Due to stock market sluggishness, securities firms' 2Q net profit down 47% QoQ and 52.5% YoY

[Asia Economy Reporter Lee Jung-yoon] Due to sluggish stock markets, the net profit of domestic securities firms in the second quarter of this year has been found to have plummeted by more than 47% compared to the previous quarter.

According to the "2022 Q1 Securities and Futures Companies Business Performance (Provisional)" report released by the Financial Supervisory Service on the 13th, the net profit of all 58 securities firms in the second quarter of this year was 1.0825 trillion KRW, down 47.4% from the previous quarter. Compared to the same period last year, it decreased by 52.5% to 1.195 trillion KRW. The average return on equity (ROE) was 4.0%, down 3.6 percentage points from the same period last year.

Looking at revenue by category, commission income decreased by 5.1% from the previous quarter to 3.756 trillion KRW, with custody fees declining by 10.3% due to a decrease in stock trading volume and others. IB division commissions increased by 0.6%, while asset management division commissions decreased by 6.2%.

Proprietary trading profits, which securities firms earn by trading stocks, bonds, and derivatives, amounted to 1.2062 trillion KRW, down 34.9% from the previous quarter. Stock-related gains increased by 756.1%, bond-related gains rose by 23.7%, whereas derivative-related gains fell by 44.6% compared to the previous quarter.

The total assets of all securities firms stood at 654.5 trillion KRW, down 0.7% from the previous quarter. Total liabilities decreased by 1.2% to 575.2 trillion KRW, and equity capital increased by 2.3% to 79.2 trillion KRW. The average net capital ratio rose by 10.5 percentage points to 718.4%.

The net profit of all four futures companies was 10.49 billion KRW, up 20.8% from the previous quarter. ROE was 1.9%, up 0.1 percentage points from the same period last year.

The Financial Supervisory Service explained, "In the second quarter of this year, due to sluggish stock markets, custody fees and fund valuation/disposal gains decreased, and bond valuation/disposal losses increased significantly due to rising interest rates, resulting in a sharp decline in securities firms' net profits compared to the previous quarter, raising concerns about increased uncertainty in business performance."

It added, "As the growth in profits slows down due to the decrease in custody fees and bond valuation losses, there is a possibility of securities firms pursuing high-risk, high-return strategies and delaying loss recognition. Therefore, we will continuously monitor the expansion of investments in high-risk assets such as real estate project financing (PF) and soundness management. We also plan to guide securities firms to strengthen overall risk management and establish emergency response plans in preparation for domestic and international economic uncertainties."

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