NH Investment & Securities (005940.KS) posted record-high operating and net profit in the first quarter, surpassing its entire first-half earnings from last year in a single quarter. The results beat market consensus by about 20%, qualifying as an earnings surprise even as expectations for the brokerage industry had risen amid a bullish stock market. Analysts say the figures validate the portfolio restructuring efforts of CEO Yoon Byung-woon, who has emphasized "open ears, a heavy mouth, and quick feet" since taking office two years ago.
According to the Financial Supervisory Service's electronic disclosure system on Tuesday, NH Investment & Securities reported first-quarter operating profit of 636.7 billion won ($470 million) and net profit of 475.7 billion won ($351 million). The figures surged 120.3% and 128.5% year-on-year, respectively, marking record highs for a single quarter. They exceeded market consensus by 19.1% and 20.7%. Analysts had previously forecast operating profit of 534.4 billion won and net profit of 394 billion won for the first quarter.
The prevailing view in the financial investment industry is that the earnings improvement reflects structural changes in NH Investment & Securities' business strategy rather than a one-off boost from the bullish market. The most notable example is the "4-3-2-1 strategy" Yoon unveiled after taking office in 2024. The strategy aims to build a sustainable business model by structuring the revenue portfolio at a ratio of 4 for wealth management (WM), 3 for investment banking (IB), 2 for asset management, and 1 for wholesale and others.
A closer look at NH Investment & Securities' fee income reveals this shift in revenue generation. First-quarter brokerage fee income rose 57.4% from the previous quarter to 349.5 billion won, while financial product sales fee income surged 87.7% to 49.1 billion won. Wealth management fees, collective investment securities handling fees, and trust fees all increased significantly from the previous quarter. The company attributes this to a qualitative shift in its client base under Yoon's leadership, in addition to favorable market conditions enjoyed by all brokerages.
The number of clients with assets of 1 billion won or more rose 71.4% year-on-year to 24,000 in the first quarter from 14,000 a year earlier. Clients with assets of 100 million won or more grew 246%, from about 90,000 at the end of 2019 to 310,000 at the end of last year. Ultra-high-net-worth clients with assets of 3 billion won or more totaled 6,323, up 51% from the previous quarter. Since high-net-worth clients tend to prefer long-term, stable asset management, their growth provides brokerages with a more stable funding base.
In the IB segment, NH Investment & Securities maintained its No. 1 market share despite industry-wide profitability pressure from the absence of "big deals." The firm retained its top position with a 30.9% share in equity capital markets (ECM), 32% in specialized credit finance bond underwriting, and 37.4% in initial public offering (IPO) underwriting.
Expectations are also rising that NH Investment & Securities' growth will accelerate on the back of its integrated management account (IMA) business. As of the first half of last year, the prevailing view was that only Korea Investment & Securities and Mirae Asset Securities would be designated as IMA operators. However, Yoon moved quickly to prepare for licensing, securing a 650 billion won rights offering from NongHyup Financial Group last July and forming a CEO-led task force, and NH Investment & Securities joined the IMA operator lineup last month.
Notably, the first IMA product, which raised 400 billion won and sold out within a week, drew 55% of its funds from corporate clients. About 60% of total sales came from new assets flowing in from other financial institutions. With more than 30 years of IB experience, Yoon is credited with concentrating company-wide capabilities on IMA to successfully launch the new business.
While brokerage analysts have been raising their price targets for NH Investment & Securities on solid growth prospects, delays in governance restructuring remain a concern. Last month, majority shareholder NongHyup Financial Group proposed discussions on whether to maintain the single-CEO structure or adopt a co-CEO or joint-CEO system. No decision has been made. Although Yoon has continued in his role after his term expired last month, flexible management is effectively impossible. "With IB competition intensifying amid the bullish market, this is a time when the CEO needs to be empowered as much as possible," a financial investment industry official said. "If the CEO appointment continues to be delayed, there is a significant risk that organizational capabilities will decline."
