[NEWS FOCUS]Brokerages struggle to enhance profit potential

Local brokerages are devising an array of solutions to improve their profit margins, as most saw a huge decrease in net income for fiscal 2008, industry officials said yesterday.

They said the brokerages are also expanding their business lines to take advantage of the Financial Investment Services and Capital Market Acts that took effect last February.

Samsung Securities, whose 225.6 billion won ($167.2 million) net profit for the year was a decrease by 37 percent from a year before, is looking, among others, to strengthen its retail financing services. This is based on the forecast that competition will be intensified among brokerages to attract the estimated 800 trillion won in short-term floating capital in the financial market.

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For the past two months, the company has worked on diversifying its production lineup for retail investors, which now includes Super Step-down ELS, an equity-linked securities product that has attracted 100 billion won in investment since February, and bond funds with 4 trillion won in assets.

In an effort to make the product available to wider investors, the brokerage is also expanding and intensifying its alliances with 15 independent insurance agencies such as TFCB, which is hiring 110 financial advisors specializing in various insurance products.

Hyundai Securities, which saw a 22 percent decrease in net profit for the year, is also working on strengthening its retail business potential. In addition to creating two new departments dedicated respectively to planning and supporting retail services recently, the company is seeking to be reborn as an asset management consulting service provider under the new financial law.

"We will improve our profitability by strengthening the competitiveness of each business division," Choi Kyung-soo, president and CEO of the company, said in an email to employees, earlier this month. `We should be quicker in thought and deed to take an initiative in new businesses over our competitors," he continued.

As securities firms will be allowed to provide various financial services through credit cards from June, an increasing number are announcing partnerships with credit card companies.

Mirae Asset Securities signed an MOU with Shinhan Card, the credit card arm of Shinhan Financial Group, on April 13, to introduce a new CMA credit card combining the functions of a cash management account and credit card. "We will continue to cooperate in other business fields as well, to reap synergy benefits," said the brokerage in a report.

Both Daewoo Securities and Hyundai Securities are in association with Woori Bank to release new debit cards combining CMA accounts soon.

Some brokerages are making efforts to enhance their global profiles by hiring analysts from major foreign financial services firms and enhancing partnerships with global players.

Last month Mirae Asset Securities named Lee Seok-je -- former vice president of Citibank Korea -- as the new director in charge of automobiles and shipbuilding, while Woori Investment & Securities put Kim Dong-yang, former Fidelity analyst, in charge of small- and medium- sized enterprises.

Samsung Securities plans to strengthen its tie with Rothschild, a leading international investment bank specialized in M&A. Through the partnership, the securities firm aims to grow into a leading player of M&A consulting in the market.

"We should concentrate our efforts and resources on several key businesses to survive such volatile financial conditions," Samsung Securities CEO Park Chun-hyeon said in a monthly meeting of the company earlier this month. "The team-oriented corporate culture of Korean companies will surely be a strong weapon in the competition against major global players," continued the CEO.

By Lee Yong-sung



(danlee@heraldm.com)