Although brokerages recorded record-breaking earnings during the first-half market boom, the prevailing assessment is that poor performance in the second half due to a slowdown in trading volume is inevitable. Major brokerage stocks have already shown a downward trend, and securities firms are also lowering their target prices. However, despite the decline in trading volume, levels remain twice as high compared to last year, and with qualitative changes such as moving beyond simple intermediation (brokerage) into WM (wealth management), retirement pension, and digital asset businesses, along with shareholder return initiatives, some analyses suggest a revaluation is possible.
According to data from the Korea Exchange and others on the 16th, major brokerage stocks have shown a downward trend, falling more than 60% from their year-to-date highs. On this day, Mirae Asset Securities closed at 31,750 won, down 62% from its year-high of 83,800 won on May 6. Similarly, Kiwoom Securities fell 46%, Samsung Securities 42%, Korea Financial Investment 36%, and NH Investment & Securities 35%.
Yuanta Securities, which released brokerage analysis reports this month, lowered its target prices. Kiwoom Securities' target price was adjusted down by approximately 14% from the previous level, Korea Financial Investment by 6%, while NH Investment & Securities and Mirae Asset Securities were adjusted down by 18% each, and Samsung Securities by 14%.
Woo-hyung Woo, a researcher at Yuanta Securities, stated, "Combined third-quarter controlling shareholder net profit for Samsung, Mirae, NH, Korea Financial, and Kiwoom Securities is expected to be 1.5 trillion won, falling 29% below market expectations." He added, "Declining trading volume is expected to result in poor brokerage P&L performance, while rising interest rates and a sluggish stock market are predicted to reduce trading P&L."
This analysis suggests that as second-half stock market trading volumes decline, the main revenue source for brokerages, such as brokerage services, is expected to suffer. In fact, last month's average daily trading volume (including ETFs) was 67.2 trillion won, down 32% from the previous month's 99.5 trillion won. Bae-seung Jeon, a researcher at LS Securities, said, "A sharp decline in trading volume, poor KOSPI performance, and falling stock prices in AI (artificial intelligence) and semiconductor sectors will likely result in reduced brokerage and asset management fee revenues and weak investment income for the third quarter." He noted, "Brokerage industry earnings for the third quarter are inevitably expected to see a significant profit decline compared to the second quarter."
However, despite slowing profits in the second half, analyses expect annual results to significantly exceed past averages. Although trading volumes are on a downward trend, they remain at twice the level of last year's average daily trading volume, and balances for bill and IMA (comprehensive investment accounts) as well as the scale of IB (corporate finance) and trading P&L continue to expand.
Brokerages are accelerating business structure transformations beyond brokerage, including expanding WM businesses, strengthening bill and IMA reception functions, and attracting long-term customer assets centered on retirement pensions. These efforts, along with shareholder return initiatives, are also evaluated positively.
Sung-hoon Kim, a researcher at Hyundai Motor Securities, said, "While brokerage is dependent on trading volume and market direction, WM, which involves financial product sales and asset management businesses, has relatively low sensitivity to market conditions and can grow based on customer networks built over the long term and capabilities in supplying financial products." He added, "If sustainable profit levels are raised and stable shareholder returns are supported, valuation (stock price level relative to earnings) revaluation will continue."
He continued, "Competitiveness in securing customer assets through digital asset intermediation and sales capabilities such as STO (security token offerings), and growth potential in trading volume through integrated foreign investor accounts, will be key factors determining the competitiveness of brokerages going forward."
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