1Q Securities Firms' Net Profit Soars 90%... "Overall Improvement in Operating Performance"

In the first quarter of this year, the net profit of domestic securities firms nearly doubled compared to the same period last year.

According to the Financial Supervisory Service on the 12th, the net profit of 60 securities firms in the first quarter was recorded at 3.8968 trillion KRW, an increase of 89.3% compared to the same period last year. Excluding one-time factors, the quarterly net profit was 2.2318 trillion KRW, up 8.4% year-on-year.

Looking at the profit and loss status by major items, commission income was 2.7766 trillion KRW, down 29.9% from the same period last year. Custody fees decreased by 7.3% to 1.3576 trillion KRW as stock trading volume slightly declined. Investment banking (IB) fees dropped sharply by 51.7% year-on-year to 758.6 billion KRW due to a contraction in real estate-related investment and mergers & acquisitions (M&A) markets. Asset management fees fell 17.2% to 268.4 billion KRW due to a decrease in fund sales commissions.

The securities firms' proprietary trading profit in the first quarter surged 215.1% year-on-year to 3.2123 trillion KRW. While derivative-related profits decreased by 6.0087 trillion KRW due to an increase in the valuation of equity-linked securities (ELS) amid rising stock prices during the quarter, bond-related profits (6.4247 trillion KRW) and fund-related profits (2.0715 trillion KRW) increased.

Other asset profits decreased 7.7% to 859.4 billion KRW due to an increase in bad debt write-offs, and selling and administrative expenses fell 2.3% to 2.8432 trillion KRW due to a reduction in labor costs.

As of the end of March, the total assets of securities firms stood at 677.8 trillion KRW, up 11.5% from the end of 2022. Receivables related to proprietary and agency trading increased by 145.6%, and bond holdings rose by 4.6%.

Total liabilities increased 12.8% over the same period to 595.4 trillion KRW. Equity capital rose 2.9% to 82.4 trillion KRW.

The average net capital ratio of securities firms was 720.9%, up 15.0 percentage points from the end of 2022. All securities firms recorded a net capital ratio above the regulatory threshold of 100%. The average leverage ratio increased by 21.0 percentage points to 640.2%, also meeting the regulatory limit of 1100%.

The net profit of the three futures companies totaled 25.27 billion KRW, up 186.4% year-on-year. Return on equity (ROE) rose 2.7 percentage points to 4.5%.

Total assets amounted to 5.5511 trillion KRW, down 2.4% from the end of last year. Total liabilities decreased 3.1% to 4.9851 trillion KRW during the same period. Equity capital increased 4.7% to 565.9 billion KRW.

The Financial Supervisory Service explained, "Last year, securities firms' operating performance shrank each quarter due to stock price declines and interest rate hikes, but turned to a recovery trend in the first quarter of this year. Overall business performance improved with increases in custody fees and proprietary trading profits compared to the previous quarter."

It added, "We will closely monitor the impact of potential risk factors such as global economic slowdown and interest rate fluctuations on the profitability and soundness of securities firms. We also plan to guide securities firms to strengthen overall risk management and establish effective contingency plans. In particular, proactive risk mitigation measures will be actively implemented to prevent real estate exposure defaults from transferring to liquidity and soundness risks of securities firms."

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