Daol Investment & Securities Reports Operating Loss of 38.9 Billion KRW in Q2 Due to Provision for Bad Debts Burden

"Keeping Pace with Strengthened Real Estate PF Standards"
Sales Increased by 5.7% but Deficit Widened

Daol Investment & Securities announced on the 14th that it recorded an operating loss of 38.9 billion KRW on a consolidated basis in the second quarter. This is 1.7 times the operating loss of 22.8 billion KRW recorded in the same period last year.

During the same period, the net loss also widened to 28.4 billion KRW compared to a net loss of 10.4 billion KRW in the same period last year. Sales increased by 5.7% to 299.7 billion KRW from 283.6 billion KRW in the same period last year.

For the first half of this year (combined 1st and 2nd quarters), sales amounted to 664.8 billion KRW, down 24.7% from 828.8 billion KRW in the same period last year. Operating loss during this period was 32.4 billion KRW, a decrease compared to the operating loss of 34.3 billion KRW in the first half of last year. The net loss for the first half was 21.7 billion KRW, turning to a deficit from a net profit of 28.2 billion KRW in the first half of last year.

This is explained by the increased burden of provisioning for bad debts due to the recent tightening of real estate project financing (PF) business feasibility evaluation standards by financial authorities. Daol Investment & Securities stated, "Despite an unfavorable market environment for small and medium-sized securities firms, we continued to post profits consecutively from the fourth quarter of last year through the first quarter of this year. However, due to the strengthened evaluation standards for real estate PF business feasibility, we additionally set aside 25.7 billion KRW in provisions for securities and 8.3 billion KRW for savings banks, which increased the scale of losses."

They added, "We have continuously reduced exposure related to real estate PF through bond sales and repayments," and "With the sharp decline in bridge loan exposure and the proactive reflection of provisions, the impact on profits and losses from any future defaults will be very limited."

Daol Investment & Securities' bridge loan exposure decreased from around 210 billion KRW at the end of December 2022 to around 110 billion KRW at the end of June. By additionally setting aside provisions for bad debts, the current net bridge loan exposure has fallen below 50 billion KRW. Furthermore, Daol Investment & Securities emphasized that it secured long-term liquidity by issuing subordinated private bonds worth 20 billion KRW yesterday.