Key Takeaways
- • Shares of major Korean brokerages have fallen more than 60% from their year-to-date highs as of the 16th, with Mirae Asset Securities down 62% from its May 6 high of 83,800 won to 31,750 won, according to Korea Exchange data.
- • Yuanta Securities projects combined third-quarter net income attributable to controlling shareholders for Samsung, Mirae, NH, Korea Financial and Kiwoom Securities at 1.5 trillion won, 29% below market expectations.
- • Average daily trading value fell 32% to 67.2 trillion won last month from 99.5 trillion won the prior month, pressuring brokerage and asset management fee revenue.
- • Analysts still expect annual earnings to well exceed historical averages, as trading volumes remain roughly twice last year's average daily level.
- • Growth in WM, retirement pension, digital asset businesses and shareholder returns is cited as a basis for possible revaluation.
Summary
Korean brokerages posted record earnings in the first half of the year amid a strong stock market, but analysts broadly expect weaker second-half results as transaction volumes slow. Shares of major brokerages have declined sharply: according to Korea Exchange data cited in the report, Mirae Asset Securities closed at 31,750 won on the 16th, down 62% from its yearly high of 83,800 won on May 6. Kiwoom Securities fell 46%, Samsung Securities 42%, Korea Financial Investment 36% and NH Investment & Securities 35% from their highs. Brokerages are also seeing target prices cut. Yuanta Securities, in brokerage analysis reports released this month, lowered targets by roughly 14% for Kiwoom Securities and Samsung Securities, 6% for Korea Financial Investment, and 18% each for NH Investment & Securities and Mirae Asset Securities.
Yuanta Securities researcher Woo Do-hyung estimated combined third-quarter net income attributable to controlling shareholders for Samsung, Mirae, NH, Korea Financial and Kiwoom Securities at 1.5 trillion won, 29% short of market expectations. He said declining transaction volumes would weigh on brokerage profit-and-loss performance, while rising interest rates and a sluggish stock market would reduce trading gains and losses. LS Securities researcher Bae Bae-seung said the sharp drop in trading volumes, weakness in the KOSPI and falling AI and semiconductor stocks would likely reduce brokerage and asset management fee revenue and weaken investment returns in the third quarter, with sector earnings expected to decline significantly from the second quarter.
Despite the second-half slowdown, analysts expect annual earnings to significantly exceed historical averages. Average daily transaction value, including ETFs, was 67.2 trillion won last month, though still about twice last year's average daily level. Deposit balances such as commercial paper and comprehensive investment account (IMA) deposits, along with investment banking and trading profit-and-loss scales, continue to expand. Brokerages are also accelerating structural shifts beyond core brokerage, including expanding wealth management (WM), building commercial paper issuance and IMA deposit functions, and attracting long-term retirement pension assets. Shareholder return initiatives are also viewed as positive.
Hyundai Motor Securities researcher Kim Sung-hoon said WM, which focuses on financial product sales and asset management, is less sensitive to market conditions and can grow on established customer networks. He said sustainable profit levels and stable shareholder returns could lead to revaluation. He also identified digital asset brokerage and security token offering (STO) capabilities, and transaction growth from integrated foreign investor accounts, as key differentiators going forward.
Yuanta Securities researcher Woo Do-hyung estimated combined third-quarter net income attributable to controlling shareholders for Samsung, Mirae, NH, Korea Financial and Kiwoom Securities at 1.5 trillion won, 29% short of market expectations. He said declining transaction volumes would weigh on brokerage profit-and-loss performance, while rising interest rates and a sluggish stock market would reduce trading gains and losses. LS Securities researcher Bae Bae-seung said the sharp drop in trading volumes, weakness in the KOSPI and falling AI and semiconductor stocks would likely reduce brokerage and asset management fee revenue and weaken investment returns in the third quarter, with sector earnings expected to decline significantly from the second quarter.
Despite the second-half slowdown, analysts expect annual earnings to significantly exceed historical averages. Average daily transaction value, including ETFs, was 67.2 trillion won last month, though still about twice last year's average daily level. Deposit balances such as commercial paper and comprehensive investment account (IMA) deposits, along with investment banking and trading profit-and-loss scales, continue to expand. Brokerages are also accelerating structural shifts beyond core brokerage, including expanding wealth management (WM), building commercial paper issuance and IMA deposit functions, and attracting long-term retirement pension assets. Shareholder return initiatives are also viewed as positive.
Hyundai Motor Securities researcher Kim Sung-hoon said WM, which focuses on financial product sales and asset management, is less sensitive to market conditions and can grow on established customer networks. He said sustainable profit levels and stable shareholder returns could lead to revaluation. He also identified digital asset brokerage and security token offering (STO) capabilities, and transaction growth from integrated foreign investor accounts, as key differentiators going forward.
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