[Edaily Reporter kyoungeun kim ] KOREA INVESTMENT HOLDINGS ( KOREA INVESTMENT HOLDINGS(071050)) reported third-quarter earnings that fell significantly short of market expectations. Net income at its core subsidiary, Korea Investment & Securities, plummeted by more than 70% compared to the previous quarter, dealing a direct blow to the holding company’s performance. Amid a slowdown in profitability across the securities industry due to declining stock market trading volumes and a deteriorating bond investment environment, the decline in KOREA INVESTMENT HOLDINGS’ earnings was steeper than that of securities firms affiliated with other major financial holding companies.

According to the Financial Supervisory Service’s electronic disclosure system on the 5th, KOREA INVESTMENT HOLDINGS’ consolidated net income for the third quarter of this year was 281.8 billion won, a 71.8% decrease from the previous quarter (998.4 billion won). It also fell by 58.3% compared to the same period last year (674.9 billion won). Net income attributable to controlling shareholders was 282.3 billion won, falling 46.6% short of the market consensus of 528.3 billion won.

The decline in operating profit was even more pronounced. KOREA INVESTMENT HOLDINGS’ consolidated operating profit for the third quarter was 300.4 billion won, plummeting 77.7% from the previous quarter (1.3442 trillion won) and 64.6% from the same period last year (849.1 billion won). In contrast, revenue rose 85.7% year-over-year to 11.1801 trillion won. This indicates that profitability deteriorated significantly despite revenue growth.

At the heart of the poor performance is its core subsidiary, Korea Investment & Securities. Korea Investment & Securities’ third-quarter consolidated net income was 281.8 billion won, down 70.2% from the previous quarter (946.4 billion won) and 56.7% from the same period last year (650.9 billion won). Operating profit also fell to 348.7 billion won, down 71.2% from the previous quarter (1.2102 trillion won) and 58.3% from the same period last year (835.3 billion won).

The decline in Korea Investment & Securities’ earnings led to a deterioration in the overall profitability of KOREA INVESTMENT HOLDINGS. In particular, given that Korea Investment & Securities’ third-quarter operating profit of 348.7 billion won exceeded the holding company’s consolidated operating profit of 300.4 billion won, the impact of factors such as consolidated adjustments involving affiliates outside the securities division is also drawing attention.

The market cites a decline in trading volume and worsening bond investment gains and losses as the main reasons for the slowdown in the securities industry’s third-quarter performance. Analysts note that the growth in brokerage revenue slowed as stock trading volume decreased compared to the previous quarter, while the burden of bond valuation gains and losses increased due to rising interest rates.

Securities firms affiliated with financial holding companies that previously reported their earnings also saw a uniform decline in third-quarter net income compared to the previous quarter. NH INVESTMENT & SECURITIES reported 383.6 billion won, down 21.6% from the previous quarter, while KB Securities reported 273.0 billion won, a 39.4% decrease. Shinhan Investment Securities saw a sharp drop of 77.4% to 65.3 billion won, and Hana Securities plummeted 94.0% to 10.3 billion won.

Korea Investment & Securities’ rate of decline in net profit was lower than that of Shinhan Investment & Securities and Hana Securities, but it was significantly higher than that of NH INVESTMENT & SECURITIES and KB Securities. In terms of net profit volume, it ranked second behind NH INVESTMENT & SECURITIES.

Year-to-date cumulative performance continued to show growth. KOREA INVESTMENT HOLDINGS’ cumulative consolidated net income for the first three quarters of this year was 2.1968 trillion won, a 31.2% increase compared to the same period last year (1.6745 trillion won). Cumulative operating profit also rose by 40.1% to 2.7509 trillion won.

Korea Investment & Securities also saw its cumulative net profit for the third quarter rise 20.1% year-over-year to 2.0128 trillion won, compared to 1.6761 trillion won in the same period last year. Cumulative operating profit increased 27.0% to 2.5188 trillion won.

However, concerns have been raised that the slump in the securities industry may persist through the end of the year, casting a shadow over future earnings outlooks. Park Hye-jin, an analyst at DaishinSecurities, stated, “It was a challenging quarter in many respects, not only due to a sharp decline in trading volume caused by a correction in leading stocks but also because of rising interest rates,” adding, “There is a high likelihood that this trend will continue through the end of the year.” On the 4th, DaishinSecurities lowered its target price for KOREA INVESTMENT HOLDINGS from 286,000 won to 200,000 won, a reduction of approximately 30%.