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A view of Yeouido financial district / Courtesy of Yonhap News

Despite growing concerns surrounding single-stock leverage exchange-traded funds (ETFs), second-quarter earnings prospects for major South Korean brokerage firms remain exceptionally bright. The bullish outlook stems from expanding trading volumes driven by leverage ETFs, an activity that shows no signs of slowing down even after the government announced regulatory measures. Daily average trading volume in the second quarter is estimated to have jumped approximately 38% compared to the first quarter. Consequently, brokerages with a higher proportion of brokerage revenues are anticipating substantial profit growth. Market analysts expect Samsung Securities and Kiwoom Securities to be key beneficiaries. In the case of Mirae Asset Securities, quarterly operating profit is projected to surpass 2 trillion won, buoyed by valuation gains related to SpaceX and expanded wealth management (WM) revenues.

According to financial data provider FnGuide on July 20, the combined second-quarter consolidated operating profit forecast for five major securities firms—Mirae Asset, Korea Investment Holdings, Samsung Securities, NH Investment & Securities, and Kiwoom Securities—ranges between approximately 4.3 trillion won and 5 trillion won.

This growth is largely propelled by increased brokerage commission income on the back of rising trading volume, alongside improvements in valuation and disposition gains. Daily average trading volume across domestic exchanges, including the Korea Exchange and alternative trading systems, reached roughly 84 trillion won in the first quarter of this year, representing an 86% surge from the preceding quarter. Following the launch of single-stock leverage ETFs on May 27, daily average trading volume surged further to nearly 137 trillion won in June. Average daily trading volume for the second quarter as a whole stands at 118 trillion won. Notably, even on the first trading day following the government's announcement of regulatory measures targeting single-stock leverage ETFs, trading volume across 16 such funds still reached 12.17 trillion won.

With wealth management commissions also expected to rise, industry analysts are upwardly revising operating profit estimates for major brokerages. Meritz Securities Research Center recently projected the combined second-quarter net profit of the five brokerages at 4.2811 trillion won. While initial annual net profit projections for these firms stood at around 10 trillion won, analysts raised the forecast by 17.1% to 11.76 trillion won, citing expanding brokerage revenues.

Cho Ah-hae, an analyst at Meritz Securities, noted, "As capital flows into the stock market, a favorable operating environment centered around brokerage revenues continues to persist." Cho added, "Over the medium-to-long term, additional earnings growth driven by issuing notes and individually managed accounts (IMAs) remains promising."

Among the five major brokerages, Samsung Securities and Kiwoom Securities—both heavily weighted toward brokerage revenues—are expected to benefit most. As equity allocations within the retirement pension market expand, market conditions favor Samsung Securities, given its strengths in retail banking. Samsung Securities' retail assets reached 496 trillion won in the first quarter, representing a 60.7% surge year-on-year. Kiwoom Securities is likewise positioned to benefit as a traditional retail leader; furthermore, having recently entered the retirement pension market, the firm is expected to expand its market share. However, narrowing brokerage market share gaps due to surging ETF trading volume remains a potential hurdle. As of late June, the market share gap between Kiwoom Securities and Korea Investment & Securities narrowed to 1.2 percentage points.

Mirae Asset Securities' second-quarter operating profit is projected to reach approximately 2 trillion won. In addition to core competitiveness in areas like wealth management, the figure reflects substantial valuation gains from its investment in SpaceX. Should Mirae Asset Securities exceed 2 trillion won in quarterly operating profit, it will become the first brokerage in the domestic industry to join the "2 Trillion Won Club."

Woo Do-hyung, an analyst at Yuanta Securities, observed, "The market continues to be driven by KOSPI stocks alongside increasing foreign currency securities trading volumes," adding that "firms with a high proportion of brokerage revenues stand to benefit most."

                                                                                                        Yoon Seo-young