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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] South Korea’s major securities firms generated approximately KRW 600 billion ($430 million) in interest income from margin lending in the first quarter, driven by a surge in leveraged stock investments during a strong market rally.
According to quarterly reports from the country’s 10 largest brokerages—including Mirae Asset Securities, Korea Investment & Securities, Samsung Securities, KB Securities, NH Investment & Securities, Shinhan Securities, Meritz Securities, Kiwoom Securities, Hana Securities, and Daishin Securities—margin lending interest income rose 55.9% year-on-year from KRW 384.6 billion and increased 14% from the previous quarter.
The growth was fueled by a sharp increase in margin loan balances as retail investors ramped up leveraged bets amid a bullish stock market. The benchmark KOSPI index surged significantly during the quarter, encouraging greater use of borrowed funds for equity investments.
Average daily margin loan balances reached KRW 31 trillion in the first quarter, surpassing the KRW 30 trillion mark for the first time. This represents a 79.3% increase from a year earlier and a 19.2% rise from the previous quarter.
The 10 brokerages are estimated to account for roughly 70–80% of total industry margin loan balances, implying their combined average balance ranged between KRW 21 trillion and KRW 25 trillion during the period. Interest rates on margin loans typically ranged from around 5% annually to nearly 10% for longer-term borrowing exceeding 90 days.
However, the contribution of margin lending income to overall profitability varied significantly across firms. For some brokerages, such income accounted for less than 10% of net profit and even declined from the previous quarter, while others derived more than 25% of their earnings from margin lending.
Overall, margin lending interest income represented 13.8% of the combined net profit of KRW 4.33 trillion reported by the 10 firms, down from 18.7% a year earlier, indicating a relative diversification of revenue streams despite the absolute increase in lending-related income.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
