Securities Industry's Performance Last Year - Key Points < Video < Article

(Seoul=Yonhap Infomax) Young Tae Seo = Competition in overseas investment services among domestic securities firms is intensifying. Particularly, Toss Securities' foreign currency securities brokerage volume grew significantly last year.

[Anchor] I heard that Toss Securities' foreign currency securities brokerage volume grew significantly last year?

[Reporter] Yes, that's correct. Toss Securities recorded an average quarterly growth of 100% in its foreign currency securities brokerage volume from the first to the fourth quarter of last year. According to the financial investment industry, the cumulative brokerage volume increased from 28.64 trillion won in the first quarter to 225.75 trillion won in the fourth quarter. The average quarterly growth rate was 99%.

[Anchor] Foreign currency securities brokerage includes both foreign stocks and bonds. What's behind this growth?

[Reporter] The biggest factor is the surge in popularity of foreign stocks. According to the Korea Securities Depository, the trading value of foreign stocks last year was about $530.8 billion, or about 765 trillion won. This is an increase of over 84% from $288 billion in 2023.

[Anchor] The sluggish domestic stock market must have also had an impact.

[Reporter] That's right. Last year, the KOSPI fell 9.63%, showing the worst performance among major global markets. However, the U.S. S&P 500 index rose 23.3%, recording a 20% increase for the second consecutive year. As U.S. big tech stocks surged, centered around the AI theme, domestic investors seem to have turned their attention to foreign stocks.

[Anchor] I heard that Toss Securities also introduced a foreign bond service?

[Reporter] Yes, in July last year, Toss Securities introduced the first foreign bond service for individual investors among domestic securities firms. It's a service that allows real-time trading of U.S. Treasury bonds and corporate bonds from a minimum of $1,000 via mobile. Investors who prefer bonds are steadily flowing in.

[Anchor] The domestic securities industry is making full-fledged moves to enter the Integrated Investment Account (IMA) business. We've heard that Samsung Securities has joined Mirae Asset Securities and Korea Investment & Securities in this endeavor.

[Reporter] Yes, that's correct. Samsung Securities has set a goal of 8 trillion won in equity capital and is challenging the IMA business. In its fourth-quarter earnings report released last week, it stated that it would "gradually increase shareholder returns considering IMA and other factors." The plan is to introduce products that guarantee customer principal and share corporate finance profits through IMA.

[Anchor] The IMA business essentially allows securities firms to have some of the deposit-taking functions of banks, right? It's been introduced for quite some time, but hasn't been fully implemented yet, has it?

[Reporter] That's right. The Financial Services Commission first introduced this system in 2016, but the business couldn't be pursued due to a lack of detailed guidelines. At the time, the FSC suggested an equity capital standard of 8 trillion won for IMA operators, but no securities firm met this standard then. However, the situation has changed in recent years as mega-sized IBs have grown.

[Anchor] There are already securities firms that have surpassed 8 trillion won, aren't there? The industry is very interested in who will become the first operator.

[Reporter] Yes, Mirae Asset Securities and Korea Investment & Securities are prime examples. According to recent disclosures, Mirae Asset Securities' equity capital is 9.9 trillion won, while Korea Investment & Securities is at 9.2 trillion won. Both companies have already met the IMA criteria.

Korea Investment & Securities, in particular, is expected to quickly enter the IMA business, leveraging its experience in the promissory note business. On the other hand, Mirae Asset Securities, which had maintained a conservative management stance, recently expressed its intention to enter the market, stating in a conference call that "IMA could be a new opportunity."

[Anchor] Samsung Securities hasn't reached 8 trillion won yet, has it?

[Reporter] That's correct. Samsung Securities' equity capital as of the end of last year was about 6.9 trillion won. It needs to secure about 1 trillion won more for the IMA business. According to SK Securities, considering its current profit capacity, it should be possible to reach 8 trillion won in about two years.

[Anchor] A company has taken the top spot in the domestic securities industry. It's Korea Investment & Securities, which was the only securities firm to achieve a net profit of 1 trillion won last year.

[Reporter] Yes, that's right. Korea Investment & Securities rose to the top securities firm last year by performing well across corporate finance, retail, and asset management sectors. According to the Yonhap Infomax IB League Table, it ranked first in IPO, paid-in capital increase, and domestic bond underwriting. This is the first time since the current Korea Investment & Securities was established that it has topped both the ECM and DCM league tables simultaneously.

[Anchor] Corporate finance and IB sectors were said to be the main areas driving growth. What specific achievements were made?

[Reporter] Yes, that's correct. The IB sector, which is also CEO Kim Sung-hwan's specialty, was key to this performance. Last year, the IB sector's separate net operating income increased by 262% year-on-year to 614 billion won. IB fees increased by 13% to 463.2 billion won, and interest income related to corporate loans increased by 79% to 169.6 billion won. Also, income related to real estate PF and M&A turned to a profit of 171.4 billion won from a loss in the previous year.

[Anchor] How was it possible to turn a profit when the real estate market conditions were not good last year?

[Reporter] Even in the first half of last year when the real estate PF market was frozen, Korea Investment & Securities employed a strategy of selectively handling deals that converted bridge loans to main PF.

[Anchor] I heard the performance in the asset management sector was also quite good.

[Reporter] That's right. Net operating income in the asset management sector increased by 82% year-on-year to 723.7 billion won. Dividend and distribution income increased by over 20% to 369.1 billion won. Bond management profits also expanded due to falling market interest rates. In particular, the increase in product profits through promissory notes seems to have driven last year's performance in the asset management sector.

[Anchor] In the domestic securities industry, KB Securities ranked in the top tier across all sectors but recorded disappointing results?

[Reporter] Yes, that's correct. Despite performing well in all sectors including retail and corporate finance (IB), KB Securities fell short of expectations last year. According to the financial investment industry, KB Securities recorded a product operation loss of 35.7 billion won in the fourth quarter of last year. As a result, operating profit for last year increased by only 15% year-on-year to 773.3 billion won.

[Anchor] I heard that net profit increased quite a bit?

[Reporter] That's right. Based on controlling interest net income, net profit increased by 50% year-on-year to 585.7 billion won. However, considering that the cumulative operating profit up to the third quarter was 735.4 billion won, it means they didn't perform as well as expected in the fourth quarter.

[Anchor] How does it compare to other securities firms?

[Reporter] KB Securities failed to join the "1 trillion club" by not exceeding 1 trillion won in operating profit. While five securities firms entered the 1 trillion club last year due to the surge in foreign stock trading volume and reduction in real estate project financing (PF) provisions, KB Securities was unfortunately excluded. NH Investment & Securities, another bank-affiliated securities firm, came close to the 1 trillion club with an operating profit of 901 billion won by boosting its fourth-quarter performance. (Yonhap Infomax Financial Department Young Tae Seo) ※This content is from the 'Economic ON' program aired on Yonhap News TV on February 18 (Wednesday) at 4 PM. (Featuring: Young Tae Seo, Yonhap Infomax reporter, Hosted by: Min Jae Lee) ytseo@yna.co.kr (End)

Young Tae Seo ytseo@yna.co.kr