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Brokerage firms set to increase equity capital

But they remain skeptical about M&As at present stage


Major securities firms are moving to meet the regulatory requirements in a bid to attain recognition as large-sized investment banks.

The brokerages, such as Daewoo Securities and Samsung Securities, are poised to resort to increasing their equity capital as an initial step rather than pushing for mergers among them.

Most of them plan to increase the equity capital by utilizing their operating profits or internal provisions.

A big securities firm ― or an investment bank ― whose equity capital reaches 3 trillion won ($2.85 billion) will be entitled to extend loans to conglomerates, the Financial Services Commission said Tuesday.

Currently there is no securities firm which satisfies the requirement of 3 trillion won.

Daewoo Securities, the largest player, saw its equity capital stay at 2.86 trillion won, followed by Samsung Securities with 2.79 trillion won, Hyundai Securities with 2.68 trillion won.

Woori Investment & Securities and Korea Investment & Securities ranked fourth with 2.62 trillion won and 2.42 trillion won.

“By handing over profits to next financial statements, we can meet the requirement,” a Daewoo Securities spokesman said. “The decision is up to (our parent) KDB Financial Group.”

A Samsung Securities spokesman said his company could easily secure about 200 billion won to reach the figure through internal funds.

The ultimate goal of the financial authorities is active mergers and acquisitions among them as the nation wants to establish bigger IBs which could compete with global players.

But the feasibility for active M&As is not high as most of the nation’s brokerage firms are units of major financial groups.

The companies under the wing of financial groups include Daewoo, Woori, Korea, Shinhan and Hana Daetoo.

“I don’t believe respective financial groups will readily sell their lucrative brokerage units,” a local stock broker said.

An official of Hyundai Securities said his company is not considering being involved in M&As.

But the regulatory bodies, the FSC and the Financial Supervisory Service, plan to continue inducing and supporting the brokerage M&As.

“It is necessary to secure sufficient manpower and funds to become a competitive IB,” an FSS official said. “Expansion of business is a prerequisite for strengthening competitiveness.”

Under FSC chairman Kim Seok-dong’s commitment, regulatory bodies reiterated Tuesday that they would ease a variety of regulations to realize the goal.

By Kim Yon-se (kys@heraldcorp.com)
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