[비즈한국] Major domestic securities firms have been busy recently pushing forward with businesses such as corporate bills and Investment Management Accounts (IMA). In contrast, LS Securities078020 (formerly eBEST Investment & Securities), a securities firm affiliated with a large conglomerate, has a relatively small presence. This is because its equity capital is less than 1 trillion won, making its scale small compared to major domestic securities firms. Amidst this, Koo Dong-hwi, CEO of LS MnM (43) and a member of the LS006260 Group owner family, was appointed as a non-executive director of LS Securities early this year. The appointment led to expectations that the group would step in to support LS Securities, but no news regarding such support has been heard yet.
LS Networks000680 acquired LS Securities for 129.9 billion won in January last year. The core businesses of LS Group are in the electrical, electronic, and materials sectors, far removed from the financial industry. For this reason, there were concerns about whether they would be able to lead LS Securities effectively.
Last year, these concerns appeared to become reality. LS Securities' net profit fell 42.01% from 28.7 billion won in 2023 to 16.6 billion won in 2024. While LS Securities cited decreased trading revenue due to market volatility and the additional setting aside of provisions for real estate project financing (PF) as reasons for the decline, it could not escape criticism from shareholders.
In March this year, LS Securities appointed Koo Dong-hwi, CEO of LS MnM and a member of the LS Group owner family, as a non-executive director. Some in the securities industry expected CEO Koo to act as a bridge for the group to provide support to LS Securities. CEO Koo has previous work experience at Woori Investment & Securities (now NH Investment & Securities005940).
At the time of Koo Dong-hwi’s appointment, the LS Securities board of directors explained, "CEO Koo Dong-hwi, who currently serves as CEO of LS MnM, an internal director of E1, and an internal director of LS Networks, possesses abundant experience in corporate management and a high level of understanding and insight into LS Group affiliates," adding, "Based on this experience and expertise, he is expected to drive the company's future growth."
Fortunately, LS Securities' performance has been improving since CEO Koo Dong-hwi joined. Net profit increased by 29.73% from 26.3 billion won in the first half of last year to 34.2 billion won in the first half of this year. However, it is assessed that there are still significant risk factors. Yoon So-jung, a senior researcher at Korea Investors Service, analyzed LS Securities, stating, "Among the real estate financial assets directly invested, the portfolio is largely composed of bridge loans where the conversion to primary project financing (PF) has been delayed for a long time resulting in delinquencies, or where licensing is delayed, and primary PF project sites with poor pre-sales rates or where construction progress is significantly below schedule." She added, "As real estate PF business feasibility assessments are conducted every quarter, there is an inherent burden of managing asset soundness centered on real estate finance."
The news of support from LS Group, initially anticipated by the securities industry, has not materialized. As LS Group’s main businesses are unrelated to finance, there are limitations to the synergy effect with LS Securities. Under current law, LS Securities cannot participate as an underwriter for IPOs (initial public offerings) of LS Group affiliates and can only participate as a member of the underwriting syndicate. The IPO underwriting syndicate plays a role in sharing the burden of underwriting and selling stocks with the lead underwriter and the issuing company.
However, there have been cases where other securities firms have received substantial support from affiliates, such as NH Investment & Securities receiving 650 billion won in capital injection from its parent company, NH NongHyup Financial Group. An official from LS Securities stated, "Rather than material help, since LS Securities was incorporated into LS Group last year, it seems we should approach this from the perspective of assimilating into the group."
LS Securities' performance could also influence the evaluation of CEO Koo Dong-hwi. LS Group has a structure where members of the owner family take turns serving as chairman. The first chairman was the late Koo Ja-hong, the second was Koo Ja-yeol, Chairman of the Board of LS Corp., and the third is the current chairman, Koo Ja-eun. All are second-generation owners, and the next chairman is expected to be a third-generation owner. CEO Koo Dong-hwi is the eldest son of Chairman Koo Ja-yeol.
Among the third generation, Koo Bon-woong, the eldest son of the late Chairman Koo Ja-hong, is considered the eldest legitimate successor. However, Koo Bon-woong does not participate in LS Group's management. For this reason, the identity of the next chairman to succeed Chairman Koo Ja-eun remains uncertain. If CEO Koo Dong-hwi proves his ability through performance, an opportunity may arise for him. LS Group remains tight-lipped regarding the next chairman.