South Korean brokerages’ combined net profit hit a record high in the first quarter, the nation’s financial watchdog said Monday, boosted by profit from investment banking services and diversified sources of revenue.

The combined net profit of 56 brokerages jumped 183.3 percent on-quarter to 1.46 trillion won ($1.18 billion) in the January-March period, data from the Financial Supervisory Service showed.

The figure narrowly beat the previous record, 1.45 trillion won, set in the first quarter of 2018. 

Combined income from brokerage commissions inched up 0.7 percent on-quarter to 2.2 trillion won.

Of the brokerage commissions, 34 percent of the profit was generated from IB services, while 11.4 percent came from wealth management. Commission fees from consignment accounted for 39.7 percent, a significant decline from 55 percent in the first quarter of last year.

Overall profit from proprietary trading, which is when a financial firm or commercial bank invests for direct market gain rather than earning commissions by trading on behalf of clients, fell 41.2 percent to 728 billion won, compared with last quarter.

But income from bond-related trading rose 7.2 percent on-quarter, while profit from stock transactions jumped 239.8 percent to 260.8 billion won in the same period.

The total assets of the firms increased 7.6 percent on-quarter to 472.2 trillion won as of the end of March, while total liabilities rose 8.6 percent to 415.3 trillion won.

According to the FSS, “Increased profit from IB and wealth management businesses has led to diversified sources of profits.” Korea’s financial sector has focused on fostering IB services, which has helped firms raise capital amid a sluggish stock market.

Analysts also predict that the positive trend will extend into the next quarter, with the brokerages’ main source of profit shifting to robust IB services.

“Despite the current lackluster climate for brokerages, the positive trend is likely to continue as profit from the IB business continues to expand,” said Kang Seung-geon, an analyst at Hi Investment & Securities.

“This is also the only financial industry that can profit from a shift in bond valuation from a rate cut,” he added.

By Jung Min-kyung (mkjung@heraldcorp.com)