Meritz Securities Co. ranked first in terms of return on equity (ROE), surpassing large securities firms with equity capital of more than 3 trillion won (US$2.49 billion). What is the secret of Meritz Securities’ success? It is largely due to outstanding performance in real estate project financing (PF). The company posted 258.6 billion won (US$214.69 million) in cumulative operating profits in the third quarter last year and about a third of them came from the real estate sector.
Meritz Securities’ project finance division, which leads real estate PF, has generated the most revenue for a single business unit every year. The division consists of 19 employees with wide working experience who worked for construction firms, engineering companies and banks before.
Yeo Eun-Seok, head of project finance division, said, “We visit the scene at least three to four times and conduct a thorough review. We also make quick decision as we finish off two to three weeks’ worth of work done by other financial companies in a week. Those are our driving force of improving the competitiveness.” Based on it, the division arranged a total of 50 PF and consulting projects last year. The size of PF loans alone reached 4.06 trillion won (US$3.37 billion).
The project finance division is planning to carry out profitable real estate-centered businesses this year again. Yeo said, “We set up the deal portfolio worth over 1 trillion won (US$830.22 million) in the first quarter this year alone. We will also actively participate in projects led by local governments.” In addition, it is considering establishing profitable real estate funds for men of wealth.
However, the size of contingent liabilities, which can be considered future liabilities as real estate PF projects grows bigger, is also on the increase. In this regard, Yeo said, “As the size gets bigger, it seems risky. But, they are risk free assets that most of them are included in underlying mortgages. They can withstand even when the financial crisis comes up.”