NICE Investors Service Upgrades Meritz Securities' Long-Term Credit Rating from 'AA-' to 'AA'

"Continued Strong Profitability in the IB Division
Stable Capital Adequacy Management Expected"

On March 16, NICE Investors Service upgraded the long-term credit rating of Meritz Securities to AA.

On this day, NICE Investors Service raised the corporate credit rating of Meritz Securities, as well as the senior unsecured bonds, equity-linked derivative bonds, and other derivative-linked bonds, from AA- (Positive) to AA. The rating for subordinated unsecured bonds was also upgraded from A+ to AA-, and for hybrid capital securities, from A to A+.

This long-term credit rating upgrade was influenced by Meritz Securities' continued strong profit generation in its investment banking (IB) division, the anticipated improvement in business diversification, and the accumulation of profits resulting in a capital base that stands out compared to its competitors.

First, NICE Investors Service commented on Meritz Securities, stating, "The company maintains a top-tier market position in the IB sector, and recently, it has been working to enhance competitiveness in brokerage and asset management to diversify its earnings base." It added, "Despite recent volatility in the domestic and overseas real estate markets, fluctuations in financial markets, and intensifying competition among major IBs, the company is expected to continue delivering strong profitability, given its excellent competitive position in the IB sector, effective risk management capabilities, and business synergies with key affiliates."

The capital base was also assessed to be substantial relative to its credit rating. The average annual net profit generated by Meritz Securities over the five-year period from 2021 to 2025 was 641.3 billion won, which is significantly higher than the average of 236.3 billion won for securities companies rated AA-. The company's shareholders' equity also reached 7.5 trillion won last year, more than double the average of 3.2 trillion won for AA- rated securities companies.

In addition, NICE Investors Service noted that Meritz Securities' contingent liability burden is on a declining trend, and the company is expected to maintain stable capital adequacy management. While pointing out that the contingent liabilities/shareholders' equity ratio of Meritz Securities surged to 156.3% at the end of September last year, it stated, "However, with the expiration of the LOC in the fourth quarter and the execution of the company's contingent liability reduction plan, contingent liabilities decreased to 7 trillion won by the end of last year." It went on to say, "At the same time, the contingent liabilities/shareholders' equity ratio also fell to 93.4%, returning to the level at the end of 2024, indicating that the company's capital management capabilities are also excellent."

Regarding capital adequacy, it stated, "With the accumulation of profits last year and the issuance of CPS, the net operational capital increased, resulting in a consolidated net capital ratio of 1,469.6% at year-end, showing improvement compared to the previous year." It added, "Given the history of key affiliates, including the holding company, acquiring the company's subordinated securities, it is expected that Meritz Securities will continue to manage capital adequacy stably through continued profit accumulation and further issuance of subordinated securities."

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