[Edaily Reporter kyoungeun kim ] Analysts predict that the securities industry will face increased pressure on second-half earnings as the Fair Trade Commission imposed fines totaling over 1 trillion won on securities firms for collusion in government bond auctions. However, given that stock prices have already undergone a significant correction due to concerns over a slowdown in the sector, the view is that the sector remains undervalued even after accounting for these additional costs.

Yoon Yu-dong, an analyst at NH INVESTMENT & SECURITIES, stated in a report on the 12th, “On the 11th, the Fair Trade Commission decided to impose a total of 1.6266 trillion won in fines on 10 securities firms and 5 banks in connection with collusion in government bond auctions,” adding, “Of this amount, 1.376 trillion won was imposed on securities firms.” The Fair Trade Commission determined that these financial institutions had increased the government’s interest burden by pre-coordinating the interest rates and purchase volumes they would offer—or by sharing information—during the process of purchasing government-issued bonds from January 2020 to June 2023.

By company, KB Securities was assessed the highest fine at 332.2 billion won, followed by NH INVESTMENT & SECURITIES(005940)(242.8 billion won), MIRAE ASSET SECURITIES(006800)(214.8 billion won), Shinhan Investment Securities (147.3 billion won), DaishinSecurities(003540)(120.1 billion won), SamsungSecurities(016360)(118.9 billion won), KIWOOM Securities (83.8 billion won), Meritz Securities (64.6 billion won), Korea Investment & Securities (37.9 billion won), and KYOBOSECURITIESCO.,LTD.(030610)(13.7 billion won). However, according to media reports, SamsungSecurities and Shinhan Investment Securities are eligible for the leniency program (leniency), so their actual financial burden is expected to be lower than the announced amounts.

Researcher Yoon stated, “Financial firms argue that the fines are calculated based on the amount of government bonds they purchased, making the burden excessive compared to the actual profits they earned,” adding, “Since late payment penalties apply if the deadline is missed, they are likely to pay first to avoid additional costs and then respond through litigation.”

The related costs are likely to be reflected in the third or fourth quarter earnings reports. KB Securities and KIWOOM Securities have revised their preliminary third-quarter earnings to reflect the full amount of the fines. Consequently, KB Securities’ consolidated net income for the third quarter turned from a profit of 273 billion won to a loss of 59.1 billion won, while KIWOOM Securities’ net income decreased from 238.6 billion won to 177.8 billion won. Analyst Yoon stated, “Other financial firms may also revise their previously announced third-quarter preliminary earnings or recognize related costs in the fourth quarter.”

He noted, “The short-term earnings burden will increase as the previously anticipated profit decline in the second half is compounded by these fines,” but added, “The price-to-book ratio (PBR) for the securities sector currently stands at 0.7x, and the expected dividend yield for major high-dividend stocks this year is around 9%.” He went on to emphasize, “Given that stock prices have already undergone a significant correction due to concerns over a slowdown in the industry, the appeal of undervaluation remains valid even when considering additional costs,” adding, “We maintain a medium- to long-term investment perspective based on the lower stock price levels and dividends, rather than the extent of the profit decline in the second half.”