Riding the Stock Market Boom, a 'Surprise Earnings'... The All-Rounder of the Securities Industry [Weekend Money]

Solid Performance Across Brokerage, Wealth Management, IB, and Asset Management
Valuation Stands Out Among Securities Firms

Korea Investment & Securities Headquarters Exterior View

Korea Financial Group delivered a surprise earnings result in the first quarter of this year. The company significantly exceeded market expectations as stock trading volume increased, early redemption of equity-linked securities (ELS) expanded, and performance improved across its savings bank, capital, and asset management subsidiaries. Amid a positive environment across the entire securities industry, Korea Financial Group saw balanced improvement in brokerage, wealth management, investment banking (IB), asset management, and subsidiary results.

In the first quarter, Korea Financial Group's net profit attributable to controlling interests was KRW 914.9 billion, up 99.6% year-on-year. This solid performance surpassed market consensus. The primary driver was the increase in stock trading. Korea Investment & Securities, its core subsidiary, posted a standalone brokerage commission profit of KRW 248.6 billion, surging by 172.4% compared to the same period last year. While overseas stock commission revenue was KRW 57.1 billion, down 4.2% from the previous quarter, it was considered to have been defended stably compared to competitors. Domestic commission revenue totaled KRW 256.7 billion, up 249.3% year-on-year, driven by increased trading volume.

Market share also expanded. Korea Investment & Securities' domestic stock market share reached approximately 10.91%, up 0.8 percentage points from the end of the previous year. The balance of margin loans stood at KRW 5.6 trillion, utilized at the maximum level within the management limit. This demonstrates that traditional profit sources for securities firms have functioned effectively amid an active stock market.

The wealth management segment performed well. Related commission profit reached KRW 96.9 billion, a 109.2% increase year-on-year. The expansion of wrap accounts and ELS sales led to a significant rise in commission income.

The investment banking (IB) segment also remained robust. Standalone IB and other commission profit was KRW 166.8 billion, up 16.9% year-on-year. Traditional IB maintained a stable trend, while new real estate project financing (PF) deals and profits related to the Bundang Doosan Tower in Gyeonggi Province contributed to strong results.

Standalone net interest income amounted to KRW 243.1 billion, a 42.7% increase from a year earlier. This was driven by the expansion of margin loan balances and increased corporate lending, such as acquisition finance. When stock trading increases, not only commission income but also interest income related to margin loans rises together.

Valuation gains and other profits totaled KRW 404.6 billion, up 3% year-on-year. Although there were base effects from the KRW 45 billion dividend from Korea Investment Trust Management in the previous year, sluggish bond management due to rising interest rates, and about KRW 40 billion in losses related to foreign currency bonds, stable performance was achieved as ELS early redemption profits occurred amid a robust stock market. Total profits related to ELS are estimated at around KRW 60 billion.

Although some valuation losses were incurred on promissory notes related to overseas real estate, they still delivered a stable profit with a yield of around 180 basis points (1bp=0.01%). The burdens from real estate and bonds were partly offset by gains in the stock market, ELS, and asset management.

Subsidiary results also contributed. The savings bank posted a net profit of KRW 89.9 billion in the first quarter, up 286.7% year-on-year. The capital company also recorded KRW 31.1 billion, up 85.6%. This was due to reduced bad debt burdens and improved securities investment profits. It is significant that subsidiaries that had previously faced soundness concerns have started recording profits again.

Performance at asset management subsidiaries also improved significantly. Korea Investment Value Asset Management posted a net profit of KRW 119.7 billion in the first quarter, benefiting from the booming stock market. This represents a 469.9% increase year-on-year.

Of particular note is the group's valuation. As of the first quarter, Korea Financial Group recorded the highest return on equity (ROE) within the securities sector. On a standalone securities basis, ROE stood at 22%, while on a group basis, it was 31%. Nevertheless, the group's projected price-to-earnings ratio (PER) for 2026 remains at 6x, and the price-to-book ratio (PBR) at 1.1x. This is why the stock is still considered attractively priced compared to other securities companies.

Yongjin Seol, a researcher at iM Securities, said, "Korea Financial Group is not a company with exceptionally high brokerage profit contribution compared to other securities firms, but in a booming stock market like this quarter, ELS early redemption, asset management profits, and improved subsidiary results can occur simultaneously." He added, "The company is expected to benefit from increased trading volume as much as its competitors."

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