Korea Investment & Securities Co. said on the 24th that the ongoing stock market boom is having a larger-than-expected positive spillover effect across various business institutional sector. It kept its Buy rating and raised the target price by 18% to 42,500 won from 36,000 won. NH Investment & Securities closed at 34,950 won the previous day.
Earlier, NH Investment & Securities said the previous day it posted controlling net profit of 475.7 billion won in the first quarter. That beat Korea Investment & Securities Co.'s estimate by 15% and the consensus (market average estimate) by 21%.
Baek Doo-san, an analyst at Korea Investment & Securities Co., said, "While brokerage fees came in as expected, fees from financial product sales, investment banking (IB) fees, and trading gains were solid versus our estimates."
First, brokerage fees in the first quarter came to 349.5 billion won, up 57% from the previous quarter. Although overseas stock revenue fell, revenue related to domestic stocks rose 82% over the same period, driving the increase.
Financial product sales fees were 49.1 billion won, up 87% from the previous quarter. Baek explained, "Along with higher trust fees, the stock market boom sharply expanded sales of products such as target-return type offerings."
In particular, the trading institutional sector performed better than expected. IB fees were 97.2 billion won, holding up with a 3% decline from the previous quarter. Although debt guarantee revenue decreased, underwriting and arrangement fees increased.
Trading and investment gains and related interest balance were 424.2 billion won, up 22% from the previous quarter and 115% from a year earlier.
Baek said, "Losses were limited thanks to conservative bond management, and the significant beat versus expectations was mainly due to expanded trading gains related to stocks and equity investments and some improvement in the interest balance."
Meanwhile, the WM-related interest balance also came in at 127.4 billion won, up 8% from the previous quarter. The average balance of customer deposits was 14.7 trillion won, up 27% over the same period, and the average balance of securities credit also increased 13%.
Baek said, "The duration of the stock market boom and its positive spillover effects across various business institutional sector are larger than initially expected," adding, "Accordingly, we raise our estimate for the market's average daily transaction value to 56.2 trillion won, up 7%." Fees from wealth management and trading gains were also revised up from previous estimates.