The performance of the securities industry has taken a downturn in the second half of the year. Mirae Asset Securities reported a net loss of 405.6 billion won ($405.6 million) due to investment losses related to SpaceX. Major securities firms have also struggled to avoid declines in profits. Following a significant drop in stock trading since the end of June, the impressive results seen in the first half of the year have sharply reversed. The outlook for the fourth quarter is also grim, with concerns that fines related to government bond bidding collusion will severely impact net income.
According to the financial investment industry on November 12, Mirae Asset Securities recorded a consolidated pre-tax loss of 520.6 billion won and a net loss of 405.6 billion won for the third quarter of this year. This marks a stark contrast to the previous quarter, where the firm posted a net profit of 1.9 trillion won, turning to a loss in just one quarter.
The primary cause of the poor performance is attributed to investment losses related to SpaceX. The pre-tax loss associated with SpaceX in the third quarter reached 514 billion won. Additionally, the separate capital investment (PI) segment incurred a pre-tax loss of approximately 380 billion won. However, the company noted that excluding the losses from SpaceX and PI investments, the consolidated pre-tax profit would be around 380 billion won.
A decline in trading volume has also negatively affected profitability. Mirae Asset Securities reported a commission revenue of 330.6 billion won from brokerage services in the third quarter, a 47% decrease from the previous quarter. The average daily trading volume on the domestic stock market fell by 42% to 52.4 trillion won. Wealth management (WM) commission revenue decreased by 6% to 123.6 billion won, while investment banking (IB) commission revenue dropped by 34% to 28.5 billion won.
Despite the downturn, Mirae Asset Securities' cumulative performance remains relatively high due to the strong results in the first half of the year. As of the third quarter, the cumulative consolidated net profit stood at 2.5 trillion won, a 148% increase compared to the same period last year.
Other major securities firms have also reported declines. Korea Investment & Securities saw its consolidated net profit drop by 70.2% to 281.8 billion won in the third quarter. NH Investment & Securities reported a 21.6% decrease to 383.6 billion won. Kiwoom Securities initially announced a net profit of 238.6 billion won but later revised it down to 177.8 billion won after accounting for fines related to government bond bidding collusion.
The changing market environment has altered the performance trends in the securities industry. In the first half of the year, rising stock prices and increased trading volumes boosted commission and operational revenues. However, in the third quarter, a combination of declining trading volumes and investment asset losses has led to deteriorating profitability.
Looking ahead to the fourth quarter, the pressure on performance is expected to continue. Securities firms that faced substantial fines from the Fair Trade Commission's investigation into government bond bidding collusion will need to account for additional costs in the fourth quarter. Smaller securities firms, in particular, are expected to experience greater financial impacts.
Jang Young-im, a researcher at SK Securities, stated, "The financial burden will be heavier for securities firms, especially smaller ones, compared to financial holding companies. This will negatively affect the securities industry's performance in the fourth quarter." She added, "NH Investment & Securities and Mirae Asset Securities are facing increased performance pressures, while Daishin Securities may even anticipate losses due to its relatively smaller profit size. If they pursue administrative litigation, there may be a possibility of recovering some funds depending on the outcome."
* This article has been translated by AI.
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