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| Seoul's Yeouido financial district / gettyimagesbank |
By Lee Min-hyung
Major brokerage houses are moving to strengthen retail finance in the face of falling revenues from their investment banking businesses, after a Legoland developer's default on debt payments in Gangwon Province heightened liquidity risks in their cash-cow real estate project financing.
In their year-end organizational reshuffles, they showed their desire to solidify their retail and wealth management businesses in 2023. The renewed strategy came to the fore amid growing market uncertainties, particularly in the real estate sector.
Early in 2021, they had shifted focus to investment banking and real estate project financing in a bid to make up for falling revenues from stock trading commissions.
But the situation is widely forecast to reverse next year, with a number of securities firms placing a top priority on ensuring stable corporate management, rather than taking risks amid escalating macroeconomic uncertainties triggered by fears of recession.
Amid bleak earnings forecasts for 2023, securities firms carried out a reshuffle of top management with a focus on solidifying their retail units.
KB Securities decided recently to extend leadership of co-CEO Park Jeong-rim for another year until the end of 2023. Park took office as the top-ranking executive of the securities firm in January 2019 and has since been in charge of the firm's wealth management business. She holds expertise in retail and sales.
Hana Financial Group also recommended Kang Seong-muk, head of Hana Alternative Asset Management, as a new leader for Hana Securities. Earlier, the group explained that the decision reflected its determination to expand the brokerage affiliate's footing into retail and wealth management, as Kang is recognized for his decades of experience in the retail and sales sector of Hana Bank. He was also promoted on Wednesday as the group's new vice chairman.
NH Investment & Securities, another major brokerage house, also created a new unit dedicated to its overall retail business. The unit is committed to boosting synergy in NH's retail, sales and wealth management businesses.
Industry officials said the moves are part of securities firms' preemptive actions to brace for an uncertain market outlook.
"Securities firms will remain more conservative in their risk management in 2023, but will face an additional burden to ensure their financial soundness amid the widened credit risks of their invested assets," said Jung Hyo-sup, a researcher at Korea Ratings.
Data showed that the securities industry is not quite ready to rebound.
According to the Korea Exchange, the KRX securities index closed at 591.52 on Dec. 20. This is a drop of more than 20 percent compared with 776.93 on the first trading day of 2022.
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