Daewoo Securities 2Q FY2008 Earnings Release 2Q FY2008 : July 2008 ~ September 2008
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
I. Company Overview 1. Company Profile 3 2. Overseas Network 4 3. Organization Chart 5 2
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 12.1 2.4 9.0 2.1 Operating Ordinary 462.1 463.2 455.2 470.8 Credit Rating AA (Korea Ratings: Sep. 2007) Paidin Capital 1.0 1.0 Net 336.8 446.1 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 14,075,750 204,176,641 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
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
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
II. Business Performances 1. Earnings Summary 06 2. Brokerage 07 3. Wealth Management 10 4. Investment Banking 13 5. 15 6. Expenses 16 6
I. Financial Highlight Summarized Statement Highlights Net Commissions (KRW bln, %) Brokerage Commissions IB Commissions 1) WM Commissions 2) Structured Securities 2Q FY08 104.2 83.1 12.1 25.6 17.1 1Q FY08 153.2 110.0 14.0 44.4 34.3 Change QoQ (%) 32% 24% 14% 42% 50% 2Q FY07 191.8 165.7 16.0 28.1 19.1 Change YoY (%) 46% 50% 24% 9% 11% The global financial turmoil brought an overall economic deceleration in the 2Q of fiscal year 2008. 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 16.6 86.3 59.2 15.3 32.8 64.8 9% 9% 17.9 9.2 47.4 7% 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 3.7 3.6 4% 3.3 12% 107.0 128.7 17% 150.6 29% Operating Net nonoperating income 26.2 2.0 60.2 2.2 9% 101.1 1.0 97% Others 2% before Tax Tax Expenses Net (Loss) 24.1 6.2 18.0 62.4 17.7 44.7 102.1 28.0 74.1 29% 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
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 FY08 83.1bln 6.3tln 52% 1Q FY08 110.0 bln 7.2tln 57% Change QoQ (%) 24% 14% 5%p 2Q FY07 165.7bln 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
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
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
III. Wealth Management Business 1 EndBalance of WM Products Highlights 21.1 21.3 19.7 2.5 3.5 1.1 1.15 1.19 1.9 3.2 2.3 3.1 1.8 ` 4.0 3.4 4.1 23.0 2.9 1.2 2.0 22.2 2.8 1.0 2.1 3.3 3.3 2.0 2.0 4.7 4.7 6.2 6.4 6.6 7.1 6.2 * 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
III. Wealth Management Business 2 Etc. Equity Equityhybrid Bondhybrid Bond MMF Breakdown on Mutual Funds 1.2 0.3 1.1 1.4 0.4 1.0 1.4 1.5 0.3 0.3 1.1 0.9 1.3 1.3 (Valuation amount/ KRW tln) 7.1 6.4 6.6 6.2 6.2 2.2 1.9 1.6 1.9 2.3 1.3 1.2 1.3 0.3 0.7 1.1 (KRW bln) WM related commissions Beneficiary Certificates Wrap Accounts Trust/Pension WM Commissions 2Q FY08 25.6 5.2 2.5 0.7 1Q FY08 44.4 6.6 2.7 0.8 Change QoQ (%) 42% 21% 7% 11% 2Q FY07 28.1 5.8 2.6 0.5 Change YoY (%) 9% 21% 7% 40% 0.6 0.5 0.5 0.9 0.5 Structured Securities 17.1 34.3 50% 19.1 10% 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 1.4 18% 1.0 1.2 18% 1.7 13% 108,629 1.8 166,781 143,923 1.7 1.7 185,112 2.1 2.4 0.6 `07.09 `07.12 '08.03 `08.06 `08.09 12
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 107.1 69.3 23.5 199.8 43.4% 18,778 19,515 Insurance Securities 173.6 22.3 27.7 29.0 7.3 0.3 20805 5107 45.3% 11.2% 16,915 Total 303.0 126.0 31.1 460.0 100.0% Accumulated Balance Pension Business Highlights Accumulated Balance(bln) 23 39 44 74 79 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
IV. Investment Banking 1 Underwriting IB League Table IB Commission Revenue Underwriting Amount & Market Share (KRW bln) Corporate Bonds FY2008 2Q 109 12%, 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 12.1 5.6 0.6 FY08 1Q 14.0 4.2 1.9 QoQ 14% 35% 71% FY07 2Q 16.0 6.0 6.2 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 0.1 5.8 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. 0.1 7.8 22% 25% 0.1 3.7 57% 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
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 86.3 62.8 23.5 Equity Fixed 237.0 270.5 21 30 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 59.4 566.9 4 55 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 `08 5.90% September `08 5.74% 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 41 25 40 12 15
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 59.2 64.8 9% 47.4 25% 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 52.7 45.2 0.2 6.0 1.2 1.2 58.8 50.2 0.2 6.6 1.8 1.2 10% 10% 9% 33% 67.2 59.7 0.3 6.1 1.0 1.6 22% 24% 33% 2% 20% 25% Total 53.9 60.0 10% 68.8 22% Client Loan Balance Retail HighNet Worth Clients Net Asset Value (KRW tln) Credit Loan Other Loan # of Customers (KRW bln) 338 35,744 38,637 37,724 34,579 34,459 429 1060 487 467 403 383 316 28,390 17 22 24 24 25 23 28,347 19 233 391 429 388 456 264 `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
Expense Expense Highlights (KRW bln) 150.6 45 55 130.1 128.7 119.0 46 43 50 36 24 22 107.0 43 5 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. 51 49 52 57 59 Fixed Salary 537.1 Number of Employees (head count) 376.5 127 105 144 171 160 206 235.6 93 28 115 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
Summarized F/S & Ratios Statement (KRW bln) Annual 200503 200603 200703 200803 200609 200612 200703 200706 200709 200712 200803 200806 200809 Operating Revenue 824 1,858 2,765 3,693 767 624 687 955 1,152 822 816 1,011 882 Operating Expense 735 1,472 2,310 3,231 701 563 436 784 1,051 717 732 951 908 1. Net Commissions 262 598 437 724 101 109 112 203 192 196 134 153 121 Brokerage Commissions 243 492 374 608 86 91 93 178 166 163 101 110 83 IB Commissions 31 47 41 70 12 15 7 23 16 16 16 14 12 WM Commissions 18 115 69 116 14 15 22 19 28 38 32 44 26 Commissions on Structured Securities 0 96 46 77 9 9 16 11 19 25 23 34 17 Commission Expense 29 56 46 70 11 12 11 16 18 20 15 15 17 2. Net gain/loss on valuation and sales of securities 37 36 105 74 14 4 84 68 9 9 5 33 86 3. 69 142 278 214 40 38 160 47 47 49 72 65 59 4. 282 390 370 537 89 91 102 137 151 128 121 129 107 5. Etc. 2 0 6 13 0 0 6 8 3 4 5 4 4 Operating 89 386 456 462 66 60 260 172 101 105 84 60 26 6. Non Operating 238 8 21 1 13 7 14 0 1 11 10 2 2 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) 149 395 471 463 80 68 243 172 102 94 95 62 24 0 16 25 127 10 2 34 51 28 28 21 18 6 149 410 446 337 90 66 209 122 74 67 74 45 18 783 2,131 2,318 1,743 474 348 1,070 640 390 352 742 940 28 5.05 6.50 9.00 12.07 8.93 9.20 9.00 10.78 11.07 11.96 12.08 13.70 14.09 3.75 4.76 6.89 9.66 7.08 7.29 6.89 8.63 8.78 9.62 9.66 11.32 11.75 1.29 1.73 2.11 2.43 1.85 1.91 2.11 2.16 2.29 2.34 2.43 2.38 2.34 460% 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 1,550 209 207 214 318 249 227 214 236 280 306 324 339 329 18
Thank You Daewoo Securities IR Team Tel: +8227682103/ 3903 Fax: +8227682101 Email: irteam@bestez.com 19