The South Korean securities firm’s investment banking activities recorded solid revenues despite the impact of Covid 19, as ‘structured products continued to grow’ during the second quarter.
Samsung’s consolidated net income climbed by 37% to KRW131.7 billion (US$111m) in the quarter ended on 30 June year-on-year (YoY) as brokerage commissions grew 1.32 times to KRW173.6 billion and trading income ‘recovered due to an improved OTC derivatives market’.
Structured product revenue was up KRW5.4 billion to KRW30.5 billion YoY, but down KRW5.5 billion on the first quarter. It made up 83% of investment banking revenue, which dropped by KRW1.8 billion to KRW 36.7billion QoQ yet remained stable from a year ago.
Consolidated financial product sales slumped 38.2% to KRW46.8 billion QoQ, or 21.1% YoY ‘due to delayed early redemption of OTC derivatives’.
Equity-linked securities (ELS) early redemption volume dropped to KRW0.5 trillion from KRW2.2 trillion a quarter ago, and from KRW3.2 trillion a year ago, as ‘global markets remain below March 2020 levels’.
The securities house also reported that its OTC derivatives issuance was at KRW1.5 trillion, lower than the KRW3.9 trillion from January to March and the KRW4.7 trillion seen a year ago. Trading and interest income of KRW121.1 billion recovered from a loss of KRW74 billion a quarter ago ‘on improved ELS related trading income and increased bond valuation’.
Repurchase agreement, ELS and debt-linked securities made up 44.7%, 42.7% and 12.6% of the trading income worth KRW26.2 trillion, respectively.
Among the total 21 companies that issued ELS in South Korea, Samsung Securities came on top with issuance worth KRW4.1 trillion in the first half of the year, translating to a share of 13%, according to figures released by the regulator.
The security firm has also retained its crown as the largest structured products distributor in South Korea since 2016, SRP data shows.
During the past year, it has distributed 1,983 products at KRW5.87 trillion, representing a market share of 11.45% followed by KB Investment & Securities and Shinhan Investment by product issuance.
In 2019 and 2018, Samsung Securities distributed 3,884 products at KRW16.12 trillion and 3,177 products at KRW11.13 trillion, respectively.
For the 750 products that struck from April to June, indices remained the most popular underlyings with the S&P 500, Eurostoxx 50, Hang Seng China Enterprises Index, Nikkei 225 and Kospi 200 taking the lion’s share.
Early this month, South Korean regulator released a series of measures to strengthen currency liquidity for securities firms and set up two platforms for investors in response to an increase in issuance of structured products, as SRP reported.
Click here to view the Q2 2020 report.