Securities Stocks That Peaked Last Year Face Challenging Performance This Year

Q1 Earnings Slowdown Inevitable
Consensus on Securities Sector Net Profit Expected to Decrease by 22.13% Year-on-Year

[Asia Economy Reporter Song Hwajeong] Last year, as the stock market reached an all-time high and showed strength, securities firms also enjoyed a boom, recording record-high earnings. However, this year is expected to be challenging. Considering that the trading volume at the beginning of last year reached an all-time high, a slowdown in earnings in the first quarter of this year seems inevitable.

According to financial information provider FnGuide on the 6th, the consensus forecast for the net income attributable to controlling shareholders in the securities sector for the first quarter of this year is 1.0386 trillion KRW, a decrease of 22.13% compared to the same period last year. The decline in earnings for major securities firms is expected to be in double digits. Mirae Asset Securities' first-quarter net income consensus is 245.5 billion KRW, down 15.69% year-on-year. Samsung Securities is expected to decrease by 29.79% to 202.9 billion KRW, NH Investment & Securities by 19.26% to 207.9 billion KRW, and Meritz Securities and Kiwoom Securities are also expected to decline by 20.73% and 25.88%, respectively.

Last year, securities firms continued their record-breaking earnings streak. Mirae Asset Securities recorded a cumulative operating profit of 1.2506 trillion KRW through the third quarter, becoming the first in the industry to surpass 1 trillion KRW in operating profit for two consecutive years. The cumulative net income was 975.7 billion KRW. Korea Investment & Securities achieved a record high with a cumulative net income of 1.2043 trillion KRW through the third quarter. Samsung Securities and NH Investment & Securities reached 821.7 billion KRW and 794.3 billion KRW respectively by the third quarter, and their annual net income last year is estimated to have exceeded 1 trillion KRW.

The fourth-quarter earnings last year are also expected to slightly exceed consensus. According to Korea Investment & Securities, the combined net income of four analyzed securities firms?Mirae Asset Securities, Samsung Securities, NH Investment & Securities, and Kiwoom Securities?in the fourth quarter is forecasted to be 715.7 billion KRW, surpassing consensus by 3%. This represents a 20% increase compared to the same period last year but a 32% decrease from the previous quarter. Baek Doosan, a researcher at Korea Investment & Securities, explained, "This reflects a decline in brokerage and asset management performance." The brokerage fees in the fourth quarter are estimated to have decreased by 7% compared to the previous quarter, with domestic stock brokerage revenue down 12%. The asset management sector saw reduced performance due to significant interest rate hikes and increased volatility in October following September.

This year, an unfavorable environment is expected due to a slowdown in trading volume, intensified competition, and rising interest rates. Jeong Junseop, a researcher at NH Investment & Securities, stated, "The controlling net income of the four analyzed securities firms?Korea Financial Group, Mirae Asset Securities, Samsung Securities, and Kiwoom Securities?is expected to decrease by 27.2% year-on-year to 3.345 trillion KRW." He explained, "Weakness in brokerage and trading sectors is the main reason for the decline."

Experts believe that concerns about the current momentum slowdown in the securities sector are excessive. Researcher Baek said, "Considering quantitative indicators such as stock market investors, number of accounts, and investment amounts, trading volume has secured downward rigidity." He added, "Also, with stock prices undervalued, future trading volume is expected to respond asymmetrically?insensitive to negative factors but sensitive to positive ones?so the current discount due to momentum slowdown is excessive."

Researcher Kang Seunggeon of KB Securities noted, "There are concerns about monetary policy normalization this year, and given last year's strong performance, a decline in securities sector profits is inevitable. There are also worries that the stagnation of the stock index may reduce individual investors' interest in direct investment." However, he added, "The intensity of these concerns will not expand further compared to last year." Kang further stated, "Considering the additional growth potential in asset management (WM) and corporate finance (IB) sectors, the actual profit decline will be only around 10%."

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