Small and Medium Securities Firms Strengthen Their Stamina and Grow Their Presence

Equity and Net Profit Ratios Soar
Shift from Large Firms Concentration Atmosphere

[Asia Economy Reporter Ji-hwan Park] The presence of small and medium-sized securities firms is growing within the industry. Until last year, there was a trend of capital and performance concentrating around large firms, but this year, the position of small and medium-sized firms has strengthened in these indicators.

According to the Financial Investment Association's electronic disclosure as of the third quarter of this year, the total equity capital of eight large securities firms with equity capital exceeding 4 trillion won?Mirae Asset Daewoo, NH Investment & Securities, Korea Investment & Securities, Samsung Securities, KB Securities, Meritz Securities, Shinhan Financial Investment, and Hana Financial Investment?was recorded at 43.0599 trillion won. This accounts for 71.03% compared to the total equity capital of 60.6258 trillion won held by 27 domestic securities firms with equity capital exceeding 200 billion won. Meanwhile, the equity capital of 19 small and medium-sized securities firms excluding the large firms grew to 17.5658 trillion won, representing 28.97%. The share of equity capital held by small and medium-sized firms in the industry increased by 0.9 percentage points from 28.07% at the end of last year to 28.97% as of the third quarter this year. This is interpreted as a result of continuous capital expansion by small and medium-sized firms to secure profitability, as risk-bearing capacity and risk management ability based on capital size have emerged as core competitive strengths in the securities industry.

The oligopoly of net income by large firms is also gradually weakening. The net income share of large firms, which reached 75.0% at the end of 2017, maintained a level in the low 70% range?72.3% at the end of 2018 and 72.8% at the end of last year?but dropped to 66.6% in the third quarter this year. During the same period, the net income share of small and medium-sized firms in the entire industry jumped from 25.0% in 2017 to 33.5% in the third quarter this year. This is thanks to the record-breaking strong performance of small and medium-sized firms recently. Their cumulative net income for the third quarter has already far exceeded the profit earned throughout last year.

While corporate finance (IB) and real estate project financing (PF), which were major revenue sources for large firms, shrank due to COVID-19 and regulatory measures by financial authorities, small and medium-sized firms were relatively less affected. Various financial product incidents, such as the Lime Asset Management and Optimus Fund scandals that occurred consecutively, also had an impact.

A financial investment industry official explained, "At the beginning of the year, it was expected that the performance polarization in the securities industry would worsen due to the absolute capital superiority of large firms. However, as risks related to incomplete sales of financial products like Lime became prominent, the business of large firms, which mainly engaged in related operations, was significantly contracted."

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