[Click eStock] Falling Securities Stocks... Meritz Securities Rated 'Buy'

[Asia Economy Reporter Junho Hwang] BNK Investment & Securities adjusted its investment rating to 'Buy,' stating that Meritz Securities is expected to record the best performance among securities stocks this year, but the stock price premium has already been discounted.

Meritz Securities posted a controlling shareholder net profit of 156.9 billion KRW in the second quarter, in line with the market consensus of 161 billion KRW. Although brokerage fees and asset management fees declined due to reduced trading volume amid the stock market downturn, corporate finance fees achieved a quarterly record high thanks to an increase in IB-related contracts. Credit loans and loans were reduced, and despite rising interest expenses, interest income showed solid results due to a significant increase in RP purchases. Selling and administrative expenses also decreased by 37.1% year-on-year due to a sharp drop in performance bonuses. However, due to a sharp rise in bond yields, product (including derivatives) and other income turned to a significant loss.

Net profit for the third quarter of this year is forecasted to decline by 14.1% year-on-year to 162.5 billion KRW. Although the reduction in credit loans will continue and funding costs will increase due to rising interest rates, the decline in interest income is expected to be less significant compared to the previous quarter.

Kim In, a researcher at Meritz Securities, stated, "These figures assume that losses in product and other income will continue due to last year's base effect and conservative earnings estimates," adding, "Despite solid profits, the investment rating has been upgraded to 'Buy' due to the sharp decline in stock prices."