Mirae Asset Securities Co., Ltd. (A006800) Earnings Call Transcript

Good morning. Thank you very much for joining us today at the earnings call for Mirae Asset Securities. [Operator Instructions] With that, we will now begin the earnings call conference for the second quarter 2026 for Mirae Asset Securities.

Yes. Good morning. I'm Dong-ho Shin, Head of the ESG & IR team at Mirae Asset Securities. Thank you very much for participating today in our 2026 second quarter earnings call. Joining us today are Mr. Sun Ho Heo, CEO of Mirae Asset Securities; and Mr. Kang-hyuk Lee, the Head of Business Innovation and CFO. English simultaneous interpretation is being provided for our overseas investors. Today's conference call will proceed in the following order: an update on our strategic business initiatives in the second quarter and progress, a review of second quarter business performance and results by business segment followed by Q&A. All materials for the second quarter 2026 earnings are available on our website under the regular reports section. A recording and transcript of today's call will also be posted on the website. Please be advised that today's presentation contains forward-looking statements based on information available at the time of preparation, and actual business results may differ due to changes in the business environment or our strategy. We'll now begin with remarks from our CEO. Please refer to Page 2.

Good morning. This is Sun Ho Heo, CEO of Mirae Asset Securities. Thank you very much, our analysts and investors who are attending Mirae Asset Securities' second quarter 2026 earnings presentation. In the second quarter, our consolidated pretax income was KRW 2,528.7 billion, and net income was KRW 1,905.2 billion, up 86% and 90%, respectively, quarter-on-quarter. On a cumulative basis, YTD in the first half, we achieved KRW 3,886.3 billion in pretax income and net income of KRW 2,907.2 billion, representing an increase of 349% and 338% year-on-year. Let me highlight performance related to SpaceX separately. Second quarter pretax income includes approximately KRW 1,624.2 billion in valuation gains related to SpaceX. Excluding these gains, second quarter consolidated pretax income was KRW 904.4 billion. For the first half as a whole, valuation gains related to SpaceX amounted to KRW 2,565.9 billion. Excluding these gains, consolidated pretax income in the first half was KRW 1,320.4 billion. Importantly, even excluding the contribution from SpaceX, our underlying earnings generating capacity has improved significantly. This is driven by our stable earnings base centered on wealth management and pensions, the expansion of our global business, strengthening of our digital capabilities, including S&T. Second quarter results are particularly significant as, in fact, they represent the highest earnings in our corporate's history. Today, I would like to highlight 4 key areas: first, strengthening our stable earnings base through WM; second, our global investment platform strategy; third, our investment position at SpaceX; and finally, our shareholder return policy. So first, strengthening our stable earnings base through our wealth management business. We have consistently emphasized the importance of creating a structure in which we support client asset growth alongside corporate value growth for ourselves as well. To achieve this goal, we have steadily expanded our stable earnings base with a particular focus on the WM and pension business. Our domestic and overseas client assets increased significantly from KRW 483 trillion at the end of 2024 to KRW 602 trillion at the end of 2025, which is year-on-year growth of 25%. As of the end of the first half of 2026, client assets have reached KRW 784 trillion, representing a further 30% increase from the end of last year. Pension assets have also steadily grown, surpassing KRW 80 trillion in the first half, an increase of KRW 23 trillion from the end of last year. The growth represents more than just an expansion in scale. It reflects the broadening of our client base and the qualitative improvement of our WM capabilities. As we strengthen our long-term relationship with clients and enhance the competitiveness of our wealth management service, our stable and sustainable earnings base is also continuing to expand. The underlying revenue model for WM is shifting from brokerage centers to an asset-allocation-centered model. Through the continued enhancement of our asset allocation solution using AI and client data, we added 605,000 clients with active account basis during the first half of this year, already significantly exceeding the 540,000 increase for full year last year. Of the new clients, minors accounted for 107,000, meaningful development, showing that we are expanding into the next generation. Going forward, the competitiveness of wealth management will ultimately depend on how effectively we provide expert-level services to a broader range of clients. We will leverage our AI and digital capabilities to build a digital WM platform that enables all of users to experience professional asset allocation services. We'll also combine the VIP wealth management capabilities of our private wealth management business with the competitiveness of our digital platform to further enhance the productivity of WM. We also see significant growth potential in the Korean capital market. Current forward PE of the KOSPI is below 6x, making Korea and the likes of Samsung Electronics and [ hynix ] one of the most undervalued equity markets in the world. Given these attractive valuations, there is great growth potential, especially in the Korean retirement pension market, which has surpassed KRW 554 trillion, will be very significant room for further upside. The 30% lift on risk-free or low-risk assets such as bonds within the retirement pension portfolio was introduced 20 years ago, significantly constrains investment for pension customers, and we believe the rule should be improved in a more rational way. We will proactively respond to the changing market conditions and grow alongside our clients to build up long-term assets. Second, our global investment platform strategy. We will expand beyond the domestic market. So a key priority is to enable our clients to access investment opportunities across the world through a single platform. We are preparing next-gen wealth management ecosystem, connecting both traditional and digital assets, providing access to global wealth management services without the constraints of geography or time to broaden our clients' investment opportunities and further avenues of growth for our company. June, we successfully launched MAPS, our global investment platform in Hong Kong. And leveraging our local license, we have established an environment where our clients can trade both traditional and digital assets on a single platform, We're planning a phased expansion into other major markets, including the U.S., Singapore, Japan and Australia. We also built our own inbound distribution platform, enabling global investors to invest directly in Korean equities and ETFs. This will reduce our reliance on external platforms while further strengthening our global WM competitiveness. We're also preparing for the future in digital finance. In line with the planned institutionalization of the STO platform in -- or framework in 2027, we're preparing the necessary infrastructure according to schedule. Building on the synergies with Korbit, which recently changed its name to Digital X, we will further expand our digital finance ecosystem, including RWA tokenization and security tokens. Ultimately, our goal is to build a global wealth management platform that combines AI and digital asset capabilities as we target the global financial market as our addressable market. Now let me discuss our investment position in SpaceX. From the beginning of 2022, when we made our investments, we have focused on its long-term growth potential. Our investment thesis was never based on SpaceX simply as a space launch company. We saw SpaceX as a global digital infra platform connecting space, communications, AI and national security built around Starlink as the base. Ultimately, we believe the essence of investing lies not in short-term price movement but in the long-term value of a company. Going forward, we'll continue to assess long-term corporate value based on innovation-driven growth and business competitiveness. We'll also continue to manage our investment portfolio. We will closely monitor market conditions and risks and manage our positions in a flexible and dynamic manner. We'll pursue opportunities for returns while adhering to our disciplined risk management principles to contribute to enhancing shareholder value. Finally, let me discuss our shareholder value enhancement policy, which is a key management priority. In June, we did KRW 300 billion in share buybacks as part of our efforts to boost shareholder return. The buyback consisted of KRW 200 billion in common shares, KRW 10 billion in first preferred shares and KRW 90 billion in second preferred shares. We included first preferred shares in the buyback for the first time, taking into consideration the valuation gap between our common and preferred shares. In July, we fully retired the treasury shares that had previously been acquired for cancellation. the Shares canceled comprised approximately of 16.55 million common shares, 620,000 first preferred shares and 9.23 million second preferred shares, representing the largest share cancellation in history with an acquisition value of more than KRW 500 billion. We will continue to allocate capital efficiently and build a virtuous cycle in which the value that we create is shared with our shareholders. We'll maintain close communication with the market regarding our plans for the use of treasury shares and our 3-year shareholder return policy, which will take effect next year ahead of the announcement of our preliminary third quarter results. We realize that a company's value cannot be measured by a single number. It's about growing our client assets, expanding our earnings base and creating new growth opportunities in the global market and translating that growth into greater shareholder value. Creating this virtual cycle -- virtuous cycle is the heart of the corporate value that we seek to deliver. We will not limit ourselves through changes in the domestic market as we continue to seek out new opportunities in the global market. We'll deliver better investment experience for our clients, sustainable long-term value creation for shareholders and set new standards for financial services in the market. By delivering sustainable earnings growth and improving capital efficiency, we will continue to build a company where our clients and shareholders can grow together.

Good morning. I am Kang-hyuk Lee, Head of Business Innovation division. I will now walk you through key performance highlights for Q2 2026. Please turn to Page 3 of the earnings release. As mentioned earlier, we achieved record-high earnings in Q2, significantly outperforming our past performance. As of the end of Q2, consolidated equity stood at KRW 16.2 trillion with an annualized H1 ROE reaching 39.5%. In particular, our core domestic businesses, brokerage, wealth management and trading maintained balanced profit growth, once again setting new historical records. Pretax income from overseas subsidiaries driven by Q-o-Q growth in normalized earnings alongside valuation gains from investment assets reached an unprecedented KRW 609.1 billion. Key principal invested PI assets, including valuation gains from SpaceX, recognized approximately KRW 1.6407 trillion in gains. Combined client assets comprising KRW 693 trillion domestic and KRW 91 trillion overseas posted a total of KRW 784 trillion, recording of 19% growth Q-o-Q. Page 4 provides a summary of our financial performance for your reference later. Moving on, I will present the detailed results by business arm. I'll start with brokerage performance. Please refer to Page 5 of the earnings release. Brokerage fee income rose 36% Q-o-Q to KRW 625.6 billion, setting another all-time high. Domestic equity fee income grew 31% Q-o-Q to KRW 445.3 billion, while overseas equity fee income surged 52% Q-o-Q to KRW 180.3 billion. The average domestic equity commission rate edged down 0.2 bps Q-o-Q to 2.7 bps, whereas the overseas equity commission rate rose 0.6 bps Q-o-Q to 15.5 bps. Q2 average daily trading value in the domestic stock market rose 35% Q-o-Q to KRW 90.0 trillion, renewing an all-time high in the history of the Korean equity market again. Notably, trading values on KOSPI and NXT market jumped 44% and 49% Q-on-Q, respectively, accounting for 85% of the total market average daily trading value, which was KRW 90 trillion. Beginning September 14 this year, introduction of the aftermarket on KRX will extend the market into 8 p.m., and we expect an increase in trade volume as well. Total stock assets under custody, combining domestic and overseas equities, grew 23% Q-o-Q to KRW 438.9 trillion. Overseas equity assets grew 30% Q-o-Q to KRW 61.6 trillion, while domestic equity assets increased 22% Q-o-Q to KRW 377.2 trillion. Client margin loan balance declined by KRW 300 billion Q-on-Q to KRW 6.6 trillion with margin income reflected under interest income in our financial report remaining stable at KRW 90.8 billion, similar to the previous quarter. To respond to recent market volatility, protect client assets and maintain a stable trading environment, we adjusted our domestic equity margin rate structure. This proactive management measure aims to mitigate loss risks from excessive margin trading and cushion market shocks. And we will continue to monitor market conditions closely to provide a secure investment environment. Our domestic m.Stock platform ranked first in monthly active users for 7 consecutive months from last December through June, rapidly strengthening its client base. In Q2, alongside monthly active clients, frequent sign-ins were 7-plus days and active trading clients both increased, demonstrating that platform growth is advancing beyond simple user acquisition to sustained engagement and real investment activity. Going forward, we plan to convert this client base and traffic into trading activation, financial product sales and AUM growth, further solidifying our position as Korea's leading investment platform. Additionally, we are promoting the tokenization of various assets along with the development of supporting trading platforms and wallets. Furthermore, we plan to review potential collaboration with former Korbit, recently rebranded as Digital X, seeking multidirectional plans to create business synergies. Regarding STO preparations, for key product launches, including MMFs and beneficiary certificates, we are constructing a tokenization platform linked with the Korea Securities Depository, KSD. As the first domestic brokerage to integrate systems with KSD, we completed the interlinking necessary for KSD to execute securities rights management and electronic registration directly on our platform. Furthermore, to tokenize MMF products, the technology enabling the full process from MMF sales to profit distribution on a distributed ledger basis has been validated among other sequential building of foundation for commercialization. Next, moving on to wealth management's WM performance. Please refer to Page 6 of the earnings release. Q2 financial product sales fee income rose 16% Q-o-Q to KRW 131 billion, surpassing the previous quarter's record high. In particular, fee income from wrap accounts, mutual funds and retirement pensions accounted for 40%, 29% and 23% of total WM revenue, respectively, each breaking all-time high records once again. WM assets grew 14% or KRW 30.4 trillion Q-on-Q to KRW 254.4 trillion. Total client assets combining WM assets and [ stock brokerage ] assets surged 19% or KRW 111.6 trillion Q-o-Q to KRW 693.3 trillion, replacing last quarter's all-time high record. To achieve a sustainable mid- to long-term growth, we are steadily building a stable revenue base. Using domestic and global AUM expansion as our core foundation, we are continuously raising the proportion of fee-based revenue centered on wealth management fees. Going forward, expanding client assets will mitigate revenue volatility and establish a resilient earnings structure over the mid- to long term. As of the end of June, total pension assets increased by KRW 16.5 trillion Q-on-Q to KRW 80.8 trillion with retirement pensions at KRW 52 trillion and personal pensions KRW 28.8 trillion. Despite an increasingly competitive market environment, our retirement pension reserve growth rate over the past year exceeded 60%, about 2.5x the market average. Since 2020, our CAGR has also reached approximately 30%, showing growth about twice as high as the market. Of our total pension assets, ETFs account for 59%, surging by over 200% compared to the end of 2024. The pension business is structured so that reserve increases lead to steady fee income growth. As ETFs trading, model portfolios, robo-advisers, default options and other asset allocation services expand, additional revenue bases are strengthened as well. Moving forward, beyond simply growing our volume, we plan to continuously reinforce this snowballing growth structure where pension asset growth accelerates revenue growth. In the WM arm, we are positioning advanced digital PB organization at the forefront to expand existing in-person focused WM services into non-face-to-face and online areas. We continue to refine hyper-personalized solutions so clients can experience expert-level hands-on wealth management without physically visiting a branch. Next, moving to trading and other financial income. Please refer to Page 7 of the earnings release. Trading and other financial income comprises gains and losses from traditional trading and equities, bonds, derivatives as well as sales and trading and flow trading on a separate basis. It also includes FX income and valuation disposal income from separate basis principal investment and IB-held assets. Total trading and other financial income surged 107% Q-o-Q to KRW 836.9 billion. This includes KRW 111.3 billion in dividend and distribution income and KRW 725.5 billion in trading and other financial income. Profitability improved across all trading desks Q-o-Q. Within trading income, equity trading accounted for approximately 46%. S&T, sales & trading, 31%; management gains from IMA and promissory notes, 7%; bond trading, 6%; and others took up 10%. The bond balance remained rather flat Q-o-Q at KRW 42.8 trillion. Despite domestic and global budgetary policy shifts and heightened rate volatility in Q2, thanks to conservative positioning, increased hedging and agile trading aligned with market conditions, we delivered solid returns Q-o-Q. In the second half of 2026, we will maintain a stability-focused portfolio while also flexibly capturing revenue opportunities as market dynamics evolve. In Q2, despite sectoral divergence in domestic equities with daily average trading value rising 59% Q-o-Q to KRW 28.3 trillion, the overall ETF market posted strong growth. Although market volatility pose challenges in disparity ratio and liquidity management, we capitalized on volatility and generated stable returns in ETF market making. Notably, this quarter, leveraging our global network through Chinese corporate IPOs, Taiwan arbitrage and cross-border exchange arbitrage, we continued to build differentiated revenue streams. In the second half of the year in anticipation of potential crypto spot ETF approvals, we will monitor regulatory updates while preparing LP and hedging trading businesses. At the same time, we plan to adapt to extended trading hours and ETF trading on the NXT market while addressing shifts in investment demand by expanding principal partially protected noncomplex ELFs and other retirement pension-dedicated products. Next is consolidated PI valuation gains. In Q2, in valuation gains from innovative companies, we recorded KRW 1.6407 trillion. This includes, based on its end of June closing, price of $178.86, KRW 1.6242 trillion in valuation gains from SpaceX-listed equity. SpaceX recently experienced short-term supply-demand pressure following post-IPO lockup expirations, and we acknowledge market concerns. And with the larger positioning, the volatility is leading to concerns about how it's going to impact the income. However, the current share price or our acquisition price was $34 and the valuation price at the end of Q1 was $105. Despite the lockup, we were able to attain a quite high price, and the price is currently very closer to the offering price of $135. So the release is taking place on a quarterly basis. So SpaceX might impact our income negatively or profitably, but SpaceX is actually going to enjoy a dominant and monopoly position, thanks to Starlink and the data center and Grok AI. All things considered, it has a very diverse vertical across AI businesses. So on an annual basis, it is going to potentially and most likely impact our revenue base quite positively in Q2. In 3 companies listed on the Hong Kong Stock Exchange, we've made new cornerstone investments. These are AI and bio-health care unicorns with strong growth potential in future tech ecosystems. With stricter Hong Kong IPO listing standards, the quality of listing candidates is expected to improve. Leveraging our track record and market reputation in Hong Kong, we continue to secure premium cornerstone opportunities unavailable to standard institutional investors. Based on this competitive edge, we plan to selectively increase the cornerstone investments across China and Hong Kong. Next, moving on to IB performance. Please refer to Page 8 of the earnings release. IB fee income grew 65% Q-o-Q to KRW 42.8 billion. In Q2, despite market headwinds, such as KOSDAQ sluggishness and commodity inflation, limiting deal flow, driven by underwriting fee, M&A advisory fees and IPO fees, performance improved Q-o-Q. In IPOs, we completed 3 KOSDAQ listings in Q2, bringing H1 total to 5, while securing a healthy pipeline with 7 additional lead mandate contracts. In alternative investment, despite reduced deal sourcing opportunities due to a sluggish domestic real estate PF market, we are actively pursuing revenue opportunities through AI national infrastructure, data center development projects and state-backed guarantees from Korea Housing & Urban Guarantee Corporation and Korea Housing Finance Corporation. Corporate lending income, classified as interest income in reports, increased 33.5% Q-o-Q to KRW 36.3 billion. Venture capital commitments continue to expand significantly above regulatory minimums. We will remain committed to providing growth capital, a core mandate for brokerages, through vehicles such as the National Growth Fund. Next, moving on to overseas subsidiaries performance. Please refer to Page 9 of the earnings release. Overseas subsidiaries posted a record pretax income of KRW 609.1 billion in Q2, up 150% Q-o-Q. The overseas contribution to total consolidated pretax income grew by 6 percentage points Q-o-Q to approximately 24%. Overseas net profit ROE reached 24.8% in Q-o-Q, up 10.8% Q-o-Q. Overseas subsidiaries recognized KRW 500.2 billion of SpaceX valuation gains in Q2. Including SpaceX, pretax profit was KRW 108.9 billion in Q1. Excluding SpaceX, pretax profit was KRW 86 billion, and an over 25% growth in normalized earnings was demonstrated Q-o-Q, reflecting steady momentum. By key region, pretax profit broke down as follows: U.S. 37%; Hong Kong 35%; London 18%; India 5%; and Vietnam, others 5%. Developed markets, U.S., Hong Kong and Europe driven by flow trading and PI investments accounted for 92%, while emerging markets focused on brokerage and WM made up 8%. Next, Q2 achievements. Key Q2 achievements for overseas subsidiaries, as I mentioned earlier, the Hong Kong subsidiary's launch of MAPS, a mobile platform designed to create traditional and digital assets in one place within RWA marketplace scheduled for future integration. Our Singapore subsidiary completed regulatory applications to expand its retail license scope and obtain a security token trading license while currently developing infrastructure for retail entry. Furthermore, in July, we launched an omnibus account service for foreign investors with UOB Kay Hian. Also in July, we completed incorporation of subsidiaries in Australia and Japan and are evaluating local brokerage acquisitions across developed markets. Lastly, SG&A expenses. Nonconsolidated SG&A expenses rose by KRW 327.7 billion Y-o-Y and KRW 172.4 billion Q-o-Q to KRW 670.4 billion. This reflects higher education taxes due to rate hikes, performance-based compensation tied to earnings growth and transaction taxes driven by higher trading volumes. Nevertheless, the SG&A to net operating revenue ratio declined 9.2 percentage point Q-o-Q from 53.8% to 44.6%, improving cost efficiency. This concludes Mirae Asset Securities' Q2 2026 Earnings Conference Call. Thank you.

[Operator Instructions] The first question will be by Mr. Yoon Yu-dong from NH Investment & Securities.