Downsizing is sweeping the securities industry with firms tightening management and costs amid the slowdown in the manufacturing sector, the Korea Financial Investment Association and analysts said.
Some 60 brokerage houses have reduced the number of their retail branches by almost 100 nationwide to 1,681 over the last year, with some 720 executives being let go.
Mirae Asset Securities closed down the most retail branches at 39, followed by Tongyang Securities shutting down 20 of its offices. Hanwha Investment & Securities had 16 of its branches closed.
The industry’s restructuring and cost cutting on low profitability is leading brokerage firms to accept voluntary retirement from their employees.
KDB Daewoo Securities, Korea’s biggest securities company, began accepting early retirement from its senior managers, while Hanwha Investment had already let go some 260 of its employees after post-merger integration with Prudential Investment & Securities.
Other securities companies are expected to follow suit amid worsening profitability.
Operating profits of 17 securities firms reached 454 billion won ($417 million) in the first half of last year, down 41 percent from 767 billion won a year earlier, according to financial statements disclosed to the Korea Exchange.
Analysts said that this is mainly due to weak consumption, or consumer spending, and the slowdown in the manufacturing industry which securities firms mainly depend on to provide their advisory and brokerage services for commission fees.
Even though there are signs of recovery in the U.S. and China, which are Korea’s top export destinations, Korean manufacturers, especially small and medium enterprises, are bound to face tougher competition overseas due to a strong won and weak Japanese yen.
This is in part weighing down confidence and driving foreign investors to unload their Korean investment. Also, foreign financial investors are retrieving their investments to reallocate their funds to markets such as the eurozone where the central bank implemented monetary easing to provide liquidity, said June Park, an analyst at Meritz Securities.
An industry source said that restructuring may spread over to other financial and professional services sectors such as mutual savings banks and law firms whose services to manufacturers account for a large share of their businesses.
By Park Hyong-ki (email@example.com