Q1 Securities Firms' Net Profit Hits 2.5 Trillion Won... Thanks to Increased Stock Trading

FSS: "High Interest Rates and Real Estate PF Uncertainties Persist"

Brokerage firms' net profits in the first quarter reached approximately 2.5 trillion KRW, driven by increased stock trading. However, financial authorities pointed out that future earnings may slow down due to the prevailing high-interest-rate environment and uncertainties in real estate project financing (PF).

The Financial Supervisory Service (FSS) announced on the 12th that the net profit of 60 brokerage firms in the first quarter, excluding one-time factors, totaled 2.5141 trillion KRW, an increase of 363.5 billion KRW (16.9%) compared to the same period last year (2.1506 trillion KRW).

Commission income amounted to 3.2176 trillion KRW, up 441 billion KRW (15.9%) from 2.7766 trillion KRW in the same period last year. Custody fees increased by 263.5 billion KRW (9.4%) year-on-year to 1.6211 trillion KRW, reflecting the rise in stock trading volume. Fees from the corporate finance (IB) sector rose by 106.3 billion KRW (14.0%) to 864.9 billion KRW, supported by an expansion in corporate bond issuance. Asset management fees increased by 33.8 billion KRW (12.6%) to 302.2 billion KRW.

Proprietary trading profits were recorded at 3.3523 trillion KRW, up 125.2 billion KRW (3.9%) from the same period last year. Although bond-related profits declined due to rising market interest rates amid weakened expectations for rate cuts, gains from the valuation of sold derivative-linked securities increased.

As of the end of the first quarter, total assets of brokerage firms stood at 722.6 trillion KRW, up 35.9 trillion KRW (5.2%) from 686.7 trillion KRW at the end of last year. Liabilities increased by 35 trillion KRW (5.8%) from 601.5 trillion KRW at the end of last year to 636.5 trillion KRW at the end of the first quarter. Equity capital rose by 900 billion KRW (1.1%) to 86.1 trillion KRW from 85.2 trillion KRW at the end of last year.

As of the end of March, the average net capital ratio of brokerage firms was 730.9%, down 3.8 percentage points from 734.7% at the end of last year. The average leverage ratio increased by 4.7 percentage points from 646.1% to 650.8%. The FSS explained that all brokerage firms met the regulatory thresholds for net capital ratio and leverage ratio (within 100% and 1100%, respectively).

The net profit of three futures companies in the first quarter was 22.52 billion KRW, down 2.75 billion KRW (10.9%) from 25.27 billion KRW the previous year.

The FSS stated, "The first-quarter performance of brokerage firms generally improved," but added, "Although improvements were seen across business sectors, profitability may decline in the future due to high interest rates, inflation, and the full-scale restructuring of real estate PF." They also plan to promptly set aside provisions for high-risk exposures and accelerate the disposal of non-performing assets.

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