Daewoo Securities 2Q FY2008 Earnings Release. 2Q FY2008 : July 2008 ~ September 2008

Transcription

1 Daewoo Securities 2Q FY2008 Earnings Release 2Q FY2008 : July 2008 ~ September 2008

2 Table of Contents I. Company Overview 2 II. Business Performances 5 This presentation material is prepared by Daewoo Securities Co., Ltd. for the information of current and future investors of the company. The contents are preliminary figures and forwardlooking statements based on Daewoo Securities internal projection. All such statements are subject to certain risks and uncertainties that could cause actual results to differ from those in this material. 1

3 I. Company Overview 1. Company Profile 3 2. Overseas Network 4 3. Organization Chart 5 2

4 Company Profile I. Company Overview Established SEP 23, 1970 (Listed in 1975) Financial Highlights (KRW tln) FY07 FY06 (KRW bln) FY07 FY06 CEO SungTae Kim (May 2007) Total Assets Shareholder s Equity Operating Ordinary Credit Rating AA (Korea Ratings: Sep. 2007) Paidin Capital Net CCC+ AUG 99 BB BBB A A A+ AA AA JUN 00 APR 02 NOV 04 DEC 05 MAY 06 JUN 06 SEP 07 Market Capitalization (as of Sep. `08) Market Cap.(KRW tln) Common Shares 3.21 Preferred Shares 0.09 Total 3.30 Share Price (KRW) 16,900 6,490 Shareholder Structure Outstanding Shares 190,100,891 14,075, ,176,641 Etc. 49.1% Foreigners NPC 8.9% 2.9% KDB 39.1% Number of Employees (head count) Sep. 08 Branches 1,946 Headquarter 1,335 March 08 1,858 1,253 March 07 1,825 1,085 (Common shares, as of Sep. 2008) Total 3,281 3,111 2,910 3

5 Overseas Network I. Company Overview Number of branches and alliances Domestic Network Overseas Network Global Alliance 124 branches (10 Wealth Managaement Centers, 1 IB Center, 3 Representative Offices) 3 Subsidiaries (Hong Kong, New York, London), 2 Representative Office (Tokyo, Ho Chi Minh) 8 Financial Institutions in Japan, China, Indonesia, Malaysia, Vietnam, Kazakhstan, Brazil Kazakhstan Daewoo Securities Strategic Alliance With Halik Finance United Kingdom Daewoo Securities LDN DWS Rep Office in HCMC DWS Strategic Alliance With BVSC Malaysia Daewoo Securities Strategic Alliance with CIMB China Daewoo Securities Strategic Alliance With Galaxy Securities & ICBC Korea Daewoo Securities Vietnam Hong Kong Daewoo Securities HK Indonesia ETrading Japan DWS Rep Office in Tokyo DWS Strategic Alliance With MUFJ USA Daewoo Securities NY Brazil Daewoo Securities Strategic Alliance Itau Banking group Gangseo Gangbuk 17branches 16branches 16branches Gangnam 17branches Honam 11branches Gyeonggi Jungbu 13branches Gyeongbuk 15branches Gyeongnam 19branches 4

6 Organization Chart I. Company Overview Retail Business Unit Individual Brokerage Equity, futures, option brokerage business to individual investors (Offline business in 124 domestic branches, Online business through HTS) General Meeting Board of Directors Wholesale Business Unit Institutional Brokerage International Brokerage Financial Products Wholesale Equity, futures, option brokerage business to Institutional Investors Equity, futures, option brokerage business to International Investors Financial products sales (Beneficiary certificates, Repurchase agreements, Wrap Accounts, and etc.) for Institutional Investors Pension Business Pension consulting and planning business CEO Corporate Finance Capital Market Relationship managers for IB related deals Product managers for equity and debt capital market Investment Banking Business Unit Project Financing M&A Domestic and International project financing M&A business Principal Investment Principal Investment, Dealing Room Steering Committee Global Business Strategic alliances with oversea companies, international finance Compensation Committee Outside Director Nomination Committee Trading Business Unit FICC Trading Equity Derivatives Trading Fixed sales and trading, FICC derivatives management Equity structured products, ELW, derivatives sales Risk Management Committee Research Center Research reports published by sector and market Audit Committee WM Consulting Institute Research reports published by sector and market 5

7 II. Business Performances 1. Earnings Summary Brokerage Wealth Management Investment Banking Expenses 16 6

8 I. Financial Highlight Summarized Statement Highlights Net Commissions (KRW bln, %) Brokerage Commissions IB Commissions 1) WM Commissions 2) Structured Securities 2Q FY Q FY Change QoQ (%) 32% 24% 14% 42% 50% 2Q FY Change YoY (%) 46% 50% 24% 9% 11% The global financial turmoil brought an overall economic deceleration in the 2Q of fiscal year In consequence, the Korean financial market also showed great instability, with interest rates of corporate bonds and bank debentures hiking and creditspread widening. Commission Expenses IB Gain or Loss of Sales and Valuation of Securities /Loss % 9% % 25% Hence, valuation losses in bonds brought Daewoo Securities to record net loss in the 2Q amounting KRW24.1 bln. ( Refer to p.8~17 for details on each business sector) Others % % % % Operating Net nonoperating income % % Others 2% before Tax Tax Expenses Net (Loss) % IB Commissions 6% Brokerage 45% 1) IB Commissions = Underwriting commissions + Consulting fee + Underwriting commissions on debentures + Other commissions 2) WM Commissions = Commissions on beneficiary certificates + Management fee on wrap account + Fees on sales of structured securities 3) The above figures have not yet been audited by independent auditors. WM 18% 7

9 II. Brokerage Business 1 Brokerage Market Share Brokerage Commission Revenue Turnover Market Share Commission Revenue Market Share Quarterly 10.2% 8.2% 6.8% 7.0% 6.7% 6.4% 7.1% 6.1% 6.6% 6.1% Brokerage Commissions Average Daily Trading Value Individual Portion in Mkt 2Q FY bln 6.3tln 52% 1Q FY bln 7.2tln 57% Change QoQ (%) 24% 14% 5%p 2Q FY bln 8.9tln 65% Change YoY (%) 50% 29% 13%p Yearly 8.6% 8.1% 7.7% 6.6% 7.1% 6.3% FY06 FY07 FY08 1H The Korean stock market experienced a downturn in the 2Q with individual investors taking 52% of the total market turnover, and average daily trading value marking KRW6.3 tln, down by 5%pt and 14%, over the previous quarter respectively. Consequently, Daewoo s brokerage commission market share decreased 1%pt to record 6.1%, and commission revenue decreased 24% to record KRW83.1 bln. Daewoo s second quarter turnover market share sustained similar figures from previous quarter recording 6.1%, highly contributed to the steady performances in institutional and retail online performances. 8

10 II. Brokerage Business 2 Market Share by Investor Type Highlights 12.6% 12.1% Retail Market Bearish market conditions in the 2Q brought down the individual investor proportion in market turnover. Especially because Daewoo has competitiveness in the retail business, its retail commission market share was effected with a 1.0%pt decrease. ( 2 nd quarter retail commission market share:10.1%) 10.5% 11.1% 10.1% Retail (Commision MS) Opening its discount brokerage service Direct we, the company is seeing a steady rate of increase in new accounts, showing positive signs to the growth of online business and client base. ( Average daily new accounts : Sep. 100 Oct. 250 Nov. 423) 5.4% 5.2% 5.2% 5.5% 6.6% Institutional (Turnover MS) Institutional Market Daewoo recorded the highest institutional market share in its history marking 6.6%, highly contributed to the growth in all areas of equity, futures and option orders. 1.7% 3.0% 2.4% 2.1% 1.9% International (Turnover MS) Moreover, Daewoo s institutional investor brokerage team was awarded the Best Institutional Investor Team for the first half of 2008 and the last 7 consecutive terms. ( Awarded from Hankyung Business) International Market Market share of international investors maintained a similar level over the previous quarter amounting 1.9%. In order to strengthen competitiveness in international business, Daewoo expanded its efforts by opening prime brokerage and DMA service. 9

11 II. Brokerage Business 3 Turnover Breakdown by Investor Type Retail Business : Online vs Offline Turnover Turnover 4% 9% 9% 8% 8% 12% 15% 15% 13% 22% International Institutional 64% 65% 70% 67% 74% Online 84% 78% 76% 77% 71% Retail 36% 35% 30% 33% 26% Offline Commissions Commissions 3% 5% 5% 5% 5% 5% 6% 7% 7% 10% International Institutional 33% 34% 39% 36% 43% Online 92% 90% 88% 88% 85% Retail 67% 66% 61% 64% 57% Offline 10

12 III. Wealth Management Business 1 EndBalance of WM Products Highlights ` * Etc. : REITs, Shipbuilding mutual funds included (KRW tln) Trust/Pension Etc. CD/CP/Bonds RP ELS Wrap Mutual Funds Earnings WM commission revenue decreased 42% over the quarter to record KRW25.6 bln, highly due to the decrease in the issuance of ELS(equity linked securities) products, included in structured securities. Structured Securities The total issuance amount of ELS decreased significantly, in accordance to tightened risk management policies, rooted from unstable market conditions. Although Daewoo maintained the top tier market share of 13% in ELS issuance, the downsized market size effected Daewoo s structured securities commissions to decrease 50% quarteronquarter, amounting KRW17.1 bln. Mutual Funds Due to unfavorable market conditions, Daewoo s mutual fund balance decreased 13% over the quarter to KRW6.2 tln. In result, mutual fund commissions recorded KRW5.2 bln in the 2Q. CMA After Daewoo launched its RP type CMA in September, the total number of CMA accounts increased 44% over the quarter to reach 266,355 clients and marking a total balance of KRW2.4 tln. 11

13 III. Wealth Management Business 2 Etc. Equity Equityhybrid Bondhybrid Bond MMF Breakdown on Mutual Funds (Valuation amount/ KRW tln) (KRW bln) WM related commissions Beneficiary Certificates Wrap Accounts Trust/Pension WM Commissions 2Q FY Q FY Change QoQ (%) 42% 21% 7% 11% 2Q FY Change YoY (%) 9% 21% 7% 40% Structured Securities % % 1) Mutual Funds Etc. : Property, Commodities, Fund of Funds included ELS Issuance Market Share Issuance Amount (tln) Market Share End Balance (tln) CMA EndBalance 266,355 21% 21% Number of Accounts % % % 108, , , , `07.09 `07.12 '08.03 `08.06 `

14 III. Wealth Management Business 3 Number of Clients Market Pension Balance Number of Clients 22,326 (KRW bln) Defined Benefit Defined Contrib. IRA Total (2Q 2008) 20,764 Banks % 18,778 19,515 Insurance Securities % 11.2% 16,915 Total % Accumulated Balance Pension Business Highlights Accumulated Balance(bln) Daewoo s accumulated balance in pension increased KRW35.2 bln in the fiscal year 2008 and recorded the largest growth rate among securities companies. The company secured 22,326 clients, increased by 1,562 clients in the second quarter. Daewoo was chosen as the main pension partner for employees of Andong MBC, KNN (Kyungnam Broadcasting), Jeju Province Development Corporation and etc. 13

15 IV. Investment Banking 1 Underwriting IB League Table IB Commission Revenue Underwriting Amount & Market Share (KRW bln) Corporate Bonds FY2008 2Q %, Rank 3 rd FY2008 1Q 89 11%, Rank 1 st FY2007 2Q 59 9% (KRW bln) IB Related Commission Revenue Underwriting Consulting Fee FY08 2Q FY08 1Q QoQ 14% 35% 71% FY07 2Q YoY 50% 7% 90% ABS Right Offerings 61 22%, Rank 1 st 24 38%, Rank 1 st 85 28%, Rank 1 st 15 14%, Rank 3 rd 39 12% 6 6% Debenutres Others IB related commissions decreased 14% over the previous quarter amounting KRW12.1 bln. This is due to conservative business practices on new project financing deals, which fees are realized in other commissions % 25% % IPO 14 62%, Rank 1 st 2 2% Daewoo successfully managed the IPO of LG Innotek, and the corporate bond issuance of GS Caltex and Kia. In result, underwriting commissions increased 35% to record KRW5.6 bln. Source : Bloomberg In the ABS business, on the back of differentiated structuring capabilities the company once again recorded the dominating 22% market share, leading the industry for 4 consecutive years. 14

16 IV. Investment Banking 2 Net Gain/Loss on Securities Net Gain/Loss on Securities Investment Status (KRW bln) FY08 2Q [as of Sep. `08 / KRW bln] Invested Amount No. of Deals Representing Deals Net Gain/Loss on Securities Bond Structured Securities, etc Equity Fixed Daewoo E&C (200bln), Renaissance #1 PEF, etc Project Financing, Convertible Bonds, Bond Warrants, etc. Due to unfavorable conditions in the global financial market in the 2Q, interest rates on corporate bonds and bank debentures hiked and credit spread widened. Hence, Daewoo realized valuation loss in bonds amounting KRW62.8bln. Etc. Total Infra, Real Estate related Funds Holding cash and cash equivalents amounting over KRW1 tln, the company secures sufficient liquidity. As Daewoo plans to hold these bond till maturity, the majority of these valuation losses will be recovered. Korea Treasury Bond (3Y) June ` % September ` % Growth 0.16pt 72 Proprietary Trading Monthly Average Equity Operation Amount (KRW bln) Bank Debentures (3Y) Rate Swap (3Y) KTBIRS Spread 6.40% 5.73% 16.95pt 7.53% 5.50% 24.00pt +1.13pt 0.23pt 7.05pt

17 V. & Client Assets Total Client Assets (KRW bln) FY08 2Q FY08 1Q QoQ FY07 2Q YoY (endbalance / KRW tln) `08.09 `08.06 QoQ `07.09 YoY % % income includes interest on loans, bonds, deposits, receivables and etc. income of 2Q decreased 9% quarter on quarter to record KRW59.2 bln, however excluding the dividend income realized in first quarter interest income figures are similar to that of the previous quarter. Securities in custody Trustor securities in custody Saver securities in custody Beneficiary securities in custody Others Customer s deposit % 10% 9% 33% % 24% 33% 2% 20% 25% Total % % Client Loan Balance Retail HighNet Worth Clients Net Asset Value (KRW tln) Credit Loan Other Loan # of Customers (KRW bln) ,744 38,637 37,724 34,579 34, , , `07.03 `07.09 `08.03 `08.09 Mar.`07 Jun.`07 Sep.`07 Dec.`07 Mar.`07 Jun.`07 Sep.`07 * HighNet Worth Clients are retail clients holding more than KRW100 mln in assets 16

18 Expense Expense Highlights (KRW bln) Other Variable Salary 2Q fixed salary stayed at a similar level with the previous quarter. Whereas variable salary dropped 76% to record KRW5.3 bln, mainly due to decreased incentive payments. As for expenses excluding salary, Daewoo recorded KRW96.4 bln, 14% decrease over the previous quarter in contribution to companywide costcut efforts Fixed Salary Number of Employees (head count) Other Variable Salary Fixed Salary 3,093 3,086 3,111 1,923 1,887 1,858 1,170 1,199 1,253 3,265 3,281 1,960 1,946 1,305 1,335 Branch Headquarter FY06 FY07 FY08 1H Sep.`07 Dec. Mar.`08 Jun. Sep. 17

19 Summarized F/S & Ratios Statement (KRW bln) Annual Operating Revenue 824 1,858 2,765 3, , , Operating Expense 735 1,472 2,310 3, , Net Commissions Brokerage Commissions IB Commissions WM Commissions Commissions on Structured Securities Commission Expense Net gain/loss on valuation and sales of securities Etc Operating Non Operating Net Before Tax Tax Expense Net EPS(KRW) Balance Sheet (KRW tln) Total Assets Total Liabilities Total Shareholder's Equity Net Capital Ratio (NCR) Net Capital Ratio (%) Net working capital (KRW bln) Riskweighted assets (KRW bln) ,131 2,318 1, , % 592% 621% 482% 531% 514% 621% 513% 493% 495% 476% 463% 471% 962 1,227 1,332 1,531 1,322 1,166 1,332 1,210 1,377 1,513 1,543 1,566 1,

20 Thank You Daewoo Securities IR Team Tel: / 3903 Fax: