As large brokerages post record earnings on a booming stock market, banks are grumbling that securities firms should take on a bigger share of the financial industry's social contribution programs. Financial Supervisory Service Governor Lee Chan-jin has pointed to brokerages' weak record on social spending, and a similar concern was raised at a meeting hosted by financial regulators, according to industry officials.
Combined net profit at five brokerages — Mirae Asset Securities, Korea Investment & Securities, Kiwoom Securities, NH Investment & Securities and Samsung Securities (016360.KS) — reached 7.7 trillion won ($5.3 billion) in the first half of this year, up 140% from a year earlier, financial industry sources said on the 13th. That is equal to 82% of the 9.36 trillion won in first-half net profit posted by the five largest banks — KB Kookmin, Shinhan, Hana, Woori and NH Nonghyup.
Banks long dominated earnings in the financial sector, but the balance began shifting last year. In 2023, the five brokerages earned a combined 2.47 trillion won, or about 17% of the five banks' net profit. The gap has narrowed quickly since last year, when the domestic stock market rallied. Brokerage commissions jumped as trading volumes rose, and large securities firms have also seen steady growth in wealth management on the strength of their capital and sales networks.
Banks argue that brokerages should shoulder a larger portion of joint industry support programs. The Lee Jae-myung administration has made inclusive finance a pillar of its financial policy, but the pressure has fallen mainly on banks. Private financial firms contributed 440 billion won to the New Leap Fund, a bad-bank program, but brokerages were excluded, and the securities industry does not contribute to the Korea Inclusive Finance Agency either. Brokerages spent 50 billion won on social contribution activities last year, according to the Korea Financial Investment Association, about 2% of the 2.2 trillion won spent by banks. "Given how market conditions have changed, social responsibility needs to be divided more reasonably within the financial industry," an official at a commercial bank said.
Regulators have also conveyed to the securities industry that it should expand its role, industry officials said. At a financial education council meeting in June attended by both public and private participants, a senior regulatory official raised the issue of soldiers borrowing money to invest and said brokerages were not doing enough to support financial education, according to officials. Brokerages are earning large commission revenues from rising stock trading but have been passive about educating consumers on high-risk investing, the official said.
Bank officials say securities firms, which deal mainly in high-risk products, should at least be active in supporting financial education programs. "Banks already put about 10% of their net profit into social contribution programs," a banking industry official said. "With interest in high-risk financial products growing, the securities industry could play a role in financial education aimed at young adults and older adults."