Mirae Asset Securities Co Ltd

KRX:006800

Q3-2025 Earnings Call

[Operator]

Good morning. Thank you for joining us on today's call for Mirae Asset Securities. We will begin the third quarter 2025 earnings call. [Operator Instructions] And with that, we will proceed with our [indiscernible].

[Dong-Jun Shin, executive]

Good morning, I'm Dong-Jun Shin, Head of the ESG and IR. [indiscernible] participating in our 2025 third quarter earnings call. We are joined today by our CFO and Head of the Business Innovation Division, Mr. Kanhaiya, and we will be providing simultaneous English translation for our overseas investors.

In terms of the order of today's call, we will start with a review of third quarter business performance overall and by business segment followed by Q&A. The presentation materials for the 2025 third quarter earnings are available on our corporate website at ci.securitys.mirasset.com under Financials and Reports.

A recording and transcript of today's call will also be available on our corporate website. Please be advised that today's conference call contains forward-looking statements based on information available at the time of preparing this presentation. Please note that actual results may differ due to changes to our business environment or strategy. We'll now begin with remarks from our CFO. Please refer to Page 2 in the presentation materials.

[Unknown Executive]

Hello. This is Executive Director of [indiscernible], Head of the Benefit Innovation division. I will begin with Page 3 of the earnings release covering the key highlights for the third quarter. In the third quarter, on a consolidated basis, we recorded KRW 447.2 billion in pretax income and KRW 343.8 billion in net income. The annualized ROE was 10.8%, achieving an annualized ROE of over 10% for 2 consecutive quarters.

In the brokerage business, both domestic and overseas stock brokerage fee revenues reached quarterly record highs, resulting in KRW 263.7 billion, or 22% increase Q-o-Q. WM performance also recorded a quarterly high of KRW 91.8 billion.

In the overseas subsidiary, solid operating profit was generated even in the third quarter. However, as losses from the valuation of investment assets were reflected, pretax income recorded KRW 74.8 billion, down 30% Q-o-Q. Investment assets recorded profit in all of the first, second and third quarters. And in the third quarter, net income amounted to KRW 93 billion.

Page 4 is a summary page of the earnings, so please refer to it afterwards. Now I will proceed to discuss the detailed performance by each business division. I'll begin with the brokerage. Please refer to Page 5 of the performance in earnings materials. Brokerage fee revenue increased 22% Q-o-Q to KRW 263.7 billion, recording the highest quarterly performance, as previously mentioned. With the increase in trading volume in both domestic and overseas markets, both domestic and overseas stock revenue achieved record high quarterly results.

Domestic Stolk brokerage revenue increased 27% Q-o-Q, to KRW 151.8 billion, and overseas stock brokerage revenue increased 16% Q-o-Q to KRW 111.9 billion. The average brokerage fee rate for domestic stock remained 2.9 bp and the same as previous quarter, while overseas stock recorded 11 bp alongside the increased proportion of off-line transactions. The total brokerage balance, including domestic and overseas stocks recorded KRW 270.4 trillion. Among this, the overseas stock balance amounted to KRW 49.6 trillion, a 25% increase Q-o-Q. As of now, it has suppressed KRW 50 trillion continuing to mark an all-time high. With the increase in domestic trading volume customer margin loan balances increased 4% Q-o-Q to KRW 7.32 trillion and margin loans reflected as interest P&L in our earnings report increased 24% Q-o-Q to KRW 87.2 billion.

Next, I will cover WM. Please refer to Page 6 of the earnings release presentation. WM revenue from financial product sales recorded a 21% increase Q-o-Q, not to KRW 91.8 billion, achieving a record high quarterly performance. Strong growth was seen across nearly all financial products, including RAP, Mutual, Pensions and Trust. In particular, RAP-related revenue increased 35% Q-o-Q to KRW 33 billion, and revenue from mutuals increased 18% Q-o-Q to KRW 28.6 billion, significantly contributing to quarterly performance improvement.

WM AUM increased balance 5% Q-o-Q to KRW 206.4 trillion. Total client assets, including brokerage assets of [ KRW 170.4 trillion ], also increased by approximately 5% to KRW 476.8 trillion, recording an all-time high. Our long-term core product pension increased by more than 10% Q-o-Q to KRW 52.2 trillion. It has surpassed [indiscernible] for the first time, continuing its steady upward trend. As of the third quarter, pension reserves recorded KRW 34.9 trillion and personal pension assets recorded KRW 17.2 trillion. Both retirement and personal pension assets ranked first among 42 financial industry providers in terms of growth amount.

During the third quarter, total retirement pension reserves increased by KRW 13.8 trillion, of which approximately 20%, KRW 2.8 trillion flowed into mere asset securities. Considering the market structure where the average market share per provider is only 2.4%, achieving a 20% share of the single provider is viewed as a very meaningful result.

Retirement pension revenue recorded KRW 22.3 billion in the third quarter, an increase of 8% Q-o-Q. Over the past 7 years, during Q3, revenue has grown at an average annual rate of approximately 14%, and balance has grown by 27%, continuing a steady upward trend.

Beyond's simple scale expansion, a snowball effect is materializing in which the pace of asset growth is accelerating revenue growth. Amid this structural shift, we expect that a stable and sustainable earnings base will strengthen and that a virtuous growth cycle for the pension business will gradually be established.

Next, I will cover the trading. Please refer to Page 7 of the earnings release. The stated trading profit and loss is based on our separate financial statements and includes traditional trading equity, fixed income and derivatives as well as SMT and profits generated from a separate PIE. In addition to direct profits generated from proprietary trading, FX gain and losses and IB carry position gain and losses are also reflected in trading income.

Distribution and dividend income amounted to KRW 87.1 billion, similar to previous quarter. However, total trading profit decreased 49% Q-on-Q to KRW 241.2 billion. The significant Q-o-Q decrease was due to reduced gains compared to the previous quarter as well as the valuation losses from the alternative investment assets and IB carry positions from an operations standpoint as market interest shifted to a downward trend in September. The fixed income trading environment made some pressure, while the flow trading segment continued to generate steady profits.

The trading division maintains a sustainable earnings structure based on a balanced portfolio and continues to contribute over 30% of company-wide revenue. Fixed income balance increased by approximately KRW 500 billion Q-o-Q to KRW 37.5 trillion. For the fourth quarter, our fixed income management strategy plans for our cautious portfolio management considering factors such as U.S. inflationary pressure and increased domestic government bond issuance. The SMT strategy, we'll focus on stable profit generation through strength-oriented management and expansion of ETF and AI.

Next, I will discuss the performance of the consolidated investment asset portfolio. As of end of third quarter, the valuation of consolidated investment assets was KRW 10.5 trillion. Main highlights are regarding overseas real estate, although a valuation loss of KRW 159.8 billion was recognized on hotel assets, and domestic real estate portfolio, approximately KRW 159.3 billion gains was recognized through the sales of [ TankuTechWin ] power.

Meanwhile, strong performance of innovative company asset group and continue in the third quarter, and total net profit of the investment asset portfolio recorded KRW 93 billion, maintaining a consistent profit base. Mirae Asset Securities is pursuing stable profit performance based on portfolio diversification strategy through a diversified investment. By reinvesting funds secured through stable profit generation into high-quality assets, we aim to establish a virtuous cycle of capital. Although throughout the years, losses were recognized in overseas real estate assets. We have had a consistently diversified investment into high-quality assets, and we were able to maintain a quarterly net profit of approximately KRW 100 billion for 3 consecutive quarters this year.

Next, I will explain our IB performance, please refer to Page 8 of the earnings release. IB brokerage revenue recorded KRW 40.7 billion, an 18% decrease Q-o-Q. In Q3, we executed 2 IPO deals and generate a revenue through real estate refinancing financial advisory, underwriting fees as well as dividends from beneficiary certificates. As the government continues to maintain a cautious stance on excessive real estate investment by companies and households, we continue to operate with a prudent and conservative approach in real estate finance in alignment with the government policy direction.

Corporate loan revenue classified as interest income in the earnings report recorded KRW 21.7 billion, a 7% decrease Q-o-Q. Regarding the IPO pipeline for Q4, Sono International, the Pink phone company and [indiscernible] are currently planned.

Next, I will discuss the performance of our overseas subsidiaries. Please refer to Page 9 of the earnings release. In the first half of this year, overseas subsidiaries recorded over KRW 100 billion in pretax income for 2 consecutive quarters. In Q3, pretax income was KRW 74.8 billion and YTD pre-tax income until the third quarter that add KRW 299 billion, marking the highest YTD third quarter performance for our overseas subsidiaries.

While stable operating profit continued in Q3, a loss of approximately KRW 11.5 billion from the investment asset portfolio of overseas subsidiary resulted in a slight decline in the overall performance. However, in the New York subsidiary, based on the expansion of flow trading business as repo, [indiscernible] and clearing along with the expansion of WM business in Vietnam, Indonesia and India, performance is expected to expand in the fourth quarter.

The annualized after tax ROE for our subsidiaries in the Q3 was 6.8% and operating profit in investment asset losses was approximately KRW 86.3 billion. In terms of revenue contribution, WM accounted for 43%, trading, including PI accounted for 53% and IB accounted for 3%. And share of pretax income from developed markets such as U.S., Hong Kong and Europe, which are focusing on diversified business centered on flow trading was approximately 48%, while the share from emerging markets was 52%.

Based on Q3 regional share of pretax income, Hong Kong accounted for 39%, Vietnam 22%; India 15% and the U.S. 13%.

Next, I will briefly explain the progress of Mirae Asset Securities digital business initiatives. Mirae Asset Group recently announced the Mirae Asset 3.0 vision to fully accelerate digital innovation and has prepared a framework to proactively respond to rapidly changing market conditions.

Accordingly, Mirae Asset Securities established a dedicated tech and AI division to secure competitiveness. In addition, 51% of new hires this year will be recruited as technology specialists, which will accelerate initiatives and STL, stable coins and digital assets.

Lastly, I will cover our shareholder return policy. In August, we announced the acquisition of treasury shares for common shares and Class 2 preferred shares. As of November 5, 2025, 2.34 million out of 4 million common shares and 0.59 million out of 1 million Class 2 per fair share has been acquired representing completion rate of 59% each. Once the acquisition of treasury shares has been completed in November, all of these shares will be canceled.

As stated in the previously announced shareholder return policy number of common shares to be canceled will be announced additionally around next February when cash dividends are announced. Policies regarding mandatory cancellation of treasury shares will be reviewed in accordance with developments in the Commercial Act revisions.

With that, we will conclude the 2025 third quarter earnings release conference call from Mirae Asset Securities. And as a follow-on, we will now proceed with the Q&A session.

[Operator]

[Operator Instructions]

[Unknown Executive]

So we see as there might be some technical difficulties and people are having trouble logging on. So maybe I can cover some questions that were sent to us in [indiscernible] is from Mr. Hani and from [ Korean Investment Securities ]. He actually forwarded us 3 questions in advance. He mentioned how recently, stock prices have been strong, both domestic and global, driven by AI. So do we stand to benefit in terms of our investment assets or in terms of our IB business. Also, when looking at our current related investment portfolio and especially global commercial real estate overall, what is our future outlook in terms of fair value -- valuation P&L on our portfolio? And then the second question was regarding overseas stock. So starting early November daytime trading for overseas stocks have resumed. And next year, we may see core market trading on us to be extended in the U.S. stock exchange as well. So he asks about the impact of the expanded overseas stock trading hours, what have we been preparing in advance and what is the expected impact?

And the next question is about our 25.5% share in labor financial which is currently pursuing a merger with [indiscernible]. So what is our position on this? And what is the expected impact from the merger in terms of our business and also in terms of financials.

[Unknown Executive]

Yes. Let me address these questions first. Regarding our investment portfolio, our investment portfolio can be broadly classified into alternative investment assets and investments into innovative businesses. For alternate investments, like we have said, for the most part, losses have already been recognized. And so if the rate cut cycle continues, we believe there is a chance for a recovery in asset valuation.

For innovative business investments, we have assets in the U.S., China and other major economies with distributed exposure across future crews sectors like robotics and AI. And so our portfolio is well diversified. And in a falling rate environment, we expect these assets to contribute more positively to performance.

And then you talked about daytime trading hours for overseas stocks and extending core market trading to 24 hours around the clock basis. So as you know, it started as of November 4, so daytime trading for U.S. stock has resumed and NASDAQ and other major U.S. exchanges are pushing to extend core market trading hours to 24. So to prepare in advance, we have already finished preparing our IT system for clearing and settlement. So that is already done. And once 24-hour extended trading is introduced in the U.S. next year, we will closely track and follow up on local policies and institutional changes to ensure that everything necessary is fully covered. So in terms of operations, we are already providing stable and aftermarket trading services. So we do not expect any operational difficulty or set back from extended trading hours.

And you asked about the impact, so the time trading an extension of U.S. trading to 24. These will all push up trading volume. So for us, with strength in overseas brokers, I think this is very good news. And due to the time difference Asian investors mostly did a lot of trading in the alternative exchanges in the U.S. So there was a limit in terms of the scope of stocks available for trading. But with extension of U.S. trading to 24 hours, that means that core market trading will be available covering a larger scope of available stuff. We expect this to promote more overseas trading exchanges or investments.

For us and also all security firms doing overseas brokerage business will add to our earnings and daytime trading resumed in Korea will mean that for us, with the strength in off time trading -- offline trading is invisible, [indiscernible] to benefit us more so than other securities firms. And then regarding the combination of the merger between [indiscernible] and you asked, I think, about the potential impact on us for the merger. So more so than any other financial company, we are very invested in the area of digital assets and AI, and so this merger between 2 most leading companies in that domain, well, in terms of business, this can deliver a great synergy for us due to our investments in labor financial, and we will try to examine what other synergies can be achieved.

So nothing in concrete hasn't decided yet on the merger, so I don't think everything has been crystallized yet. But in terms of financials as well, once we have that merger, we think that this can result in an increase in value later on down the line. And at the time of our exit, I think this will mean a higher likelihood of a potential IPO as well, which can have a positive impact on our earnings.

Next question please.

[Operator]

The next question will be from Do-hyung Woo from Yuanta Securities.

[Do-hyung Woo, analyst]

This is Do-hyung Woo from Yuanta Securities. I have some questions on the overseas subsidiaries and also the commercial paper. The overseas subsidiaries have continued to grow. So I would like to get some more details on why -- and I would like to ask about the business model and future outlook as well. And regarding commercial paper, do you plan to maintain the current level of funding what trends are you seeing in the commercial paper margin? And I understand that IMA approval process is currently underway. So I would like to know the progress status and if the IMA is approved, what the general business plan and strategic business direction would look like?

[Unknown Executive]

Thank you very much for the question. First, I did cover it in the presentation, so Q3 compared to Q1 and Q2 for our pretax income was KWR 74 billion, a slight decrease. In our investment asset portfolio, in the previous quarter, there was an increase. But this quarter, there was a negative, and this was recorded as a result. On the ordinary profit side, there was not much of a difference, and for certain subsidiaries like Hong Kong, actually, the earnings is better.

So we are seeing improvement on the operating profit side. And in terms of the future business model and direction, in the case of the U.S., as mentioned earlier, we have repo, SBL and clearing. So have strengthened our flow trading businesses. We have made a lot of preparations very systematically, and we are seeing the results materialize. Our brand recognition in the market has improved. And we have reached a level where stable profit generation is possible, and we are really seeing the results. So compared to the previous year, the operating profit is gradually improving.

For Hong Kong, in Q3, we achieved very strong results in equity and ETF LP. And U.S., Hong Kong, London, the flow trading collaboration among these countries have seen business synergies materialize. And moving forward, we plan to further strengthen flow trading capabilities across these 3 markets and secure a more stable profit-generating structure than before.

And earlier this year, we acquired and established GTX, a global ETF market making specialists in the U.S. And we have completed the registration process for the U.S. broker-dealer license. And GHCO, which was acquired by the U.K. subsidiary in 2023 was renamed as GTX U.K., further strengthening our foundation for expanding the flow trading business.

And for India and [indiscernible], brand remodeling, relocation and WM center KPI realignment functional organizational restructuring, efforts are taking place on all aspects, accelerating PMI to actively strengthen competitiveness in local markets. In addition, from Q2 of this year, stock markets in emerging regions like Vietnam and Indonesia are showing signs of recovery, and we expect a high likelihood that this will lead to performance improvement moving forward.

If we look at the overall digital assets and such related structures, we do definitely see that with such change in regulations, there will be new business opportunities. Ultimately, we actually want to not be restricted by region and build an integrated performance. So in Hong Kong and Xinchang, we are building an IT center. And we are looking at how we could expand not only in the domestic market, but in the broader Asian market. And if required, we are also actively considering strengthening platform competitiveness through the acquisition of local companies as well.

And you asked about commercial paper and IMA. So first, I'll cover the commercial paper side. So regarding the balance trends for CP funding, the balance was KWR 6.5 trillion at the end of 2023. And at the end of 2024, it was KRW 7.5 trillion. And approximately, at the end of third quarter, it was KRW 8.3 trillion, showing a consistent annual increase of KRW 1 trillion each year.

We plan to maintain CP at the current levels without much strain caused while gradually increasing the scale. And in terms of our CP margin, it has expanded compared to the previous year. However, it remains at a lower level relative to peers due to our stable asset allocation approach.

This is a result of avoiding high risk and very much conservative approach, enabling us to respond stably even under market volatility. So WM overseas business and pension business, so business diversification and geographic spread. We are pursuing balanced earnings structure. So we will also pursue that business direction overall, a stable expansion in CP as well. In the case of IMA, we have recently completed the on-site due diligence procedures for their approval. In line with the government's policy direction to revitalize venture capital, we plan to gradually increase the investment allocation in various assets categorized as venture capital ranging from sub A-grade debt assets to competitive SMEs, VC and New Technology Business Association depending on market conditions.

However, although these assets relatively offer higher returns, they are also long term. So we are rather than aggressively expanding from the outset, plan to operate them in a balanced amount while considering market conditions. We have already experienced participating of LP and various investment funds managed by our affiliates and providing these 2 retail clients.

Through Mirae as a venture investment and Mirae as a Capital, we expect this track record to serve as a strength in the management of IMA moving forward. And we also are considering offering products segmented into low-risk, medium-risk and high-risk categories in alignment with current needs for the underlying investment assets. For venture capital investments, risk management it's very important, so we intend to design products with careful consideration of asset allocation.

[Operator]

And the next question will be by Mr. Yu-dong Yoon from NH Investment Securities.

[Yu-dong Yoon, analyst]

Yes. This is Yu-dong Yoon from NH. I think it was at the second quarter earnings call, you mentioned that there were about 3 or so overseas assets in the risk grew. So this time in the third quarter, you did recognize some loss on overseas real estate assets as well. So how much more global real estate exposure remains? And how much longer do you expect to recognize losses?

[Unknown Executive]

So in terms of overseas real estate investments, I think it was during our earnings call in the fourth quarter of last year actually, where I mentioned that so I commented that there may be about 3 to 4 overseas real estate assets that could potentially pose an issue this year. And like I said before, we did record an impairment loss on our hotel property in the U.S. in the third quarter. So regarding the overseas assets, we have already recognized the loss. So that is done. Overall, in terms of overseas real estate I think for the most part, large impairments have already been reflected and assuming that the rate cut cycle continues, we may expect some upside.

What is encouraging is that despite losses from our overseas real estate investments. Nonetheless, we have booked valuation gains from a diverse range of other assets. And into this year, for 3 quarters straight, we now posted KRW 100 billion or so in net income every quarter. And we're seeing the return generating capacity of our overall portfolio recovering quickly, allowing us to offset large losses gradually.

Thank you very much. If anybody has any further questions, please contact us at the ESG IR team of your Asset Securities. And with that, we will now conclude the third quarter 2025 earnings call for Mirae Asset Securities. Thank you for your attention.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]