Brokerages Benefit From Stock Market Boom... Net Profit Forecasts Raised 70%

As the "money move" into equities accelerates, expectations are rising for securities firms’ earnings in the first quarter of this year. Despite growing uncertainty from the war in the Middle East, funds have continued to pour into the domestic stock market, pushing up brokerages’ net profit forecasts by more than 70% over the past three months.
According to FnGuide on the 13th, the first-quarter consensus forecast for net profit attributable to controlling shareholders at the five major brokerages—Mirae Asset Securities, Korea Financial Group, Kiwoom Securities, NH Investment & Securities, and Samsung Securities—stands at 2.7873 trillion won. This is a sharp increase of 71.33% from 1.6269 trillion won projected three months ago.
Some analysts say net profit could even top 3 trillion won. The upper end of the consensus range for the five firms reaches 3.3634 trillion won.
Expectations for Mirae Asset Securities have risen particularly sharply on hopes for a "SpaceX investment effect." The firm’s first-quarter net profit consensus is 1.0105 trillion won, up 168.25% from 376.7 billion won three months earlier.
Yuanta Securities Korea projects Mirae Asset Securities’ first-quarter net profit could climb as high as 1.3176 trillion won. Do-hyung Woo, a researcher at Yuanta Securities Korea, said, "We believe valuation gains related to SpaceX will be reflected," adding, "Brokerage commission income is expected to increase 28.8% quarter-on-quarter thanks to higher market trading turnover."
The net profit consensus for Korea Financial Group has also risen 45.60% over the past three months. Over the same period, forecasts for Kiwoom Securities are up 32.82%, NH Investment & Securities 54.42%, and Samsung Securities 35.46%.
Robust inflows of capital underpin the upward revisions to brokerages’ earnings forecasts. The stock market rally that began in the second half of last year continued through February, and although volatility increased last month due to the war involving Iran, trading turnover has kept growing. As a result, many expect strong results centered on brokerage (commission-based trading) income.
In fact, average daily trading value on the KOSPI Composite Index and Korea Securities Dealers Automated Quotations (KOSDAQ) in the first quarter reached 43.8253 trillion won, an all-time high. That is about 65% higher than the previous quarter’s 26.5611 trillion won.
The number of active stock trading accounts stood at 103.67 million at the end of last month. It has continued to grow since surpassing 100 million for the first time on January 29. Investor deposits—cash on the sidelines waiting to enter the stock market—also reached 110.2889 trillion won at the end of last month, increasing by more than 22 trillion won in the first quarter alone.
Youngim Jang, a researcher at SK Securities, noted, "Across the industry, brokerage-related profits have increased on the back of a strong stock market," and added, "Despite last month’s rise in interest rates and the exchange rate, trading and investment gains are expected to be better than feared."
Some analysts also expect the securities industry’s earnings improvement to continue, supported by stock market revitalization policies and expanding capital inflows. Jo A-hae, a researcher at Meritz Securities, stated, "Favorable business conditions are persisting, including ongoing stock market reform measures and the accelerating flow of funds from individuals and companies into equities," adding, "Additional profit growth driven by notes payable and individual managed accounts (IMA) remains intact."
Jo went on to say, "We expect downside pressure on trading income due to greater interest rate volatility," but added, "The higher the share of brokerage income at a securities firm, the stronger its ability to defend profits, and firms with stable income sources and high dividend yields will remain attractive investment targets."
jisseo@fnnews.com Minji Seo Reporter