Seoul: Samsung Securities Co reported on Tuesday a 56% fall in quarterly net profit as financial market turmoil cut commissions from investment product sales and handling and advisory fees.
South Korea’s top brokerage by market value said on Tuesday its October-December net profit fell to won33.5 billion ($24.16 million) from won75.6 billion a year ago.
The results slightly exceeded an average forecast of won31 billion according to Reuters Estimates, but were still lackluster compared to its peers, analysts said.
“Earnings from bond investments seem to have been smaller than expected, and commission from product sales and securities handling also fell,” said Park Eun-joon, an analyst at Shinyoung Securities.
Competitor Daewoo Securities posted late last month a 26% jump in year-on-year net profit to won84.11 billion.
During the October-December period, a significant portion of Samsung Securities’ profits came from securities trust commissions and financial product sales and handling fees, the brokerage said.
Earnings from fees from securities product sales and handling and merger and acquisition advisory fell substantially, company data showed.
The earnings outlook for South Korea’s brokerages remains grim this year as ongoing fears about a global recession will likely weigh on stock markets, clouding prospects for commission income and mutual fund sales.
Stiff competition is also fuelling a cut in brokerage commission rates and squeezing margins. A number of new securities firms entered the already crowded sector last year, including Standard Chartered Securities Korea Ltd.
However a recently implemented Capital Markets Consolidation Act may provide brokerages with more of a buffer as it is designed to give securities companies a bigger role in financial markets by breaking down barriers between brokerages, asset managers and futures trading firms.
Analysts said Samsung Securities, with a more diversified business portfolio than its peers and less dependence on retail brokerages, would maintain its position as the most promising firm in the sector.
“There is no doubt that Samsung Securities remains a top-tier securities firm. The company is very well-rounded in terms of its business model and portfolio. Given relatively weak results from the third quarter, it should see solid growth in the fourth quarter,” Park added.
Shares in Samsung Securities fell 14.5% in October-December, outperforming the benchmark KOSPI’s 22.4% loss, as it remained a top brokerage pick among investors.