Seoul's financial district in Yeouido / gettyimagesbank

The country's major brokerage firms marked significantly improved performances in the first quarter compared to the same period last year, but reserving provisions for non-performing real estate project financing (PF) will be a key variable affecting their future performance, market observers said.

Korea's eight major securities firms saw a total net profit of 1.4 trillion won ($1.02 billion) in the first quarter of this year, according to the Financial Supervisory Service's electronic disclosure system DART.

This represents a 12.7 percent increase compared to the same period last year.

The eight securities firms are Mirae Asset Securities, Korea Investment & Securities, NH Investment & Securities, KB Securities, Hana Securities, Shinhan Securities, Kiwoom Securities and Daishin Securities.

Korea Investment & Securities recorded a net income of 368.7 billion won, an increase of 40.7 percent from the same period the previous year, achieving the highest quarterly earnings in its history.

NH Investment & Securities also experienced substantial growth, with its first-quarter net income rising 22.4 percent to 225.5 billion won, marking its best performance in 11 quarters.

Their better-than-expected performance was primarily driven by brokerage services, as the stock market regained momentum after the government announced the Corporate Value-up Program.

An increased volume of foreign currency trading also played a part.

Their performances are expected to continue improving, mainly through brokerage and investment banking services.

However, as financial authorities have recently intensified efforts to restructure real estate PF, there are warnings that additional reserve provisions may cast a cloud over their future performances.

Already, the industry experienced significant losses last year, with PF-related provisions set aside in the fourth quarter ranging from 100 billion won to 700 billion won.

Financial authorities currently classify projects into three categories: good, average and at risk of deterioration.

They are reportedly considering refining the evaluation criteria to include the current categories and adding a fourth, "questionable recovery," to facilitate smoother restructuring. This could involve changes to loan maturity, business purpose, or sales to third parties, all of which could increase losses at securities firms.

Last month, Korea Investors Service estimated that potential losses related to PF risks at 26 securities firms could range between 4.6 and 7.6 trillion won.

Financial authorities are set to announce the overall measures early next week.

"Financial authorities intend to implement stricture measures, including refining the viability assessment criteria for PF projects and strengthening the quorum requirements for maturity extensions. These steps aim to encourage the auctioning and restructuring of non-performing projects," Park Se-woong, a Samsung Securities researcher, said.

"As a result, there may be a renewed emphasis on the potential incurrence of additional provisions and valuation losses associated with PF exposure," Park added.