Net profits of securities firms in the third quarter of this year decreased by more than 14% compared to the previous quarter.
According to the Financial Supervisory Service on the 1st, the net profit of 60 securities firms in the third quarter was 895.9 billion KRW, down 14.4% from 1.0466 trillion KRW in the previous quarter. The cumulative return on equity (ROE) for the third quarter was 5.7%, similar to the same period last year.
Commission income of securities firms was 3.1484 trillion KRW, down 3.2% from 3.2517 trillion KRW in the previous quarter. Custody fees increased by 3.2% to 1.5381 trillion KRW due to an increase in stock trading volume. Investment banking (IB) fees were 851.1 billion KRW, down 12.8% due to a contraction in IB activities caused by the real estate market downturn. Asset management fees increased by 1.8% to 294.7 billion KRW, driven by growth in discretionary investment fees and trust fees.
Proprietary trading profits were 1.9859 trillion KRW, similar to 1.9769 trillion KRW in the previous quarter. Fund-related losses decreased by 955.3 billion KRW due to overseas alternative investment valuation losses and declines in major country stock indices, while bond-related profits increased by 559.2 billion KRW due to a reduction in bond valuation losses amid a slowdown in the interest rate rise compared to the previous quarter.
Other asset profits were 802.9 billion KRW, down 3.7% due to a decrease in foreign exchange-related profits, and selling and administrative expenses increased by 1.4% to 2.7368 trillion KRW.
As of the end of September, the total assets of securities firms stood at 682.2 trillion KRW, down 1.4% from 691.7 trillion KRW at the end of June. Total liabilities decreased by 1.7% to 597.3 trillion KRW during the same period, while equity capital increased by 1.0% to 84.9 trillion KRW. The average net capital ratio of securities firms rose by 9.9 percentage points to 740.9% compared to 731.0% at the end of June. The average leverage ratio decreased by 4.4 percentage points to 638.2%.
Net profits of three futures companies in the third quarter were 21.2 billion KRW, up 6.0% from 20.0 billion KRW in the previous quarter. The cumulative ROE was 11.1%, up 4.3 percentage points from 6.8% in the same period last year.
As of the end of September, the total assets of futures companies were 5.0983 trillion KRW, down 1.5% from the end of June. Total liabilities decreased by 2.1% to 4.4882 trillion KRW, while equity capital increased by 3.2% to 610.1 billion KRW. The average net capital ratio rose by 52.9 percentage points to 1270.4%.
A Financial Supervisory Service official explained, "Net profits in the third quarter decreased by 14.4% compared to the previous quarter, showing a gradual decline in the profitability of securities firms. While custody fees showed an increasing trend, IB activities contracted and valuation losses related to real estate exposure appeared." He added, "Unfavorable business conditions are expected to continue due to delayed recovery in the real estate market and prolonged high interest rate environment leading to increased funding costs. We plan to closely monitor the impact of potential risk factors such as the expansion of real estate exposure defaults on soundness and liquidity, ensure sufficient loss absorption capacity through expanded provisions for bad debts, and further strengthen liquidity risk management."
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