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Securities firms enjoy hefty dividend profits despite earnings fall

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Seen above are the headquarters of securities firms in the financial district of Yeouido in Seoul. Yonhap
Seen above are the headquarters of securities firms in the financial district of Yeouido in Seoul. Yonhap

By Lee Min-hyung

Korea's major securities firms enjoyed hefty dividend profits in the first quarter of this year by generating stable rewards from their assets. The companies will use them as a source of risk management amid the stock market doldrums.

According to data from the Korea Financial Investment Association, the nation's 59 securities firms chalked up 501 billion won ($384.6 million) in dividend profit between January and March, up 11 percent from the previous year.

This dividend profit was driven by earnings growth of their affiliates and improved cash flow generated from their diverse assets such as stocks and real estate. In general, dividend profit means a stable source of financial reward that investors receive regularly from their stocks, property or funds.

Mirae Asset Securities, the nation's largest brokerage house by annual profit, reported the largest dividend profit of 64 billion won during the same period. The company did not unveil a specific breakdown of the dividend earnings.

But securities firms are widely expected to have achieved the dividend profit growth due to the overall asset market boom last year.

NH Investment & Securities came in second with a dividend profit of 42.3 billion won in the first quarter.

Despite the dividend profit growth, most securities firms are moving to shift their investment strategies this year, as their cash-cow brokerage commission profits are on the steep decline in line with the rapidly freezing market sentiment.

According to data from the Financial Supervisory Service, the combined net profit of Korea's 58 securities firms plunged by 31.2 percent in the first quarter amid falling stock transactions. The outlook for the second-quarter earnings remains cloudy, as the benchmark Kospi is not showing much signs of a major rebound while extending a losing streak to this year's new low.

Korean stocks' daily average transaction volume is also declining sharply. The figure for May came in at 16.9 trillion won, down 9.1 percent from a month earlier.

As the U.S. Federal Reserve and the Bank of Korea are set to step up monetary tightening throughout 2022, securities firms may suffer additional earnings falls in the latter half of this year, which is pushing them to focus more on investments in stable assets.

"Assets that offer dividends are mostly stable, and securities firms will likely shift their focus onto enhancing risk management this year," an industry source said. "The financial uncertainty here and abroad will make most securities firms reshape their asset portfolios in a way so as to increase ones offering stable dividend profits."

Lee Min-hyung

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