With the sanctions risk resolved, Samsung Securities is now poised to receive approval for issued notes for the first time in nine years. There is growing expectation that approval could be granted as early as next month following a review process.
According to the financial investment industry on the 3rd, the Financial Services Commission recently confirmed at its regular meeting that the sanction level against Samsung Securities regarding unsound business practices at its WM (wealth management) hub branches would be set at an "institutional investor warning."
With Samsung Securities' sanctions now concluded, the likelihood of receiving approval for issued notes as early as September has increased. Since the Financial Services Commission's regular meeting will enter a one-month recess this month, it is expected that relevant agenda items will be reviewed as early as next month.
Until now, the sanction level related to unsound business practices at hub branches had been the biggest variable affecting approval for issued notes against Samsung Securities. Although the Financial Supervisory Service initially proposed severe penalties including suspension of business, the Financial Services Commission downgraded the sanction to an "institutional investor warning," thereby resolving the related risk.
The Financial Supervisory Service conducted its first inspection of WM hub branches in May last year and found unsound business practices at Samsung Securities, such as missing recordings and supporting documents from a well-known PB (private banker), recommending severe penalties. If sanctions at or above the level of severe penalties were confirmed, it would have met disqualification criteria, making approval for issued notes inevitably delayed. The sanction levels include five tiers: cancellation of registration/approval, suspension of business, corrective order, institutional investor warning, and institutional investor caution. Suspension of business or higher constitutes a severe penalty.
The review process for approval of issued notes is also expected to resume. Samsung Securities applied for approval of its issued note business in July last year, but the review was temporarily suspended twice due to the possibility of sanctions. In August last year, some securities firms including Samsung Securities faced a crisis with their issued note reviews halted due to judicial risks, but they overcame the situation after the Financial Services Commission decided to resume the review. Subsequently, Samsung Securities passed the review by the Financial Supervisory Service's Securities and Futures Committee in April this year, leaving only the final hurdle—the Financial Services Commission's decision—but was again postponed due to the possibility of severe penalties.
If Samsung Securities receives approval for issued notes this year, it will mark the completion of a long-standing project after nine years. In 2017, Samsung Securities was designated as a comprehensive financial investment company with own capital exceeding 4 trillion won, but it did not receive approval for issued note operations. This was because the review had been stalled due to legal proceedings involving major shareholders.
With the variables resolved, expectations for the Q2 earnings report to be released on the 4th are also rising. The securities industry has previously pointed out that the delay in approval for issued notes as a regrettable factor.
The securities industry predicts that Samsung Securities' consolidated net profit attributable to the parent company for Q2 will reach 505.1 billion won, marking its highest quarterly earnings ever. Kim Hyun-soo, a researcher at Sangsangin Securities, stated, "With high trading volumes continuing primarily in domestic stocks and ETFs (exchange-traded funds), brokerage revenues are driving earnings growth, while wealth management operations and interest income/loss also improve simultaneously, pushing profit levels to the next stage."
With the return on equity (ROE) for this year expected to exceed 20%, expectations for dividends are also high. Jang Young-im, a researcher at SK Securities, said, "The dividend per share (DPS) for this year is projected to be 7,200 won, with a dividend yield reaching the 6th% range, indicating a high level."
in STOCK
