Source: Economic Daily
Recently, the 2023 report card of securities companies has been intensively disclosed. On the whole, in the context of the increased volatility of the A-share market and the stricter IPO review last year, listed securities firms are under pressure and actively break through the situation in the transformation and development. The self-operated business has become a strong engine of growth, the transformation of wealth management has continued to deepen, and the international development has been steady and commendable.
Industry revenue stopped falling and rebounded
As of April 10, 26 A-share listed securities companies have disclosed their annual reports, accounting for more than half. Looking at revenue, traditional head brokerages still maintain their leading position. CITIC Securities will still rank first in 2023 with an operating income of 60.068 billion yuan. Huatai Securities, Guotai Junan, and China Galaxy followed, with operating income of 36.578 billion yuan, 36.141 billion yuan, and 33.644 billion yuan in 2023, an increase of 14.19%, 1.89%, and 0.01% year-on-year respectively. Looking at the net profit, the brokerages are mixed. For example, in 2023, CITIC Securities' net profit attributable to shareholders of the parent company will be 19.721 billion yuan, down 7.49% year-on-year, Huatai Securities' net profit attributable to shareholders of listed companies will be 12.751 billion yuan, an increase of 15.35% year-on-year, Guotai Junan Securities' net profit attributable to shareholders will be 9.374 billion yuan, down 18.55% year-on-year, and China Galaxy's net profit attributable to shareholders of the parent company will be 7.879 billion yuan, up 1.43% year-on-year.
Talking about the company's asset scale and profitability in 2023, Huatai Securities said that the rapid growth of scale, the steady increase in customers, and the increasing diversification of business layout reflect the rapid development of China's economy from the side, and also make the company more confident and powerful to grow together with customers and progress with the times.
Compared with the head brokers, some small and medium-sized brokerages show stronger growth, achieving "double growth" in operating income and net profit. For example, in 2023, Guohai Securities will achieve revenue of 4.188 billion yuan, a year-on-year increase of 15.81%, and net profit attributable to the parent company will be 327 million yuan, a year-on-year increase of 31.18%. Hongta Securities achieved revenue of 1.201 billion yuan, a year-on-year increase of 43.63%, and net profit attributable to shareholders of the parent company of 312 million yuan, a year-on-year increase of 710.57%. Southwest Securities achieved revenue of 2.329 billion yuan, a year-on-year increase of 30.33%, and net profit attributable to shareholders of listed companies of 602 million yuan, a year-on-year increase of 94.63%.
Talking about the reasons for the growth of performance, Guohai Securities said that the company adheres to the development ideas of differentiation, specialization, specialization and intensification, deeply promotes the "three major projects" of customers, high-quality products and capacity improvement, continuously improves the quality and efficiency of serving the real economy, and promotes the company to achieve high-quality development centered on benefits.
"On the whole, the securities industry will show an increase in revenue but no profit in 2023. Liu Jiawei, an analyst of the non-bank team of Dongxing Securities, believes that in the context of continuous and large fluctuations in the equity market, the market downturn has led to a decline in trading activity, the credit business spread has shrunk under the high competition in the industry, the income of asset management business and investment and direct investment business has fluctuated and differentiated, and the incremental space of equity investment banking business in the second half of 2023 will be under pressure under strict regulatory conditions.
Looking at the whole industry, it is also more obvious that there is no increase in profits. According to the data released by the Securities Association of China, 145 securities companies in the industry will achieve operating income of 405.902 billion yuan in 2023, an increase of 2.77% year-on-year, and net profit of 137.833 billion yuan, a year-on-year decrease of 3.13%. It should also be noted that compared with 2022, the revenue of the securities industry will stop falling and rebound in 2023 and come out of the recovery curve. In 2022, the total operating income and net profit of the securities industry decreased by 21.38% and 25.54% year-on-year, respectively.
"Although the performance of listed brokerages that have released results is mixed, it is generally better than expected. Sun Jiageng, an analyst in the non-bank financial industry of Guohai Securities, said that in 2023, when the stock market activity and money-making effect are weak, listed brokerages have shown strong performance resilience, which is mainly due to the support of fixed income investment-related businesses, while the higher growth rate of some small and medium-sized brokerages is based on the lower performance base in 2022.
Self-operated business becomes a growth engine
Looking back on 2023, the overall A-share market has shown a volatile downward trend, and the trading activity has declined. Judging from the situation of listed securities companies that have published annual reports, listed securities brokerage, investment banking, asset management, trading and institutional business are under pressure. As far as the investment banking business is concerned, the investment banking business of some securities companies has performed poorly due to factors such as the stricter IPO review and the slowdown in the pace of listing. For example, in 2023, the net fee income of CITIC Securities' investment banking business will be 6.293 billion yuan, down 27.28% year-on-year, and CICC's investment banking business revenue will be 3.242 billion yuan, down 40.30% year-on-year. Looking at the trading and institutional business, the performance of listed securities firms is differentiated. For example, in 2023, GF Securities' trading and institutional business will achieve revenue of 3.709 billion yuan, a year-on-year increase of 29.43%, and Guotai Junan's institutional and trading business will achieve revenue of 14.930 billion yuan, a year-on-year decrease of 4.12%.
The business performance of the securities industry is closely related to the equity market. Liu Xinqi, chief analyst of non-bank finance at Guotai Junan Securities, analyzed that the decline in the brokerage business of some securities firms in 2023 was mainly caused by the decline in the income of agency trading securities, the decline in investment banking business was affected by the decline in the scale of IPO and refinancing, the decline in asset management business was mainly affected by the decline in management fees, and the year-on-year decline in credit intermediary business income was mainly due to the narrowing of interest income and expenditure interest margins.
It is worth mentioning that proprietary business has become a strong support for the performance of brokerages. According to the data released by the China Securities Association, in 2023, proprietary business, brokerage business, investment banking business, and asset management business will account for 29.99%, 27.78%, 13.42%, and 5.54% of the main business of securities companies, respectively, and proprietary business will be the largest source of revenue in the industry.
Specifically, CITIC Securities' self-operated business will achieve a net income of 21.846 billion yuan in 2023, a year-on-year increase of 23.87%, contributing to CITIC Securities' first revenue. Huatai Securities and CICC also had more than 10 billion yuan in self-operated business income. For some small and medium-sized brokerages, the growth of proprietary business income is an important driving force for their performance. For example, in 2023, Southwest Securities' proprietary business income will be 318 million yuan, compared with a loss of 134 million yuan in 2022, and Hongta Securities' proprietary investment business income will reach 662 million yuan, compared with a loss of 2.6322 million yuan in 2022.
"Stable and high-quality proprietary investment business is the cornerstone of Hongta Securities' development. Hongta Securities said that the company's proprietary investment business has withstood the test of the market in 2023, and it also fully reflects the transformation results of the past two years. Strategically and effectively carry out the allocation of large types of assets: moderately reduce the scale of equity assets, increase the allocation of high-dividend assets, and increase the allocation of stable assets, which effectively copes with the decline of the market.
Analyzing the future development of investment business, including proprietary business, Liu Jiawei believes that investment business is still the winner or loser of brokerage performance, but its predictability is still low, and there is significant differentiation among peers. In 2024, the above situation will still exist, in addition to the phased increase in market trading volume, the securities lending business is facing strict supervision, IPO financing scale or continued sluggishness, which will bring pressure to the marginal improvement of brokerage performance.
Accelerate the construction of a first-class investment bank
Looking at the annual reports of securities firms, it can be found that in the past year, many securities companies have taken the initiative to embrace changes, actively seek new performance growth points, and strive to reshape the corporate structure under the comprehensive registration system and promote the high-quality development of the securities industry. On the one hand, deepen the transformation of wealth management. For example, CICC provides customers with "full life cycle accompaniment" through buy-side investment advisory professional services, and the product holding scale of its wealth management business is about 350 billion yuan, achieving positive growth for four consecutive years. GF Securities is deeply engaged in the transformation of wealth management, and as of the end of 2023, GF Securities ranked third in the industry in terms of the scale of non-monetary public funds distributed, and the scale of consignment financial products increased by 13.98% compared with the end of the previous year. On the other hand, it actively expands its overseas business. In 2023, the operating income of Galaxy Securities' international business will be 2.006 billion yuan, a year-on-year increase of 11.28%, accounting for 5.96% of the company's total operating income.
Promoting the high-quality development of the securities industry has always been the expectation of the industry. In March this year, the China Securities Regulatory Commission issued the "Opinions on Strengthening the Supervision of Securities Companies and Public Funds and Accelerating the Construction of First-class Investment Banks and Investment Institutions (Trial)", proposing to strive to form about 10 high-quality leading institutions to lead the high-quality development of the industry in about five years, and to form two to three investment banks and investment institutions with international competitiveness and market leadership by 2035.
In this regard, a number of brokerages said that they would move towards a first-class investment bank. Jiao Xiaoning, chief financial officer of Huatai Securities, said at the performance briefing that the company will strive to build a first-class investment bank with both local advantages and global influence, and the main measures include: adhering to the investor-oriented, creating new value for customers in wealth services, strengthening the linkage and coordination of the whole business, expanding the new space for comprehensive institutional services, deepening the empowerment of financial technology, and releasing the new momentum of "business + technology" integration and co-creation.
Small and medium-sized brokerages are not willing to be left behind. "In recent years, the regulatory authorities have proposed to guide small and medium-sized institutions to combine their shareholder background, regional advantages and other resource endowments and professional capabilities to do fine and detailed development, and achieve characteristic and differentiated development. Small and medium-sized brokerages are expected to give full play to regional and business characteristics, focus on subdivided tracks, deeply explore and meet the needs of specific customer groups, and then create distinctive and differentiated competitive advantages. Du Wanzhong, president of Guohai Securities, said at the performance briefing.
Looking ahead, the mainland securities industry is still in a period of historical opportunity for rapid development. "In the long run, the development of the capital market and the reform and opening up of the financial system will provide a broader space for the development of the industry. Guotai Junan said that under the traction of the comprehensive registration-based reform, the construction of multi-level capital markets has become clearer, the shortcomings of the basic system of the capital market have been continuously filled, and the capacity building of the investment side has been accelerated.
"At this point in time, the acceleration of capital market reform is expected to become a direct catalyst for the return of industry value, and business innovation will also open up imagination space for profit growth. Liu Jiawei believes that with the support of more active fiscal and monetary policies, with the implementation of various policies to optimize the operation of the capital market, the positive cycle between "policy-market-investor" is expected to accelerate, and then effectively improve the medium-term performance expectations of securities companies. (Economic Daily reporter Li Hualin)