Underwriting and advisory fees also decreased by 28% from the previous quarter to 38.5 billion KRW. Delays in deals caused by the COVID-19 pandemic led to significant underperformance in the ECM and M&A sectors. However, with an increase in domestic and overseas alternative investment deals, revenue from structured finance, a subcategory of underwriting and advisory fees, rose by 13% from the previous quarter to 36 billion KRW.

Due to increased trading volume caused by market volatility, net brokerage fees reached 120 billion KRW. This was an 82% increase from the previous quarter, with domestic stock fees rising 68% to 100.7 billion KRW and overseas stock fees increasing 222% to 19.3 billion KRW during the same period. Financial product sales revenue decreased by about 8% from the previous quarter to 75.7 billion KRW, but early redemption of derivative-linked securities (DLS) continued steadily through January and February, resulting in sales revenue of 52 billion KRW.

Researcher Baek Doosan forecasted, “Brokerage fees will remain robust until the end of the year, exceeding market expectations due to increased trading volume,” and added, “In the second quarter, operating profit and financial income will recover, offsetting the underperformance in IB and financial product sales revenue.”

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