Q2 Securities Firms' Net Profit Plummets... Asset Management Firms Beam with Joy

Despite KOSPI Surpassing 3300
Brokerage Firms' Commission Revenue Declines
Net Profit Drops Over 20%
Asset Management Firms Achieve Record Highs

[Asia Economy Reporter Park Jihwan] Securities firms and asset management companies experienced mixed results in their second-quarter earnings this year. While securities firms saw their net income drop by more than 20% compared to the first quarter, breaking their growth streak, the asset management industry continued to achieve record-high net profits following the first quarter. The third quarter is also expected to see securities firms maintaining a sluggish trend, while asset management companies continue to perform well.

According to the Financial Supervisory Service on the 3rd, the net income of 58 securities firms in the second quarter was 2.3172 trillion KRW, a decrease of 677.1 billion KRW (22.6%) from 2.9943 trillion KRW in the first quarter. The decline was largely due to reduced commission income. Commission income for securities firms in the second quarter was 4.1521 trillion KRW, down 395.8 billion KRW (8.7%) from the first quarter. The main reason was a 20.7% decrease in custody fees, which fell by 522.1 billion KRW to 1.9995 trillion KRW, caused by a decline in domestic and international stock trading volumes. Custody fees account for 48.2% of total commission income for securities firms. Although the KOSPI surpassed 3300 for the first time in history during the second quarter, the significant drop in stock trading volume compared to the first quarter led to a sharp decline in custody fee income. The KOSPI trading volume, which reached 1183 trillion KRW in the first quarter, decreased by 345 trillion KRW (29.2%) to 838 trillion KRW in the second quarter. During the same period, foreign currency securities settlement amounts fell from 157.6 billion USD (approximately 182 trillion KRW) to 103.6 billion USD, a decrease of 54 billion USD (34.3%).

On the other hand, the asset management industry's net income reached an all-time high again in the second quarter following the first quarter. The net income of 335 asset management companies in the second quarter was 609.4 billion KRW, up 3.2% from the first quarter and soaring 91.6% year-on-year. Operating profit increased by 172.3 billion KRW (34.3%) compared to the first quarter. The increase in profits for asset management companies is attributed to the growth in assets under management and a booming asset market. As of the end of June this year, the assets under management by asset management companies increased by 3.07 trillion KRW (2.5%) from three months earlier, totaling 1268.5 trillion KRW.

In the financial investment industry, it is forecasted that securities firms will continue to show sluggish performance in the third quarter, while asset management companies will maintain their record-breaking earnings streak. Kang Seunggeon, a researcher at KB Securities, said, "Considering the steady progress of investment banking (IB) deals and the 4.2% increase in the average daily trading volume in August (27.5 trillion KRW) compared to the previous month, the third-quarter earnings of securities firms are expected to be generally favorable." However, he added, "Since the second quarter's results were higher than expected due to the reflection of securities valuation gains, a net income decrease of around 20% compared to the first quarter is anticipated." There is also concern that additional interest rate hikes expected in the second half of the year could negatively impact major revenue sources such as brokerage and IB.

An industry insider from the asset management sector stated, "The recent rapid growth of exchange-traded funds (ETFs) means that most asset managers holding related products are expected to achieve record-breaking earnings again in the third quarter." They added, "Looking at the entire asset management industry, assets under management continue to increase steadily, so there seems to be no particular reason for earnings to decline compared to the second quarter."

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