Mirae Asset Securities Co., Ltd. (A006800) Q4 FY2025 Earnings Call Transcript & Summary

Good morning. Thank you very much for joining the earnings conference call of Mirae Asset Securities. We will start with a presentation by the company followed by a Q&A session. [Operator Instructions] Now we will start the earnings presentation of Mirae Asset Securities for 2025 full year and Q4.

Yes. Good morning. I am Dong Chul Shin, Head of the ESG and IR team at Mirae Asset Securities. Thank you very much for participating at our 2025 Annual earnings call for Mirae Asset Securities. Joining us today are our CEO, Kim Mi-Seob of Mirae Asset Securities; and [ Kang-hyuk Lee ], Head of Business Innovation. Please be advised that simultaneous interpretation into English is being provided for international investors. Today's conference call will proceed in the following order. We'll start with a presentation on Mirae Asset Securities key strategies and business priorities for 2026, a review of 2025 performance results by business, followed by Q&A. The presentation materials for the 2025 annual earnings are available on our company's corporate website at ci.securities.miraeasset.com under the regular reports menu. A recording and transcript of today's call will also be posted on our corporate website. Please note that today's presentation contains forward-looking statements based on information available as of the time of preparation. Actual business results may differ due to changes in business environment or strategy. Now we will begin with remarks from our CEO. Please refer to Page 2 of the presentation materials.

Yes, Greetings. This is Mi-Seob Kim, CEO of Mirae Asset Securities. I'd like to thank you very much for attending Mirae Asset Securities 2025 earnings call despite your busy schedules. May I briefly take you through our performance for 2025. In 2025, we achieved record high performance with consolidated pretax income of KRW 2.080 trillion and net income of KRW 1,593.6 billion, up 70% and 72%, respectively, year-over-year. As of the end of 2025, shareholders' equity totaled KRW 13.5 trillion on a consolidated basis, up approximately KRW 1.220 trillion year-on-year, with ROE coming in at 12.4%, representing meaningful improvement in our capital efficiency. This is the result of generation of solid earnings across all of our business lines, including wealth management, pension, prop trading overseas, et cetera, without any overdue reliance on any single segment alone. Next, we will move on to our key strategic priorities for 2026. In 2026, we intend to pursue the following 4 priorities. First is to strengthen sustainable earnings structure. Second is to expand investments in innovative companies and provide more venture capital. Third is to lead innovation across both traditional and digital assets. Fourth, to enhance customer-centered management as well as protection and data security. Now allow me to elaborate more on our first priority of enhancing stable earnings structure, which has been proven through performance. In 2023, we delivered stable earnings across wealth management, pension, brokerage, trading and overseas business, achieving the highest record revenue and performance for full year 2025. Our client assets centered around wealth management and pension has been a key driver growing with our client assets growing to KRW 602 trillion. And our goal is to expand this further 17% year-on-year to KRW 700 trillion or more in 2026. On the trading IP and PI front, strengthening the stability of our earnings is the #1 priority initiative. For trade in particular, we intend to maintain a solid earnings contribution of 30% out of total earnings based on a solid revenue stream based on flow trading. Performance from overseas subsidiaries contributed to roughly 24% of total pretax income last year. As we deliver our 2030 target of KRW 500 billion pretax income earlier than planned. Going forward, we will continue to increase the overseas contribution to our total earnings mix to develop it into a key driver of ROE growth. And second, we will strengthen our role as a global investment specialist by expanding our investments into innovative growth companies and providing more venture capital. We have acquired differentiated investment capabilities, making direct investments into many global unicorns in and outside of Korea. In 2026, we will continue to make investments into innovative growth sectors, including AI, aerospace, not only in Korea but China, India and the U.S. as well. In particular, funds secured through investment assets will be reinvested into new drivers of future growth as we build an investment portfolio that is balanced across stability and growth in the long term based on a virtuous cycle. Also, as the financial industry overall faces a transition toward productive finance, we are committed to fulfilling our due role in the capital markets, leveraging our capabilities in providing venture capital, mostly through corporate financing as well as solid risk management to support growth of innovative businesses and contribute to enhancing market trust. Our third strategy is to lead innovation across global finance across both traditional and digital assets, to secure competitiveness for Mirae Asset Securities 3.0. The global financial industry is entering a phase of structural transition with traditional assets converging with digital assets. We have been moving preemptively at the forefront, positioning MTS as a key customer touch points and to enhance the competitiveness of our digital platform, where asset management, transactions and information access are seamlessly integrated. We will actively recruit outstanding IT and AI talent from the global market, established an overseas IT center as well to deeply embed AI in asset management and risk management as well. This will represent the strongest source of competitiveness from your asset securities going forward. And finally, on our fourth strategy of reinforcing protection of financial consumers and customer data management, amid widening volatility across both the domestic and global financial markets, we placed the greatest value in customer production as a responsible financial company. We have elevated our financial consumer protection organization as a division while investing more in terms of budget and headcount to strengthen our company-wide response. From the entire process -- across the entire process from product development and sales to after sales management, we have been internalizing customer-centric internal controls and risk management with strict protection of client assets and trust. And while, we strengthened our capabilities, expecting our client assets, we have been making strategic investments in digital transition and AI advancement as well. Last year, we received consulting on our data protection strategy, establishing a next-generation security road map whereby we increased our information protection budget by 26% Y-o-Y in 2026. We will go beyond simple expansion of infrastructure as we strengthen our fundamental confidence in preemptive management against security risks to better safeguard customer trust and shareholder value. With that, this concludes my presentation. Thank you for your attention. And I will now pass to our CFO, Mr. [ Kang-hyuk Lee ] to take us through our 2025 results from the respective business segments.

Good morning. This is [ Kang-hyuk Lee ], CFO and Head of Business Innovation. First, a look at our key highlights of 2025, which starts on Page 3 of the presentation. In 2025, for brokerage, WM, trading and financial income all set new record performance. Our overseas subsidiaries also recorded record performance in both developed and emerging markets and delivered highest performance since start of our overseas business. In the 2025, PI investment assets recorded fair value surplus for 4 consecutive quarters, realizing a total valuation gain of KRW 645 billion full year 2025. Page 4 is a financial summary provided for your reference. A comment that I would like to offer regarding the Mirae Asset Securities profit structure is that in the case of securities business, the way investment asset gains are reflected it to the business results is different from, for example, a manufacturing business and the equity method gains or some investment asset-related gains or losses are classified as nonoperating in accounting terms, but are in substance ordinary gains obtained through our core capabilities. Accordingly, rather than relying on only operating income, also looking at pretax income and net income will be a more accurate way of understanding actual fundamentals of the company. This is particularly so from your asset, which has a higher share of global business and investment assets and consolidated basis profit we believe our more appropriate measure than separate numbers. Next is a look at each division, starting from the brokerage on Page 5. Brokerage revenue was KRW 1.011 trillion, which is a 43% increase Y-o-Y and a new record high. 2025 domestic stock trading volume was KRW 26.2 trillion, which is a 37% increase Y-o-Y with particularly strong growth seen since the opening of the next trade market. Overseas stock was also strong around AI and semiconductor sectors and overall brokerage performance improved significantly Y-o-Y. Domestic brokerage revenue was KRW 567.6 billion, which is a 35% increase Y-o-Y. Overseas was KRW 443.4 billion, which is a 57% Y-o-Y increase. Domestic average commission rate was 2.9 bp, which is 0.02 bp fall from last year and overseas commission rate was 11.5 bp, which is a 1.2 bp increase from last year. Overseas brokerage balance exceeded KRW 5 trillion for the first time, and total brokerage balance was KRW 306.9 trillion, which is a 42% increase Y-o-Y. margin low net revenue, which is reflected as interest income was KRW 315.3 billion, which is a 28% [indiscernible] Next is a look at WM performance on Page 6. In 2025, WM revenue was KRW 342.1 billion, which is a 21% increase Y-o-Y. In particular, wrap account mutual funds and retirement pension sales commission revenue accounted for KRW 36 million and 25% of WM revenue, respectively, driving overall all-time high of the WM performance. WM AUM increased 11% Y-o-Y to KRW 21.1 trillion. Total client assets, which combined WM and brokerage assets increased 27% to KRW 518.1 trillion, which is another new record high. Engine assets, which is a key strategic focus for Mirae, continued upward trend, growing 35% Y-o-Y to KRW 57.8 trillion. According to the 2024 retirement pension statistics, the share of DB-type pensions fell below 50%, showing a shift to investment products and away from savings types. Well positioned to capture this shift, we quickly rose from #4 in 2024 to #1 in 2025 in terms of DC pension assets in the entire financial sector. And in 2025, attracted KRW 4,415.9 billion, which is 19.1% of all new DC inflow. Retirement pension revenue was KRW 86.9 billion, which is a 17% increase Y-o-Y. During the past 8 years, retirement pension profit grew 19% CAGR and balance also grew by a solid 24%. Pension reserve growth, combined with improving profitability is generating a snowball effect and solidifying a stable profit foundation from our pension business. The recent update to digital asset-related laws and regulations has need digital asset business requirements more clear, and we have already established a direction for our digital asset business and have participated in Digital Exchange Consortium in line with the stock and exchange regulatory framework. We will continue to implement step-by-step the specific business strategies in key areas including digital wallet, asset tokenization and table points. Next is a look at our trading and other financial income on Page 7 of the presentation. Trading and financial income includes the separate financial statement base income generated from trading -- traditional trading of stock bonds and derivatives, S&T and also separate financial statement-based guidance. It also includes direct revenue from prop trading FX gains and losses and IB asset gain and losses. Total trading and financial income was KRW 1,065.7 billion, which is a 14% increase Y-o-Y and the highest ever on a full year basis. This included KRW 383.6 billion of distribution and dividend income and KRW 882.1 billion of trading and financial income. In Q4, this restrictive market environment due to external factors, fixed income investment exceeded its annual target by focusing on rate hedging and conservative management strategy. Fixed income balance was KRW 39.6 trillion similar to last year. flow trading also continued to deliver solid profits with bullish domestic stock market and system upgrades given its low activity to market volatility, it helps also to stabilize our overall performance. In 2026, this year, we plan to expand market making and other businesses that connect overseas subsidiary, including Hong Kong and gradually build out a new digital asset product platform. Next is a look at consolidated PI asset fair valuation. During Q1 to Q3, PI assets delivered a run rate of around KRW 100 billion gain each quarter. As an investment Specialist Mirae Asset Securities generated more than KRW 1 trillion in gains last year from investments in innovative companies alone. After reflecting losses from overseas real estate and alternative assets, total full year PI investment asset gain was KRW 645 billion. In 2026, we expect positive results to continue even that the commercial real estate market is expected to show modest recovery and AI and other innovation industries are expected to continue growth. That said, we will heighten risk management against financial market volatility. From the very beginning, global diversification has been our key strategy, and we have focused on creating a virtuous cycle by investing capital earned from our investment portfolio back into other promising investments. This is how the investment business delivered so many achievements last year, and we will continue to actively search for high-quality assets in this rapid changing market to generate sustainable growth based on this virtuous cycle of capital investment. Next is a look at our IB performance on Page 8 or presentation. IB revenue decreased 10% Y-o-Y to KRW 167.4 billion. In 2025, major deals included a total 21 IPOs, including LT, sole guarantee insurance the ink phone company and into cell as well as some SDI new rights issue, an C&E acquisition refinancing and the Channa International business complex development product and Ecopro PRS. In Q4, additional gains were earned by exercising our warrants for Intucell and G2G Bio. Corporate loans, which are classified as interest income recorded KRW 96.3 billion, which is a 3% Y-o-Y fall. We are also planning to actively contribute to supply of capital to new growth middle market and SMEs by supplying IMA-linked products in line with the policy to drive increase in venture capital supply. For product financing, PF, we have been generating additional gains by monitoring and managing existing project sites, and we maintain a comprehensive and conservative stance towards new PF deals. Next is a look at overseas subsidiaries. This is Page 9. Overseas subsidiaries reported pretax income of KRW 498.1 billion, which is a 200% Y-o-Y growth. This is another record high and accounts for 24% of total consolidated pretax income. Q4 pretax income was KRW 199.1 billion, and 2025 overseas subsidiary ROI, which is based on net income with 8.2%. Last year, New York recorded KRW 214.2 billion, a record high from flow trading and investment asset valuation gain. The share of DIA, including U.S., Hong Kong and Europe, which with a stronger flow trading business accounted for 67% of pretax income. And the more brokerage-focused EM accounted for 33% of pretax income. By region, U.S. was 43%, Hong Kong, 17%, India, 14%; and Vietnam, 10% of total income. In 2026, this year, we plan to continue expansion of the S&T business while also gradually pursuing stable retail business expansion in DM and in EM accelerate the shift from existing brokerage business to WM business. We will also work on building the right platforms in time for digital asset-related laws that are being passed in DM. And on trading of global asset management platform as a foundation for mid- to long-term growth. And that completes our 2025 earnings conference call. Thank you.

[Operator Instructions] First question will be by Mr. Mingi Jeong from Samsung Securities.

Yes. This is Mingi Jeong, an analyst from Samsung Securities. First, I'd like to thank you for delivering good performance. I have three questions or so regarding your results. First of all, your investment assets or your investment into innovative tech companies. So I think last year, there was a significant contribution in terms of your total earnings from that segment. According to media reports recently this year, this or I see many other aspects that you own. Preparing to do an IPO, have M&As in the plan, so they may contribute to leveling up your fair value, the valuation side. So in terms of your internal view from an investment point of view, the exposure innovative tech companies. What kind of exit strategy are you thinking of method, about timing and criteria? And in case of exits, you mentioned how you want to build up a virtuous cycle of investments. But in terms of the use of proceeds, it could be used in value to shareholders, for example, it can be reinvested in part or it can be used to fund M&A for your main business. So what is your allocation strategy in the case of those exits? And the second question is regarding your investment into innovative companies. So in linkage with your domestic core business, Premier Asset Securities, as you said, in terms of investing in overseas tech companies, I think you're very strong. So apart from prop trading, how about in terms of retail investors, are there any means where you can offer joint investment opportunities? For example, to SpaceX to your retail customers. So will they be given any access into these opportunities to have past examples? And as a leader in IMA market going forward, for these types of new type of IMA offers, will you also be incorporating the innovative name in the IMA portfolio as well? And then regarding revision to the commercial code regarding the elation of treasury shares, a our ongoing discussion. So from your treasury stock holdings, not only shares bought back on the market, but the treasury stock, we have significant holdings from your past margin. So assuming calculation of treasury shares what kind of impact will it have in terms of your shareholder equity. How much of an equity deduction do you anticipate? And in the vent share cancellation actually becomes mandatory post legislation or regulatory change, could this potentially lead to any changes in your shareholder return policy?

Yes. Thank you for your questions. I think there were many questions mixed together. So regarding our investments into innovative companies, you asked about our ad strategy and use the proceeds in the event that we exited. So first, in terms of our overall strategy, we have a diverse array of investments into global innovative companies. Most of them are unlisted companies at the moment. So we see very bright prospects from these names, and they are already performing quite strongly. So we are not at this stage thinking seriously about the exit. But basically, in terms of our innovative tech companies, the exit, of course, will take place at a time where we see it to be the ideal timing. And then the funds that are recovered will be either reinvested into high-growth potential industries or could be used in M&A deals as well, again, to stably anchor a virtuous cycle of investments. And so we will be working to put in place this kind of virtuous cycle. And in terms of our innovation to innovative tech companies, this is a strength. So outside of crop trading, I think you asked about whether we can offer joint investment opportunities to retail investors as well. You asked whether we have any case studies you asked also about the linkage to our IMA business or whether that can be incorporated into our IMA products. So in terms of case studies, for example, already our prop trading or prop investments into domestic and global innovative counties. When we invest our principle, so solid assets, for example, space or perplexity for these solid investments, already, we have structured product offerings to our retail investors so that they could also take part. So although we cannot say that 100% of our projections have played out. For the most part, most of these investments have been delivering good results so far. It's not just us investing into innovative tech companies. But for the retail investors, we continue to provide them with opportunities to in invest LP, in VC funds. And as productive and venture capital become increasingly more important, we will be strengthening these types of offerings. They also offer tax benefits to the investors as well. So for our customer base, I think this will certainly be a good opportunity. So this, again, is something that we will reinforce going forward. And in terms of our IMF products, incorporating the innovative tech companies in the portfolio, obviously, that is something that we think can help enhance the return the yield certainly. So that is something that we are considering. That said, between the IMA products and the underlying assets, the regulatory authorities are requiring that does the alignment of maturity between the 2 sides. So it is what we have received guidance to strictly control that kind of maturity matching. And so because of that requirement, I think it may act as a certain constraint. We will see, as we go to see how much we can actually incorporate our innovative tech investments in our IMA product. And then not only individual companies, but some of our group affiliates are quite competitive in terms of discovery of innovative companies from the domestic market as well. So we want to use this kind of collaborative structure as a GP and LP with our affiliates to further boost our IMA return. And then the commercial code is currently pending the revised proposed revision. So you asked if the treasury shares from our past merger are canceled, how that will impact our equity and then upon regulatory change, you asked if share cancellation becomes mandatory, how that will affect our shareholder return. Well, the treasury stock from our past merger. Well, currently, we hold 110 million of treasury shares. If they're fully canceled, that will be equivalent to a reduction of KRW 450 billion in shareholder equity. But again, this proposal revision to the commercial code is still pending at the national assembly. For treasury stock from mergers, which we came to hold involuntarily just as a consequence of the merger, I think it is still very evenly divided, whether it will be included in the mandatory scope or not. For security companies, shareholder equity is actually a key source of competitiveness. So I do not personally think that increasing shareholder returns by resorting to reduction in shareholder equity is advisable. However, because shareholder returns is also very important, we will see when the legislation, the revision is finalized, and we will try to come up with the optimal plan that can be a win-win for both the shareholders and the company alike. We, of course, will always pay the maximum attention to shareholder returns. But I think invariably, it will constantly be subject to change, considering our share valuation where common shares are trading at a PBR of above 2x, to buy back and cancel treasury shares, no less common shares given the coalition, I don't think it will be in the interest of our shareholders, that is quite clear. So according to our shareholder return plan, we have our commitment to cancel 50 million shares up to next year's AGM. So we will complete that. And according to our value plan, we talked about using our profits available for dividends to buy back and retire a total of 100 million shares by 2030. But I think you will appreciate that given the current share price levels, we may have to -- we have to consider whether this is in the best shareholder interest or not. So we are examining our options from a multifaceted perspective. And as we observe development, if there is any change, we will communicate actively with the market.

We'll take the next question. The next question is Doosan Baek from Korea Investment Securities.

This is Doosan Baek of KIS. I also have three questions. First question is about your KRW 11 trillion of investment assets. We do know that you have KRW 11 trillion of investment assets, can you break that down in more detail, equity versus loan, domestic versus overseas? Also within that portfolio, are there any potential assets that you think need monitoring? And considering all of that, how much of a return do you expect from your investment assets? Second question may overlap with the previous question. This is about shareholder return again. You've just mentioned about treasury shares and do with it. But it seems that currently, the government policy prefers distribution and dividends. That actually is about the separate taxation on dividend income. Do you have plans of meeting the qualifications to become a high dividend company? Third question is about the Digital Asset, the Media Asset 3.0 strategy. not only at Mirae Asset Securities, but at the entire Mirae Asset Group, there is directly, indirectly connections with, for example, Tunamu and you're planning to also support rural asset or digital asset transaction as part of your one platform. I want to hear a bit more about your digital asset and platform strategy.

Thank you very much for those three questions. First about our investment assets. You've asked for a bit more color into the composition and expected return levels and any potential monitoring risk assets in the alternative asset side. To answer last question. As you mentioned, as of end of 2025, our total investment asset is around KRW 11 trillion. Equity versus loan is 8 to 2 and domestic versus overseas is about 5 to 5 roughly. Regarding returns from these investment assets, as you know, each asset is very, very different. And so it's difficult to give you, for example, an average return that we expect. But as we mentioned, thanks to the increase in fair value of our investments assets, especially the innovation company investments, we recorded a total of KRW 645 billion in gains 2025 even after accounting for some losses. Also, what I believe is most meaningful is that, on average, we're running at around KRW 163 billion gain each quarter throughout last year on average. Now the KRW 11 trillion of investment assets, when we look at that, that does include some alternative assets, real estate and infrastructure assets, that is around KRW 2.2 trillion alternative assets. And then corporate financing is around KRW 8.8 trillion. And regarding our alternative assets in the portfolio, we are monitoring them, but we don't see any investments that are at particular risk of loss. And then regarding the investments into innovative companies. There are some assets that we have that has gotten a lot of press coverage. Of course, we are limited in what we can offer in public settings, but SpaceX and xAI merger was recently announced publicly. I'm hearing that there are planning in the year. And if that happens, we are expecting a high upside. For xAI, you've probably heard from the media, we actually made a larger investment in xAI versus our investment into SpaceX. If the 2 companies merged, as announced, and if they are able to go through that IPO, I think we will have quite a lot of positive events coming from these investments throughout the year. Your second question was about our capital policy about the dividend and whether we plan to satisfy the requirements to become a high dividend payout company. These law revision for separate taxation of dividend income has been passed. Now personally, yes, the Korean government currently is emphasizing productive finance and we're also going through this huge transition to AI. It's at a magnitude similar or even surpassing what we experienced during the Industrial Revolution. Yes, at the end of the day, we are clearly aware that shareholder return is very, very important. But personally, I think that at this point, given the situation, this may not be the right time for us to focus more on dividend and other shareholder return over, for example, investments. So currently, we are studying from various angles what will be in the best interest of our shareholders ultimately, and the direction will be to determine soon through a BOD resolution. Now when it comes to shareholder return and enterprise value enhancements, there are many ways of achieving this depending on the situation. But looking at our current stock price level and domestic and external environment, we think that pursuing higher stock price through investment-driven growth in parallel with shareholder return appears to be the best approach. We have not yet discussed any renewals of our value of program. But if we see updates become necessary due to various external and internal factors, we will actively communicate this with the market when that time comes. Your last question was about our digital asset business, the Mirae Asset 3.0 as a bit more color on the direction. And we've already communicated through the media about the security token platform and digital wallets being a key foundation of what we plan to do. We want to use our security token platform and digital wallets to develop a business that provides various tokenized assets to market and customers, and this is what we refer to as a Media Asset 3.0. As you know, the framework for the STO business has already been established with the passing of the Capital Markets Act and the Electronic Securities Act. We plan to upgrade the security token platform and develop a stable business using a blockchain-based tokenizer engine that can efficiently tokenize high body assets. Also need to source high-quality underlying assets to tokenize and also develop products, we will initially target launch within Korea 3. For digital wallet, we will need to monitor how the regulation develops and we will be ready to introduce features as they regulatory available. Ultimately, we aim to provide clients with a seamless experience across all regions and all types. As already covered by the media, the media asset group at the group level is looking into acquire the virtual asset exchange Korbit. And this is because collaboration with such a virtual asset exchanges are critical in operating a digital asset business. The virtual asset exchanges also provide brokerage functions in addition to trading assets. And so in that sense -- so it's very likely that all these digital assets in the future will be traded over these virtual asset exchanges. And in that sense, being the only financial group to own a virtual asset exchange will be a unique [indiscernible] area for Mirae. The strength of the digital asset business is at, as demonstrated by Robinhood, with a competitive platform, it can compete on a global basis in the retail market. Now unlike Robinhood, we already have a large-scale assets. And so once we have the right platform, an attractive platform, we believe that we will be quite competitive on a global basis. Robinhood's market cap soared with its STO and on chaining of RWA. And we think that once on track, our digital asset business will grow into another stable and high-growth business model of its own right. And that completes my answer.

Yes. Due to limited time, we will end the call here. If you have any additional questions, please forward them to the ESG and IR team of Media Asset Securities. E-mail Address is the [email protected]. Thank you very much for joining our 2025 earnings conference call of Mirae Asset Securities. [Statements in English on this transcript were spoken by an interpreter present on the live call.]