South Korean brokerages face sharp third-quarter earnings downturn
- Major South Korean brokerages face a sharp downturn in third-quarter earnings, missing market consensus by significant margins as plunging trading volumes, contracting retail deposits, and rising bond yields...
- Shinhan Securities analysts project that third-quarter net profits for major listed brokerages will fall well below consensus estimates, dropping anywhere from 13% to 91% short of market expectations.
- Brokerage firms are also struggling to secure revenue from their core brokerage and investment banking operations as retail investors pivot toward safer bank deposits.
Major South Korean brokerages face a sharp downturn in third-quarter earnings, missing market consensus by significant margins as plunging trading volumes, contracting retail deposits, and rising bond yields reverse the record profits posted in the first half of the year, according to Shinhan Securities and Hyundai Motor Securities.
Slumping Brokerage Revenue and Liquidity
Shinhan Securities analysts project that third-quarter net profits for major listed brokerages will fall well below consensus estimates, dropping anywhere from 13% to 91% short of market expectations. Additional headwinds include Mirae Asset Securities reflecting valuation losses on SpaceX stock holdings, and Korea Investment Holdings absorbing asset valuation losses from subsidiaries. Market liquidity has deteriorated rapidly since July amid ongoing stock market corrections, semiconductor adjustments, and extreme volatility triggered by single-stock leverage exchange-traded funds. Daily average trading volume in the third quarter tumbled 34% from the previous quarter to 77,000,000,000,000 won. Investor deposit funds—representing waiting capital for the stock market—dropped 23% from 121,634,000,000,000 won at the end of the second quarter to 93,925,800,000,000 won as of Sept. 21. Meanwhile, credit transaction loan balances shrank 11% over the same period to 33,055,500,000,000 won.
Stalled Investment Banking and Bond Pressures
Brokerage firms are also struggling to secure revenue from their core brokerage and investment banking operations as retail investors pivot toward safer bank deposits. Shinhan Securities researcher Lim Hee-yeon noted that a lack of leading stocks and wider market volatility have sharply reduced trading turnover rates and dampened overall financial product sales amid a broader money move into bank accounts. Investment banking business prospects remain weak. Hyundai Motor Securities researcher Kim Sung-hun explained 거래대금 둔화와 증시와 연동된 유가증권 운용손익의 악화, 추가적인 채권금리 상승시 자금조달 비용 증가와 채권평가손익 부담이 커진다
and added that a weaker IB environment will pressure future earnings. Kim also noted that given the record-high earnings seen in the first half of the year, a high base effect makes a weaker second half inevitable for the securities industry.