[Click e-Stock] "Kiwoom Securities to Expand IB Earnings with CFIB Entry"

Maintains "Buy" Rating and Target Price for Kiwoom Securities
CFIB Entry Expected to Boost IB Earnings and Credit Capacity

[Asia Economy, reporter Lee Minji] Daishin Securities maintained its "Buy" investment rating and target price of 140,000 won for Kiwoom Securities on March 8. The decision is based on the expectation that earnings from the investment banking (IB) division could increase if the company enters the comprehensive financial investment business (CFIB) sector.

Last year, Kiwoom Securities posted a net profit of 904 billion won and a return on equity (ROE) of 25.3%, consistently demonstrating the highest capital efficiency among domestic securities firms. While brokerage (BK) earnings were overwhelmingly strong this year, the company’s core IB-related earnings also reached a record high of 156 billion won.

In September of last year, the company met the 4 trillion won self-capital requirement and applied for CFIB status. Since there are no issues such as major shareholder eligibility concerns or institutional warnings that could lead to sanctions, it is expected to obtain approval smoothly.

The most anticipated aspect of entering the CFIB sector is credit. Park Hyejin, a researcher at Daishin Securities, stated, "CFIBs can provide margin loans up to 200% of their equity capital, and Kiwoom Securities is the best at utilizing credit among domestic securities firms. Although the margin lending limit is divided 100% for retail and 100% for corporate finance, the company's recent focus on the IB sector is expected to benefit from this."

In the fourth quarter, the company’s net profit reached 188.1 billion won, surpassing market expectations by 8%. The average daily trading value was 22.7 trillion won, a 13.6% decrease from the previous quarter. The proportion of individual investors also fell to 71%, resulting in domestic stock commission income declining by 17.3% to 62 billion won over the same period.

However, the decrease in domestic trading value is being offset by overseas stock trading. The company’s overseas stock trading value in the fourth quarter was 109.4 billion won, a 34.7% increase from the third quarter. As a result, commission income rose from 32 billion won to 40 billion won. The company’s market share in overseas stock trading value stands at 29.5%, the highest among domestic securities firms.

The company’s core IB earnings also performed well. In the fourth quarter, it achieved a record high, with significant increases in restructuring and financial advisory commission income, and a continued rise in commission income related to debt guarantees. However, as market conditions weakened, commission income from ECM-related activities declined sharply.

Despite increased bond market volatility, the company’s minimal bond investment exposure led to a significant decline in product operation income, but it still performed better than competitors. Researcher Park Hyejin commented, "The equity investment division also returned to profitability despite a declining index environment, which is estimated to be due to increased gains from financial product valuation and higher dividend income recognition."

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