Shinhan Investment Securities is maintaining its current capital structure while major South Korean securities firms pursue aggressive capital expansion, according to statements from Shinhan Financial Group CFO Jang Jeong-hoon during the second quarter earnings conference call. The company's decision stems from sufficient leverage capacity as a late entrant to the issuance note business, having received approval only in December last year. This contrasts with industry peers including KB Securities, which decided on a 1 trillion won capital increase last month following a 700 billion won increase early this year, and Korea Investment Securities, which conducted a 1.5 trillion won capital increase early this year. Bank-affiliated securities firms have been accelerating capital expansion to complement bank-centered revenue structures and meet comprehensive investment account (IMA) authorization standards.
Korean Securities Firms Accelerate Capital Expansion
Korea Investment Securities conducted a 1.5 trillion won capital increase early this year. Woori Investment Securities, NH Investment Securities, Hanyang Securities, and KB Securities are also expanding through capital increases. KB Securities' 1 trillion won capital increase decision last month, following a 700 billion won increase early this year, positions the firm to surpass the capital strength of Meritz Securities and Samsung Securities. Bank-affiliated securities firms hold advantages in capital competition through parent company support, enabling faster equity capital growth. Financial holding companies are strengthening securities firm capital to complement bank-centered revenue structures.
Shinhan Investment Securities Maintains Current Capital Structure
"Shinhan Investment Securities differs somewhat from the cases of Korea Investment Securities and KB Securities," CFO Jang stated during the conference call. "We currently have sufficient room for leverage." The company received issuance note business approval in December last year, making it a late entrant compared to Korea Investment Securities (2017), NH Investment Securities, KB Securities, and Mirae Asset Securities, which entered the business years earlier. Shinhan Investment Securities obtained approval alongside Hana Securities last year, following Kiwoom Securities. The company maintains that business capacity utilizing issuance notes remains sufficient given its late-mover position.
Company Focuses on Risk Limit Management Strategy
Shinhan Investment Securities prioritizes risk limit management over capital increase given sufficient issuance note procurement capacity. "Credit limits and other risk limits are insufficient," CFO Jang explained. "We are additionally proceeding with work to increase brokerage credit limits and IB limits within the 100% equity capital range through the holding company's subscription of subordinated bonds." This approach contrasts with large securities firms actively meeting comprehensive investment account (IMA) authorization standards through capital expansion.
Performance Results Will Determine Future Capital Allocation
"If results emerge to some degree and usage plans exist for those areas, resource allocation is fully possible," CFO Jang stated regarding future capital decisions. On the recent property and casualty insurance company acquisition, he said, "I think P&C insurance and securities capital increases can proceed in parallel. We can inject capital anywhere as long as we have confidence that it's a business with high ROE and ROC." The statements emphasize performance outcomes as the determining factor for capital deployment decisions.
FAQ
Why is Shinhan Investment Securities not pursuing capital expansion like its competitors?
The company maintains sufficient leverage capacity as a late entrant to the issuance note business, having received approval only in December last year, according to CFO Jang Jeong-hoon's statements during the second quarter earnings conference call.
What is Shinhan Investment Securities' current capital strategy?
The company is focusing on risk limit management rather than capital increase, working to expand brokerage credit limits and IB limits within the 100% equity capital range through Shinhan Financial Group's subscription of subordinated bonds, as stated by CFO Jang during the earnings call.
