Samsung Securities
The author is an analyst of NH Investment & Securities. She can be reached at -- Ed.
We expect Samsung Securities’ 1Q23 results to show significant y-y and q-q improvement thanks to increased trading profits on market interest rate stabilization. Compared to other securities firms, Samsung is less likely to require provisioning or recognize losses for its remaining PF balance given its superior risk management. We continue to recommend the stock as our second pick for the sector.
Less PF risk
Samsung Securities’ PF balance is approximately W2.6tn (main PF W2tn + bridge loans W500bn). The subordinated portion of the firm’s main PF balance is limited, and more than half of its bridge loans are indirectly guaranteed to diversify risk. Thus, additional provisioning at the company is likely to be smaller than that at competitors. Considering both the health of Samsung’s PF balance, and its annual earnings improvement, we believe that the firm’s share price is attractive.
We raise our TP from W41,000 to W44,000, as we: 1) hike our 2023 EPS estimate by 12.1%; and 2) adjust our three-year ROE period to 2023E~2025F.
Trading arm enjoying strong rebound
We expect Samsung Securities to post 1Q23 NP (excluding minority interest) of W237.9bn (+56.7% y-y, +1,904.4% q-q), exceeding both our previous estimate and consensus.
Brokerage: Commission income is estimated at W120.4bn (-5.3% y-y, +29.3% q-q). Backed by its overseas stock trading system, which allows trading during daytime hours (Korea basis), the firm’s market share in overseas stock trading is on the rise.
WM: We forecast commission income of W25.4bn (-9.5% y-y, +41.4% q-q), with earnings rebounding q-q on greater early redemption thanks to a recovery in global indices. However, ELS sales volume remains limited, with total balance declining from W3.6tn at the end of last year to W3.2tn.
Trading/other: Related income is estimated at W215bn (TTP q-q). Profits were likely booked from bond trading thanks to the decline in market interest rates (3yr KTB yield: 4Q22 3.72% → 1Q23 3.27%).