The performance of investment banks in the "cold winter" has generally declined, which brokerages have bucked the trend and run out of acceleration?丨2023 in the securities market

21st Century Business Herald reporter Cui Wenjing reported from Beijing

2023 is undoubtedly a challenging year for brokerage investment banks. In the first half of the year, the performance of investment banks generally fell by more than 20% year-on-year, and with the phased tightening of the IPO rhythm on August 27 and the introduction of new refinancing regulations, the number of A-share new IPO and the number of private placements both pressed the deceleration button, and the investment banking business became even worse.

Judging from the amount of equity financing underwriting of securities companies in 2023, the year-on-year decline has further intensified compared with the first half of the year, and more than 30% of the decline abounds, even CITIC Securities, the "first brother of the securities industry" with a historically strong ability to resist the decline of investment banks, has not been spared, down 41.39% from 2022.

However, there are also a few red flowers on the green grassland. Among the top 10 brokerages, Haitong Securities, Minsheng Securities and Zhongtai Securities Investment Bank performed against the trend, with the amount of equity underwriting increasing by 10.39%, 31.35% and 10.00% respectively. The large increase in the amount of equity underwriting is mainly due to its outstanding IPO business, with the year-on-year increase of 16.85%, 58.58% and 143.34% in the IPO underwriting amount of the three brokerages in 2023, respectively, and the data of the remaining top ten brokerages collectively plummeted.

According to the analysis of the interviewed insurance agency, the IPO decline of the Science and Technology Innovation Board and the Growth Enterprise Market (GEM), which have significant advantages in the head brokerages, has been more obvious during the year, resulting in a relatively greater decline in the performance of the top two brokerages, and the performance of investment banks in CITIC Securities and CICC, which ranked among the top two in terms of underwriting amount in the two major sectors in 2022, has declined even more dramatically this year. Haitong Securities, whose investment banking business suffered a waterloo in 2021, is rapidly recovering, Zhongtai Securities, as the only provincial-level local brokerage firm in Shandong, enjoys the advantage of abundant local resources, and Minsheng Securities' investment banking business has been strong in recent years. The three brokerages have their own ways of surviving against the trend, so they have become a bright spot in winter.

Sixty percent of the top 10 brokerage firms' IPO underwriting amount fell by more than 30%

Looking at the A-share listing data in 2023, IPOs have dropped significantly. In 2022, the number of newly listed companies will be 428, and in 2023, it will only be 312, a year-on-year decrease of 27.10%.

The number of new shares has plummeted, and the amount of IPO underwriting by investment banks will naturally decline. According to Wind, six of the top 10 brokerages in terms of IPO underwriting amount in 2023 will drop by more than 30%. CITIC Securities, which ranks first in the investment banking business all year round, saw the most significant decline, with its IPO underwriting amount shrinking from 150.255 billion yuan in 2022 to 50.033 billion yuan, a decrease of 66.70%.

CICC, which is also good at investment banking business and follows CITIC Securities in 2022 in terms of IPO underwriting amount, has become the second highest decline among the top brokerages in 2023, with the underwriting amount falling from 77.876 billion yuan in 2022 to 32.245 billion yuan, a decrease of 58.59%, ranking fourth in the industry.

The other two of the "three Chinas and one China" - Huatai Securities and China Securities Construction Investment have not been spared. From the perspective of IPO underwriting amount, Huatai Securities fell sharply by 49.09% to 16.487 billion yuan, and China Securities Construction Investment was relatively stable, from 56.852 billion yuan in 2022 to 39.402 billion yuan, although the decline reached 30.69%, but this decline ranked fifth among the top ten brokerages.

In the opinion of the interviewees, there are three main reasons for the sharp decline in the performance of the above-mentioned brokerages: first, under the phased tightening of the IPO rhythm of the Shanghai and Shenzhen stock exchanges, the investment banks with strong IPO strength and a large number of sponsors, the performance of A-share investment banks in recent years have remained stable, the dependence on shareholder resources is smaller, and the impact is significantly greater. CITIC Securities, CICC, Huatai Securities, and China Securities Construction Investment all meet the above characteristics, so the number of IPO sponsors and underwriters has declined seriously. Secondly, A-shares have repeatedly bottomed out, and the price-to-earnings ratio of new shares issued under the relative downturn of the stock market has been discounted, and the average issuance size of a single IPO project has declined. Moreover, in 2023, the IPO "Big Mac" projects will drop sharply, and the "fat" of the head brokerage as the undertaker of large projects will lose even more. The sharp decline in the number of IPOs and the decline in the financing scale of a single project have led to a contraction in the IPO performance of leading brokerages.

The IPO business is the core of the equity business of the brokerage investment bank, and it is also the majority of the investment bank's income. In the year when the speed of new stock listing is relatively fast, the ranking of IPO underwriting amount has a relatively greater impact on the ranking of investment banks' equity underwriting amount.

However, now, the IPO has pressed the deceleration button, and the additional issuance underwriting amount has become the key to the equity underwriting amount of the brokerage.

According to Wind, the top six brokerages in terms of additional issuance underwriting amount in 2023 are CITIC Securities, China Securities Construction Investment, CICC, Huatai Securities, Haitong Securities, and Guotai Junan.

It is worth noting that compared with the same period in 2022, the number of new IPOs in the first half of 2023 has decreased, especially the decline on the Science and Technology Innovation Board. For example, CITIC Securities seized the opportunity of refinancing business in a timely manner, and the lead underwriting amount increased by 48.264 billion yuan from January to June 2023, an increase of 62.29%.

However, with the issuance of the new refinancing regulations on August 27, special attention has been paid to large-capitalization listed companies such as the financial industry, and appropriate restrictions have been imposed on listed companies with broken issuance, broken net, continuous losses in operating performance, and high proportion of financial investment, focusing on the use of previous fundraising by all listed companies and restricting diversified investment. The scale of refinancing underwriting of securities firms has collectively declined. Judging from the year-on-year changes in the amount of additional issuance underwriting in 2023, the top six securities firms in terms of additional issuance and underwriting scale all fell by more than 10%, among which CICC and Guotai Junan fell by more than 50%.

Haitong, Minsheng, and China and Thailand grew against the trend

At a time when the number of new stock IPOs has dropped sharply and the performance of investment banks has declined, brokerages that have bucked the trend and accelerated are even more valuable.

According to Wind, in 2023, when the performance of investment banks will generally drop by more than three percent, Haitong Securities, Minsheng Securities, and Zhongtai Securities will perform particularly conspicuously. Among the top 10 investment banks in terms of IPO underwriting amount and equity underwriting amount, three brokerages became the only year-on-year growth.

In terms of equity underwriting amount, Haitong Securities increased from 57.594 billion yuan in 2022 to 63.577 billion yuan, a year-on-year increase of 10.39%, Minsheng Securities increased from 24.016 billion yuan in 2022 to 31.545 billion yuan, an increase of 31.35%, and Zhongtai Securities was adjusted from 17.275 billion yuan in 2022 to 19.002 billion yuan, an increase of 10.00%.

The increase in the amount of equity underwriting of the three brokerages was mainly due to the sharp increase in the IPO business. From the perspective of IPO underwriting amount, the increase is more prominent, with Haitong Securities, which has the smallest increase, also increasing by 16.85% compared with the same period in 2022, Minsheng Securities increasing by 58.58% year-on-year, and Zhongtai Securities, which has a relatively small base, rising by 143.34%. In 2023, the IPO underwriting amount of Haitong Securities, Minsheng Securities, and Zhongtai Securities will be 46.615 billion yuan, 20.067 billion yuan, and 9.23 billion yuan respectively, ranking second, sixth, and eighth in the industry.

At a time when the IPO performance of investment banks is collectively declining, why have the performance of the above-mentioned three brokerage investment banks been able to increase sharply against the trend? According to the analysis of the interviewees, Haitong Securities, Minsheng Securities, and Zhongtai Securities may be typical representatives of the three types of brokerage investment banks.

Haitong Securities is a representative of a highly market-oriented securities firm with strong comprehensive strength in investment banking. The growth in its investment banking performance is largely due to the low base in 2022 and the major restructuring since 2021. In 2021, Haitong Securities was placed under investigation, and in the same year, a number of key management teams, including the general manager, were replaced, and the investment banking style was adjusted from a relatively aggressive pursuit of efficiency to a more stable pursuit of quality. Under the investigation and adjustment of business style, the performance of Haitong Securities' investment banking declined in 2021 and 2022, and Haitong Securities, which ranked second in the industry in terms of IPO underwriting amount for many times in the past, ranked fourth in the industry in 2022. However, due to the fact that its comprehensive strength of investment banking has not declined, in 2023, the performance of Haitong Securities' investment banking will improve rapidly, and its ranking will return to the second place in the industry. For Haitong Securities, the contrarian performance of investment banks in 2023 will increase significantly, more from the recovery of the strength of strong brokerages.

Zhongtai Securities is a typical example of local small and medium-sized brokerages. As the only provincial-level local brokerage firm in Shandong Province and a typical local state-owned enterprise brokerage with the actual controller of Shandong State-owned Assets Supervision and Administration Commission, Zhongtai Securities naturally enjoys many resource advantages in Shandong Province. For such brokers, when the business opportunities and other resource advantages given by shareholders and their affiliates increase, their investment banking performance will also increase significantly, and the impact of IPO slowdown on them is relatively small.

Minsheng Securities is a typical representative of securities firms with strong investment banks and investment banking performance in a period of rapid growth. In terms of equity underwriting amount, it ranked 14th in the industry in 2021, improved to 11th in 2022, and ranked among the top 10 to 7th in the industry in 2023. From 2021 to 2023, the equity underwriting amount of Minsheng Securities has also increased year after year, from 22.568 billion yuan to 24.016 billion yuan, and will increase again to 31.545 billion yuan in 2023.

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