Daishin Securities Increases Net Profit Amid Securities Firms' 'Earnings Shock'

[Asia Economy Reporter Koh Hyung-kwang] Most domestic securities firms posted 'shock' level earnings in the first quarter of this year, significantly below market expectations. The sharp decline in the stock market due to the impact of the novel coronavirus disease (COVID-19) was the cause. Korea Investment & Securities and KB Securities turned to losses. Among the top 10 domestic securities firms, Daishin Securities was the only one to achieve earnings improvement.

According to the financial investment industry on the 18th, Korea Investment & Securities recorded sales of 7.9079 trillion won and a net loss of 133.8 billion won in the first quarter of this year. Sales surged 148.4% compared to the previous year, but net profit turned to a loss compared to the previous year (218.6 billion won). Operating loss in the first quarter also reached 191.3 billion won. It is the first time in over 11 years since the fourth quarter of 2008 that Korea Investment & Securities posted a quarterly net loss.

Korea Investment & Securities has been well known for its performance management, having ranked first in net profit among securities firms for four consecutive years recently, but it could not avoid the impact of COVID-19. A Korea Investment & Securities official explained, "Due to evaluation losses on derivatives such as equity-linked securities (ELS) and derivative-linked securities (DLS), a loss of 56 billion won occurred, and the decline in domestic and international major stock markets caused by COVID-19 worsened the performance."

KB Securities, which posted a net profit of 87.3 billion won in the first quarter of last year, also saw a loss of 14.7 billion won this year. Sales increased sharply by 108.7% to 5.2454 trillion won compared to the previous year, but operating losses exceeded 20 billion won. Samsung Securities' first-quarter net profit was only 15.4 billion won, down 86.9% year-on-year, due to large losses from ELS trading. As stock market volatility increased, hedge (risk avoidance) costs rose, resulting in a 74 billion won loss in the asset management and financial income sections.

Kiwoom Securities' net profit in the first quarter shrank 95.8% to 6.7 billion won compared to 158.7 billion won the previous year. NH Investment & Securities also recorded only 31.1 billion won, down 81.9% from 171.5 billion won the previous year. Even Mirae Asset Daewoo, which performed relatively well, saw sales increase 93.7% to 9.0857 trillion won compared to the previous year, but net profit decreased 36.3% to 107.1 billion won.

Among the top 10 domestic securities firms, Daishin Securities was the only one to increase net profit. Daishin Securities posted a net profit of 47.1 billion won in the first quarter of this year, up 4.2% from 45.3 billion won in the same quarter last year. Sales recorded 1.5312 trillion won, up 76.2% from the previous year, and operating profit was 55.6 billion won, similar to the previous year (-0.3%). The significant reduction in the proportion of ELS self-hedging limits from the previous 3 trillion won to about 100 billion won, which other securities firms suffered large losses from, was effective. The performance of affiliates such as F&I, savings banks, and asset management was also favorable. A Daishin Securities official said, "We performed well in the capital markets (CM) division through hedge trading on the entire assets in preparation for increased volatility, and entrusted brokerage commissions also increased due to a surge in stock trading volume and market share gains."

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