Data shows Korean firms lag behind foreign rivals in soundness


Korean securities firms are of weak financial soundness compared to foreign brokerage houses in Korea, a regulatory report has shown.

Data from the Financial Supervisory Service showed Tuesday that 42 local brokerages posted an average net capital ratio of 478.7 percent in the first quarter of the fiscal year 2011, or between April and June.

The NCR, a barometer of financial soundness, indicates that local firms lag behind 20 foreign players operating in Korea, whose combined net capital ratio approached 900 percent.

More specifically, eight foreign brokerages’ Korean corporations and 12 foreign brokerage branches saw the figure come to 803.7 percent and 967.1 percent, respectively, during the period.

Further, the nation’s big three players ― Samsung Securities (502.3 percent), Woori Investment & Securities (419.5 percent) and Daewoo Securities (462.7 percent) ― saw their combined NCR stay below the average figure of 478.7 percent of 42 local firms to record 461.5 percent.

In contrast, Europe-based BNP Paribas and UBS posted 2,411.9 percent and 1,852 percent. Eight of the 20 foreign firms saw the NCR exceed 1,000 percent, according to the FSS.

Among them were Citigroup, Merrill Lynch, Standard Chartered, Credit Suisse, BoS and Societe Generale.

Out of the 20 biggest local brokerage houses, including Hyundai Securities, Korea Investment & Securities, and Shinhan Investment Corp., no firm posted more than 700 percent.

While the firms with an NCR of less than 150 percent could face regulatory sanctions, a number of Korean brokerages are already in a relatively poor position as 13 of the 42 firms recorded between 200 and 400 percent.

They included Kyobo Securities, Hanwha Securities, Eugene Investment & Securities, Meritz Securities, and Leading Investment & Securities.

“The average net capital ratio of all securities companies was 513.7 percent as of June, down 15.4 percentage points from 529.1 percent a year earlier,” the FSS said in a statement.

“This was due mainly to an increase in assets at risk by 9.2 percent,” the regulator said. “The risky assets were attributable to their increased bond holdings.”

While policymakers have been striving to induce active mergers among local firms to create big investment banks, there has been skepticism because of their weak asset soundness.

Critics of the plan stress that financial health should be bolstered ahead of M&As.

Meanwhile, the FSS said the 62 local and foreign players reported a net profit of 793.2 billion won ($734 million) between April and June, up 74.7 percent over the same period last year.

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