Financial Holding Securities Firms' Role as Group Profit Drivers 'Wavers'...Net Income Share Drops by 2.4%P

[Asia Economy Reporter Park Jihwan] The standing of securities firms affiliated with financial holding companies, which had significantly risen due to record-breaking performance in the first quarter, has recently somewhat faltered.

According to the financial investment industry on the 2nd, the average net profit ratio within the holding companies of securities firms belonging to financial holding companies such as KB Securities, Shinhan Financial Investment, Hana Financial Investment, and NH Investment & Securities was 14.2% in the second quarter of this year. This is a decrease of 2.4 percentage points compared to 16.6% in the first quarter.

The decline in the influence of financial holding company securities firms within their groups is due to the fact that while the total net profit of the holding companies increased by 3.82% to 4.0511 trillion won in the second quarter compared to 3.902 trillion won in the first quarter, the net profit of securities firms decreased by 11.25% from 646.2 billion won to 573.5 billion won. The growth in financial holding companies' performance was largely driven by the rise in market interest rates, which significantly increased interest income, a major revenue source for core affiliates such as banks.

On the other hand, securities firms generally saw their performance stall as the business environment became relatively unfavorable compared to the first quarter. The average daily trading volume of the domestic stock market in the second quarter was 26.9 trillion won, down 18.9% from the first quarter, and rising market interest rates led to bond operation valuation losses being reflected. However, some firms compensated for sluggish brokerage segments by achieving results in asset management (WM) through expanding customer assets and financial product sales revenue.

Among financial holding companies, NH Investment & Securities recorded the highest net profit ratio within the group in the second quarter at 18.4%. This was followed by Hana Financial Investment (15.2%), KB Securities (12.9%), and Shinhan Financial Investment (12.4%).

NH Investment & Securities posted a net profit of 270.4 billion won in the second quarter, a 5% increase from the previous quarter, continuing its record-breaking quarterly performance following the first quarter. However, as NH Nonghyup Financial's overall net profit rose by more than 12% during the same period, its net profit ratio within the holding company decreased by 1.3 percentage points.

Hana Financial Investment also recorded a net profit of 139.3 billion won in the second quarter, up 1.8% from the previous quarter, but this did not meet the group's overall net profit growth rate of 9.8%. Hana Financial Investment's contribution to net profit within the financial holding company fell by 1.2 percentage points from 16.4% in the first quarter to 15.2% in the second quarter.

KB Securities posted a second-quarter net profit of 154.8 billion won, down 30.4% from the previous quarter, causing its net profit ratio within the group to drop from 17.5% to 12.9%. Shinhan Financial Investment also saw its net profit ratio within the holding company decrease by 1.7 percentage points to 12.4% due to an 8% decline in second-quarter net profit.