Stock Market Slump Hits Hard... Last Year's Securities Firms' Net Profit Plunges 50% Year-on-Year

Last year, the net profit of domestic securities firms sharply declined by more than 50% compared to the previous year, which recorded the highest-ever performance.

The Financial Supervisory Service announced the "2022 Securities and Futures Companies Business Performance (Provisional)" on the 23rd, stating that the net profit of 58 securities firms last year was 4.5131 trillion KRW, down 50.3% from 9.0896 trillion KRW the previous year. The return on equity (ROE) was 5.8%, a decrease of 6.7 percentage points from 12.5% the previous year.

Commission income fell 22.5% to 13.0185 trillion KRW. Custody fees decreased by 37.9% to 5.0109 trillion KRW due to a decline in stock trading volume. Fees from the IB division amounted to 4.8388 trillion KRW, and fees from the asset management division totaled 1.1633 trillion KRW, down 6.8% and 15.1% respectively compared to the previous year.

Proprietary trading profits, which securities firms earn by trading stocks, bonds, and derivatives, increased by 23.8% to 6.1274 trillion KRW. While profits and losses related to stocks and bonds decreased by 80.2% and 70.5% respectively, profits and losses related to derivatives surged by 375.6%.

The total assets of securities firms stood at 608 trillion KRW, down 2.1% from 621 trillion KRW at the end of the previous year. Total liabilities decreased by 2.9% to 527.8 trillion KRW, while equity capital increased by 3.4% to 80.2 trillion KRW. The average net capital ratio fell by 35.3 percentage points to 708.9%.

Last year, the net profit of four futures companies was 53.06 billion KRW, up 56.2% from the previous year. The ROE was 9.6%, an increase of 2.8 percentage points compared to the previous year.

The Financial Supervisory Service explained, "Last year, securities firms’ net profit significantly decreased compared to the previous year due to a decline in brokerage commissions and an increase in interest expenses," adding, "This year, prolonged U.S. tightening policies and the ongoing Russia-Ukraine war may expand uncertainties in the domestic financial market due to global economic instability."

It continued, "We will conduct a detailed analysis of the impact of internal and external potential risk factors on the profitability and soundness of securities firms, and closely monitor the liquidity status of securities firms to prevent real estate exposure-related insolvencies from turning into liquidity risks," adding, "We will also promote institutional improvements to enhance the effectiveness of capital and liquidity regulations for securities firms."