Meritz Securities posts positive third-quarter earnings surprise

Meritz Securities saw net profit rise 14% in the third quarter in stark contrast to other brokerages suffering from earning shocks due to the stock market slump and hikes in interest rates.

Meritz on Monday said its third-quarter net profit rose 13.8% to 217.5 billion won year on year and sales skyrocketed 185.9% to 17.5 trillion won. In this year's first three quarters, net profit grew 11% to 658.3 billion won.

This feat also marked Meritz's 19th straight quarter of 100 billion won in net profit, a streak that started in the first quarter of 2018. A company source said, "The economy has seen worsening internal and external conditions such as a surge in market interest rates and decline in stock trading value, but all of our business units posted excellent performance."

"The investment banking unit used a conservative approach toward new deals, but partnerships with blue-chip companies helped defend performance," the source said. "The sales and trading division preemptively slashed its bond positions to prevent lower performance due to the jump in interest rates."

Mertiz's profitability and financial soundness also led the industry. Return on equity, an indicator of profitability, rose 15.7%, to post double-digit growth for the ninth straight year. And net capital ratio late in the third quarter surged an incredible 1,516%, up 13 percentage points year on year.

A Meritz source also commented on fears over the company's project financing (PF) of the land for Legoland in Chuncheon, Gangwon Province, saying, " Meritz's real estate PF is 95% senior secured loans and the loan-to-value ratio at the 50% level. So even if land prices plummet 50%, the loans are recoverable without loss of principal."

Write to Eui-myung Park at uimyong@hankyung.com