Credit Rating Boost for Small and Medium Securities Firms "Strong Performance and Risk Management UP"

[Asia Economy Reporter Ji-hwan Park] Recently, the credit ratings of small and medium-sized securities firms have been consecutively upgraded. This is interpreted as a result reflecting the stable maintenance of various capital adequacy indicators through clear performance improvements and thorough risk management.

According to the financial investment industry on the 2nd, NICE Credit Rating upgraded KTB Investment & Securities' corporate credit rating outlook from A- (Stable) to A- (Positive) on the 1st. The improvement in financial stability due to sustained excellent profitability, accumulated profits, and issuance of subordinated bonds received favorable evaluations. Overall business divisions, including brokerage, investment banking (IB), stock management, and proprietary investment (PI) related to derivatives, showed improved performance. Operating profit up to the third quarter of this year was 86.1 billion KRW, 2.9 times higher than 29.6 billion KRW in the same period last year. Net profit surged 6.9 times to 159.9 billion KRW. After issuing subordinated bonds totaling 95 billion KRW since September, capital adequacy indicators also improved significantly. As of the end of September, the net capital ratio was 640.6%, and the adjusted net capital ratio was 295.8%, sharply higher than 428.0% and 237.4% at the end of June, respectively.

Recently, IBK Investment & Securities succeeded in entering the 'AA' credit rating for the first time since its establishment. On the 26th of last month, Korea Ratings upgraded IBK Investment & Securities' corporate credit rating and credit rating for derivative-linked bonds from A+ (Positive) to AA- (Stable). Sun-joo Kim, Senior Researcher of Financial Division 2 at Korea Ratings, stated, "As of the end of September this year, with equity capital exceeding 1 trillion KRW, not only has market dominance improved, but profitability is also on an improving trend. Conservative risk management and capital expansion have maintained excellent financial soundness, which contributed significantly to the rating upgrade."

In particular, the trend of profitability improvement is evaluated as clear. Researcher Kim analyzed, "Since the second quarter of last year, based on stock market recovery, hedge asset valuation gains, increased revenue from SME-specialized financial mediation and project financing (PF), the ratio of selling and administrative expenses to operating net revenue improved to 55.4% compared to 58.5% the previous year. This year as well, thanks to expanded revenue in IB and brokerage divisions, the cumulative ratio of selling and administrative expenses to operating net revenue for the third quarter recorded 50.3%, continuing the profitability improvement trend."

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