Korea's major securities houses, which are the primary distributors on one of the largest structured products markets in the world, have posted broadly improving figures for the first quarter, amid dynamic structured products operations that saw large volumes of knockouts and demand for fresh issuance.

Mirae Asset Daewoo, which formed following the merger between Mirae Asset and Daewoo Securities, reported pre-tax profit of KRW138.6bn (US$0.12bn). Revenue from equity-linked securities (ELS) and derivative-linked securities (DLS) was KRW11.4bn, on the back of KRW4.3trn worth of product issuance. Issuance from the standalone Daewoo Securities operations totalled KRW3.4bn in the fourth quarter of 2016, and KRW1.9bn and KRW2.2bn for the two previous quarter, respectively.

Overall wealth management revenue, which includes the ELS/DLS segment, totalled KRW52.8bn, as compared with KRW43.8bn for the fourth quarter of 2016 from the standalone Mirae Asset operations. Wealth management assets under management (AUM) totalled KRW111.1bn, KRW7.6bn of which was in ELS/DLS. AUM in ELS/DLS was KRW8.1bn as at the end of the fourth quarter of 2016.

KB Financial Group, which acquired Hyundai Securities at the end of last year, reported net Q1 profit of KRW870bn, up 60% on an annual basis, on the back of higher interest income and fee and commission income. Notably, fee and commission income rose 41% primarily due to the consolidation of former Hyundai Securities, and up 9.2% quarter-on-quarter largely due to higher trust income from the bank.

KB Securities, which encompasses the group's structured products business, reported KRW63.8bn in profit, as compared with KRW16bn for the first quarter of 2016.

Wealth management assets expanded led by competitive products provided such as alternative investment and ELS products, the company said. Group AUM as at the end of March stood at KRW223trn, up from KRW128trn for the 1Q16 figure for KB's standalone operation.

Shinhan Financial posted pre-tax earnings of KRW997bn, up 29.3% on an annual basis. Shinhan Investment, which handles the group's structured products operations amongst others, generated 39% of the group's net income, up from 24% for FY16, and over 80% of the group's non-bank net income, with KRW46bn, up 111% on an annual basis.

Of Shinhan Investment's KRW70.5trn in outstanding financial products, just KRW2.7trn were in ELS, down from KRW3.1trn for the previous quarter, and KRW3.8trn from 1Q16.

Samsung Securities reported net income of KRW55.8bn, up 20% on an annual basis.  Notably, financial product sales were up 45% to KRW96.1bn, due to strong ELS-related revenue and mutual fund sales, which grew by 39% on a quarterly basis.

Significantly, OTC derivatives revenue surged 24% on an annual basis to KRW70.7bn, as early termination during the quarter reached historic high, generating KRW50.5bn in revenue in itself, up five-fold year-on-year, Samsung noted.

A report by Societe Generale earlier this year highlighted that structured products issuance in Japan and South Korea has been increasing dramatically after the global rally in equities following the election of Donald Trump as US president triggered autocalls in a greater number of products.

'Given the globally bullish stance (especially on emerging markets), we could reasonably expect to see substantial knockouts and subsequent issuance in the coming months... [with] almost all the products issued in the past year are at risk of being knocked out', stated the research note. 'Given the good performance by equities globally, a significant proportion of products issued last year could be knocked out soon.'

Samsung held KRW9.8trn in ELS and DLS assets as at the end of the first quarter, broadly unchanged from the previous quarter.

Korea Investment, reported net profit of KRW130.1bn for the first quarter, more than double the figure for the comparable period of last year.

The company's ELS, DLS and ELW activities yielded KRW172bn in operating profit, up 118% on an annual basis, on revenue of KRW305bn. ELS/DLS sales in the period totalled KRW5.5trn, up 12% on an annual basis.

Between them, the five groups have distributed nearly 100,000 products, according to the SRP database, including over 4,000 tranches so far in 2017, all of them on the Korean market.

Click on the respective links to view the full Q1 results of Mirae, KB, Shinhan, Korea Investment (in Korean) and Samsung.

Related stories:
Strong quarter for Credit Suisse and UBS as stateside sales increase

Japanese banks enjoy structured products windfall in Q1

Singapore banks enjoy higher wealth management profits in first quarter