UPDATE 2-Daiwa, Samsung Sec prosper but competitive threat seen

* Daiwa net profit 2 bln yen vs 7.1 bln yen consensus

* Daiwa boosts trading profit

* Samsung Secs Q2 net 57.5 bln won vs 76.6 bln won consensus

* Samsung sees rise in broking commission, advisory fees (Wraps Daiwa and Samsung Securities; adds byline, background)

By Junko Fujita and Jungyoun Park

TOKYO/SEOUL, Oct 30 (Reuters) - Daiwa Securities, Japan's second-largest brokerage, and South Korea's Samsung Securities Co may face a tough task in sustaining their strong quarterly profits as their margins are seen coming under pressure from competitors' moves.

There is a concern Daiwa may lose revenue after pulling out last month from its 10-year-old investment banking joint venture with Sumitomo Mitsui Financial Group, leaving the brokerage vulnerable to growing competition.

SMFG, Japan's third-largest bank, expanded its brokerage business by buying Nikko Cordial Securities from Citigroup and launching underwriting and corporate advisory businesses this month.

Daiwa Securities Chief Financial Officer Nobuyuki Iwamoto told a media conference on Friday about 220 bankers left Daiwa for SMFG.

Daiwa was the No.2 underwriter for bond sales by Japanese companies for the quarter, but it could lose its position if enough of its clients leave the brokerage to go to Nikko Cordial.

Mitsui Sumitomo Banking Corp, the main banking unit of SMFG and a frequent bond issuer, this month switched its bond underwriter to Nikko Cordial from Daiwa.

Samsung Securities, South Korea's biggest brokerage, also faces stiff competition in both retail brokering and investment banking sectors, as new rivals such as KB Investment & Securities emerge, while existing peers tie up with stronger financial players.

Daewoo Securities is also expected to encroach upon Samsung Securities' stronghold areas of investment banking and other value-added services, after becoming a unit of state-owned financial institution KDB Holding.

"We have been waiting for changes to take place at Samsung Securities ... but it has been slow. In the meantime, Daewoo Securities is expected to strengthen its (corporate financing) capability through KDB," said Chung Bo-seung, an analyst at Hanwha Securities.

EARNINGS STRONG

Both Daiwa and Samsung Securities unveiled strong quarterly results on Friday, thanks to a rebound in stock markets and an increase in investor risk appetite.

Daiwa reported a 2 billion yen ($22 million) net profit for July-September compared with a 20.6 billion yen loss in the year-ago period, as Japan's benchmark Nikkei average recovered from a 26-year closing low hit on March 6.

The profit, however, was below a 7.1 billion yen estimate by three analysts polled by Thomson Reuters I/B/E/S.

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The Japanese brokerage boosted trading profits almost three-fold and joined its bigger rivals, such as Nomura Holdings Inc, Goldman Sachs and JPMorgan Chase & Co in posting profits for the latest quarter.

At Samsung Securities, July-September net profit almost doubled to 57.5 billion won ($48.6 million) from 29.7 billion won a year earlier, but was also below an average forecast for a profit of 76.6 billion won, according to Thomson Reuters I/B/E/S. Its profit was eroded by losses from its bond investments.

Daiwa shares finished up 2.9 percent at 491 yen on Friday. They have fallen about 9 percent so far this year, underperforming a 3.6 percent fall in Tokyo's brokerage sector subindex.

Samsung shares ended down 1.7 percent on Friday. They are up 10.8 percent this year. ($1=90.72 yen) (Editing by Muralikumar Anantharaman)