Korea Financial Group Eyes 3 Trillion Won in Operating Profit [Click e-Stock]

2Q Net Income Forecast at 783.5 Billion Won
Surging Commissions on 90 Trillion Won Average Daily Trading Volume
"High ROE, but PBR Remains Below Industry Average"

As the stock market continues to fluctuate rapidly and trading volume increases, Korea Investment & Securities has seen a steady rise in both its commission income and market share. However, its price-to-book ratio (PBR) remains below the industry average, leading some analysts to consider it undervalued.

On July 8, Daishin Securities maintained its target price for Korea Financial Group at 335,000 won and reiterated its 'buy' recommendation. The previous day's closing price was 243,500 won. Korea Financial Group, with Korea Investment & Securities as its core subsidiary, is a major financial investment company with a well-balanced portfolio across brokerage, investment banking (IB), notes issuance, and operating profit.

The key factor is performance. Korea Financial Group's second-quarter net income attributable to controlling shareholders is projected to be 783.5 billion won. This represents a 14.4% decrease from the previous quarter, but a 45.4% increase compared to the same quarter last year. It also surpasses the consensus forecast of 699.5 billion won by 12%.

The most significant change comes from brokerage (commission from consignment trading) revenue. In the second quarter, the average daily trading volume in the domestic stock market reached 90.3 trillion won, up 35.5% compared to the first quarter. As trading volume increases, securities firms can earn more from consignment trading commissions. Korea Financial Group's second-quarter brokerage commission income is expected to reach 435.3 billion won, an increase of 38.7% from the previous quarter and 226% from the same period last year.

Notably, Korea Investment & Securities has shown a remarkable increase in its brokerage market share. Among large securities firms, it is reportedly the only one whose brokerage market share has risen over the past five years. By trading volume, Korea Investment & Securities' market share increased from 9.3% in June 2021 to 13.3% as of March this year.

A key factor behind this is the Direct Market Access (DMA) service for foreign investors. DMA is a service that allows institutional investors, such as foreigners, to place orders quickly through securities firms' systems. Currently, Korea Investment & Securities and Shinhan Securities are the only firms offering this service. The influx of foreign capital into the domestic stock market is believed to have contributed to the increased market share of both companies.

The IB division also remains robust. Korea Investment & Securities reportedly ranked first in the industry in acquisition finance during the first half of this year, handling 12 deals with a total arranged amount of 1.9 trillion won. Major deals include Ulsan GPS·SK Multi Utility, Kakao Games, Twosome Place·KFC, JB Financial Group, and Central Terminal Korea refinancing projects. However, as most of these deals were concentrated in the first quarter, IB commission income is expected to decline in the second quarter compared to the previous quarter.

The operating division may see a temporary slowdown. Second-quarter trading profit is estimated at 350 billion won, a decrease of 32.1% from the first quarter. This is attributed to a reduction in distribution and dividend income, as well as weaker bond-related profits due to rising interest rates. Nevertheless, the outstanding balance of notes issuance continues to grow, and margins remain higher than those of competitors, so related income is expected to stay solid.

Although profitability is among the highest in the industry, the stock is still trading below the average valuation. Korea Financial Group's return on equity (ROE) for 2026 is projected at 19.9%, placing it at the top among securities firms. The expected PBR for this year is 1.12 times, which is below the industry average of 1.22 times. Hyejin Park, a researcher at Daishin Securities, commented, "In terms of sheer size, it will deliver the largest profit among domestic securities firms. Nevertheless, as the stock remains undervalued, its investment appeal is high."

This content was produced with the assistance of AI translation services.