Major Securities Firms Expected to See 39% Decrease in Operating Profit in 4Q Last Year

[Asia Economy Reporter Lee Jung-yoon] Major securities firms are expected to see a sharp decline in earnings in the fourth quarter of last year, which was marked by multiple adverse factors.

According to financial information provider FnGuide on the 23rd, among the six major securities firms with earnings estimates, five excluding Meritz Securities showed an average operating profit decrease of 38.8% year-on-year in the fourth quarter of last year.

[Image source=Yonhap News]

Daishin Securities' operating profit estimate is 25 billion KRW, expected to plunge 62.8% compared to the same period last year. NH Investment & Securities is also forecasted to drop 46.2% to 125.8 billion KRW. Kiwoom Securities and Samsung Securities are estimated to record 158.9 billion KRW and 125.8 billion KRW respectively, with operating profits declining by more than 30% year-on-year.

Furthermore, Mirae Asset Securities' operating profit estimate is expected to decrease by 15.2% to 199.1 billion KRW, while Meritz Securities is the only firm projected to increase operating profit by 9.6% to 202 billion KRW.

This is interpreted as all business sectors struggling due to the challenging market conditions.

In brokerage (stock commission trading), profits likely decreased amid weakened stock investment sentiment. According to Samsung Securities, the average daily trading volume in the fourth quarter of last year was 13 trillion KRW, down 5.8% from the previous quarter, and the turnover rate was only 0.78 times.

The corporate finance (IB) sector is also expected to have seen a significant decline in profits. Traditional IB businesses such as the equity capital market (ECM) and debt capital market (DCM) likely experienced reduced fee income due to the seasonal nature of the fourth quarter. Additionally, concerns over the real estate market downturn led to a tightening in the real estate project financing (PF) market, likely causing sluggishness in real estate finance business as well.

However, separate from the fourth-quarter earnings, securities stocks showed strength from the beginning of the year. Comparing the closing prices on the first trading day of the new year to those on the 20th, most securities stocks rose by an average of about 12%.