Last Year Securities Industry Net Profit 5.9 Trillion KRW...Record-Breaking Highest Performance Again

[Asia Economy Reporter Park Ji-hwan] Last year, domestic securities firms recorded the highest annual net profit in history. They broke the previous record of 4.8945 trillion KRW set the year before, achieving a new all-time high in just one year. This was thanks to an unprecedented stock market boom and a surge in commission income due to increased direct investment by individuals, despite COVID-19.

On the 15th, the Financial Supervisory Service (FSS) announced the "2020 Securities and Futures Companies Business Performance" (provisional), reporting that the net profit of 57 securities companies reached 5.9148 trillion KRW, a 20.8% increase compared to 4.8945 trillion KRW the previous year. The average return on equity (ROE) was 9.1%, up 0.8 percentage points from 8.3% the previous year.

Looking at revenue by category, commission income, a traditional revenue source for securities firms, surged by 43.8%. In particular, trust fees increased by 3.6288 trillion KRW in one year to 7.0924 trillion KRW. Due to the influence of "Seohak Gaemi" (Korean investors investing in U.S. stocks), foreign currency securities trust fee income also rose by 3.838 trillion KRW from 163.7 billion KRW to 547.5 billion KRW. IB division fees increased by 15% to 3.9351 trillion KRW compared to the previous year. On the other hand, asset management division fees decreased by 2.7% during this period.

Proprietary trading profits, which securities firms earn by trading stocks, bonds, and derivatives, amounted to 2.6695 trillion KRW, down 32.7% from the previous year. Stock-related and bond-related profits decreased by 782.9 billion KRW and 1.6335 trillion KRW respectively compared to the previous year, but derivative-related gains increased by 1.1195 trillion KRW.

Last year, non-operating expenses increased by 753 billion KRW to 1.1941 trillion KRW compared to 441.1 billion KRW the previous year, due to recognition of compensation costs related to suspended or delayed redemption of private equity funds.

The total assets of the 57 securities companies amounted to 608.8 trillion KRW, up 26.1% from 482.9 trillion KRW at the end of the previous year. Total liabilities increased by 28.5% to 541 trillion KRW. The total equity capital of all securities firms rose by 9.7% to 67.8 trillion KRW.

The net profit of four futures companies last year was 34.3 billion KRW, a 31.4% increase from the previous year. This was due to an increase of 30.3 billion KRW in trust fees compared to the previous year.

An FSS official explained, "Despite COVID-19, last year's net profit of securities firms reached an all-time high due to a surge in trust fees driven by expanded stock investment by individual investors and sharp rises in domestic and foreign stock indices."

The FSS believes that uncertainty due to COVID-19 still persists and that volatility in domestic and foreign capital markets is expanding. Accordingly, it plans to closely monitor the impact of domestic and foreign risk factors, such as stock markets, on the profitability and soundness of securities companies.

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