[Click eStock] "Kiwoom Securities, Capital Increase Needed to Expand Credit Extension Limit"

Meritz Securities Report
Target Price Raised by 6%

[Asia Economy Reporter Minji Lee] Meritz Securities expressed the opinion on the 10th that Kiwoom Securities should expand its credit extension limit through capital increase. The investment rating was maintained as Buy, and the target price was raised by 5.9% from the previous level to 180,000 KRW.

In the fourth quarter of last year, Kiwoom Securities recorded a net profit of 201.1 billion KRW, a 143% increase compared to the same period last year. This was due to continued strong performance in brokerage and operating income. A one-time expense of 24 billion KRW was recognized as a provision related to the Gentoo Fund.

Go-eun Kim, a researcher at Meritz Securities, said, “The contracted amount of overseas stocks has increased significantly, and the number of new account openings continues to rise due to the favorable stock market.” She added, “They plan to apply for the second phase of MyData approval, and app integration work is underway to unify domestic, overseas, and account opening categories.”

The overhang issue appears to have been largely resolved. This is because the redeemable convertible preferred shares (RCPS) issued in 2018 have been converted. When the remaining convertible bonds (CB) are converted, equity capital is expected to increase by about 90 billion KRW, which will allow an increase in credit extension based on this, potentially generating an additional interest income of around 8 billion KRW.

Recently, Kiwoom Securities’ market share (MS) of credit balance has been declining. While large firms are reducing corporate credit extension and increasing individual credit extension, Kiwoom Securities finds it difficult to expand further within the 100% limit of its equity capital.

If the favorable stock market continues, it is expected that expanding the credit extension limit through capital increase will be necessary. Researcher Kim explained, “Toss Securities has a small equity capital size, making it difficult to provide direct credit extension,” and added, “Capital increase will act as a differentiating factor in competition with Toss Securities.”

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