Big foreign IBs benefit from M&As, smaller hurt by tepid foreign stock invest

Foreign investment banks operating in South Korea posted mixed earnings last year, with big ones keeping up profit from merger and acquisition (M&A) deals and initial public offerings (IPOs) while most others suffered from lackluster foreign stock investment.

According to Maeil Business Newspaper that received data on earnings of foreign investment banks’ Korean operations from the Democratic Party lawmaker Kim Byung-wook on Thursday, big names such as JP Morgan, Credit Suisse, Morgan Stanley and Citi Global Market saw their net income from January to September last year surpass that of the whole 2019.

A combined net profit of 22 foreign IB’s Korean operations reached 425.1 billion won ($387.6 million) from the beginning of last year to September, on track to exceed 2019’s figure at 455.8 billion won. Their net profit has been trending down from 617.5 billion won in 2017 and 588 billion won in 2018.

JP Morgan raked in 81 billion won for the first nine months of last year, already breaking the previous annual records of 50.7 billion won in 2018 and 53 billion won in 2019. It eagerly looks forward to seeing more than 100 billion won in net income from its Korean operation for the first time.

Credit Suisse also saw its net income from January to September at 72.4 billion won surpass that of the full 2019 at 68.1 billion won. Morgan Stanley and Citi Global Market reaped 53.9 billion won and 41.7 billion won, respectively for the nine months last year, exceeding their full 2019 figures.

“Big name foreign brokerages excelled after leading mega M&A deals such as Asiana Airlines and Intel’s NAND business as well as blockbuster IPOs,” a high-ranking official from a foreign securities firm said.

On the other hand, companies that focused on retail stock business was hit hard mainly due to the Korean government’s short selling ban, which soured foreign appetite in Korean market. Net income of Merrill Lynch, which is known to have a higher proportion of retail stock brokerage business than others, shrank to 16.6 billion won for the first nine months of last year compared to 41.8 billion won in 2019. Japanese firms also suffered due to weak marketing and frosty Korea-Japan relations, according to an industry official.

The Financial Supervisory Service said foreign investors maintained their selling spree from February, when the first wave of Covid-19 outbreak hit the country, to June. Their net selling amounted to 3.22 trillion won in February, 13.45 trillion won in March, and 5.29 trillion won in April.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]