Brokerage beats major bank in net profit, marking an industry first

(Korea Investment & Securities)

South Korea has entered an era where securities firms earn more than banks. Korea Investment & Securities, the country’s leading brokerage house, recorded cumulative net profit in the third quarter that exceeded the earnings of one of Korea’s five major commercial banks, NH NongHyup Bank.

Apart from unusual cases related to past bank restructuring, this is virtually the first time a securities company’s net profit has surpassed that of a major bank. Analysts say the Korean financial ecosystem—long dominated by banks—is now seeing securities firms rise as new power players.

According to an analysis conducted by Maeil Business Newspaper on Thursday, the combined annual net profit of the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori and NongHyup) increased from 5.67 trillion won ($3.85 billion) in 2016 to 15.06 trillion won last year—a 2.6-fold rise. Over the same period, the total net profit of the five leading securities companies (Korea Investment & Securities, Mirae Asset, Samsung, Kiwoom and Meritz) jumped from 860.6 billion won to 4.47 trillion won—a 5.2-fold increase, meaning securities firms’ growth rate is nearly twice as fast as that of banks.

This year, the growth gap is even more striking. As of the end of the third quarter, the combined net profit of the five major securities firms reached 4.98 trillion won, already surpassing their full-year 2023 profit of 4.47 trillion won. Korea Investment & Securities alone posted 1.67 trillion won in cumulative net profit in the third quarter, beating NH NongHyup Bank’s 1.57 trillion won. The firm is now on track to become the first brokerage in Korea to approach annual net profit of 2 trillion won. Mirae Asset Securities, the industry’s No. 2 player, also recorded more than 1 trillion won in cumulative profit for the same period.

A view of the Yeouido Financial District in Seoul. (Yonhap)

Market observers say the leadership of the financial industry may soon shift from banks to securities firms. As more retail funds flow into the stock market, brokerages are seeing higher income from trading commissions, and their advanced wealth-management capabilities are attracting pension and long-term assets—rapidly boosting profitability.

Both Korea Investment & Securities and Mirae Asset Securities have recently been designated as operators of the new Integrated Management Account (IMA) system, strengthening their footing as full-fledged investment banks. Banks, meanwhile, remain stuck in a profit model dependent on interest-rate margins, slowing their growth trajectory by comparison.

“As conditions in the capital market continue to improve, within the next five years, large securities firms may surpass most of the five major commercial banks in net profit,” said a senior executive in the financial industry.