South Korean securities firms delivered strong first-quarter earnings this year by shifting their focus from equities to investment banking, principal investments and asset management services.

This comes after most suffered an earnings shock in the fourth quarter last year due to a lackluster stock market. 

Meritz Securities’ first-quarter operating profit jumped 22.8 percent on-year to 165.9 billion won ($141.9 million), according to data from the Financial Supervisory Service, marking its highest first-quarter performance ever. Its net profit came in at 141.4 billion won, a 36.7 percent and 23.8 percent increase on-year and on-quarter, respectively.

The company said in a statement that its solid performance was due to its decision to expand and diversify its investments related to acquisition financing and private equity funds, under its IB business. The strong performance of its IB and trading units contributed to nearly 70 percent of its operating profit, the FSS data showed.

NH Investment & Securities’ operating profit increased 34.5 percent on-year to 237 billion won and net profit rose 33.7 percent to 171.6 billion won in the same period. The firm has been boosting its IB business through a series of project finance deals in the fourth quarter last year including the acquisition of the massive 23-story Seoul Square building in central Seoul.

Firms that are part of financial holding companies here, such as KB Securities, collaborated with their parent companies’ banking segments for solid output.

KB’s operating profit inched up 0.54 percent on-year to 117.6 billion won, while its net profit increased 6.6 percent to 87.3 billion won. The brokerage firm has been bolstering its wealth management unit after rebranding to a holding entity in 2016.

Recent data showed its volume of assets from wealth management products rose 14.7 percent to 23.4 trillion won last month, compared to 20.4 trillion won in the fourth-quarter of 2018.

KB’s industry rival Hana Financial Investment’s operating profit jumped 29.8 percent to 85.4 billion won and its net profit rose 48.9 percent to 62.3 billion won.

Despite the shrinking trade volume over the investors’ cautious sentiments, analysts said increased demand in equity-linked securities, IB sector and bonds led to a solid performance.

“The rise in both local and global indexes in the first quarter led to increased profits from products linked to equity-linked securities, while a decline in interest rates also boosted demand for bonds,” said Park Hye-jin, an analyst at eBEST Investment & Securities.

“The business models of securities firms have become diversified, while profit from their brokerage services have accounted for less -- which resulted in solid earnings despite the underperforming stock market,” she added.

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