When the disclosure of the first quarterly report of the securities industry is carried out, 4 small and medium-sized securities firms leverage their proprietary business to achieve "double growth"

Securities Times reporter Ma Jing

As of April 27, a total of 24 brokerages disclosed their quarterly reports.

On the whole, the proprietary business played the role of the winner and loser, while the performance of the net fee income of the asset management business was more differentiated, with 4 brokerages increasing by more than 100%. In contrast, the brokerage and investment banking business of most brokerages declined in the first quarter.

The performance fell more and increased less

Previously, some non-bank analysts predicted in the research report that combined with last year's high base, it is expected that the operating income and net profit of the securities industry will decline in the first quarter of this year. Judging from the data disclosed so far, the prediction is roughly fulfilled, and the net profit attributable to the parent of the above 24 brokerages is showing a pattern of falling more and increasing less.

According to the data, a total of 18 brokerages saw a year-on-year decline in net profit attributable to the parent company, of which 14 had a "double decline" in revenue and net profit attributable to the parent company. The net profit attributable to the parent company of Industrial Securities, Haitong Securities, Huaxi Securities and Pacific Securities fell by more than 60% year-on-year, while the decline of 10 brokerages such as Hualin Securities and Western Securities was between 10% ~ 50%.

In terms of large brokerages, the three brokerages that have disclosed their results are also under significant pressure. CITIC Securities, the "first brother" of the brokerage, is currently the only one with a single-quarter revenue of more than 10 billion yuan, but compared with the same period last year, its performance has also declined. The company's revenue in the first quarter was 13.755 billion yuan, down 10.38% year-on-year, and the net profit attributable to the parent company was 4.959 billion yuan, down 8.47% year-on-year. The net profit attributable to the parent company of China Merchants Securities and Haitong Securities, two large brokerages, decreased by 4.54% and 62.56% year-on-year respectively.

Under the general pressure of the industry, five brokerages, including Zhongyuan Securities, Dongxing Securities, Founder Securities, Capital Securities, and Nanjing Securities, recorded a "double increase" in revenue and net profit attributable to the parent company. Among them, Zhongyuan Securities and Dongxing Securities are among the top performers. Zhongyuan Securities' revenue in the first quarter increased by 38.93% year-on-year, and the net profit attributable to the parent company increased by 85.53%, while Dongxing Securities' revenue in the first quarter increased by 112.56% year-on-year, and the net profit attributable to the parent company increased by 64.28%.

Self-operated business is the winner and loser

The main reason for the differentiation of brokerage performance lies in proprietary business. In addition to Capital Securities, the other four securities firms mentioned above that achieved "double growth" all benefited from the increase in investment business income during the reporting period. Based on the estimation of "investment income + fair value change profit and loss - investment income on associated joint ventures", Dongxing Securities' proprietary business collected 554 million yuan in the first quarter, while Nanjing Securities, Founder Securities, and Zhongyuan Securities collected 404 million yuan, 744 million yuan, and 310 million yuan respectively.

In contrast, Pacific Securities, Huaxi Securities, Haitong Securities, Caida Securities, Industrial Securities, Guojin Securities, etc., due to the decline in securities investment business during the reporting period, resulting in a year-on-year decline in net profit attributable to the parent company of more than 38%. At present, the largest decline in proprietary business is Huaxi Securities, the brokerage's self-operating income in the first quarter was 44 million yuan, a year-on-year decrease of 89.77%.

Capital Securities, which has outstanding performance, is mainly related to the "strength" of its asset management business. According to the first quarterly report, the net fee income of Capital Securities' asset management business in the first quarter was 250 million yuan, an increase of 169 million yuan year-on-year. In fact, Capital Securities' proprietary business income in the first quarter was weaker than the same period last year, down 4.52% year-on-year.

The impact on the investment banking business has been significant

At present, the investment banking business is the biggest drag on the performance of brokers.

After combing the data, the Securities Times reporter found that 15 brokerages saw a decline in net income from investment banking fees in the first quarter, of which more than seventy percent of brokerages fell by more than 20%. For example, Hualin Securities, the brokerage's net income from investment banking fees in the first quarter fell by 73.79% year-on-year. Hualin Securities said that due to the phased tightening of IPO and refinancing, the volume of investment bank-related business decreased year-on-year.

Specifically, there are 6 brokerages with a decline of more than 50% in the net income of investment banking fees, including leading brokerages such as CITIC Securities and Haitong Securities, as well as small and medium-sized brokerages such as Zhongyuan Securities and Pacific Securities. The handling fee of CITIC Securities' investment banking business decreased by 56.11% year-on-year, which was significantly higher than that of brokerage and asset management business, and also higher than that of proprietary business.

The decline in investment banking business income of securities companies is directly related to the slowdown in the scale of the equity financing market. In the first quarter of 2024, the scale of equity financing decreased by 75% year-on-year, and the scale of funds raised by IPOs and refinancing of listed companies both fell by more than 70%.

The asset management business of some securities firms has strengthened

Judging from the data, the net brokerage fee income of 14 brokerages has also declined, but compared with the investment banking business, the decline is relatively moderate, mostly within 10%. Only Huaxi Securities, Capital Securities and Industrial Securities fell by more than 10%, at 15.31%, 17.55% and 23.44% respectively.

The performance of the asset management business was more differentiated, with 10 companies achieving positive growth in this business. Among them, Caida Securities, Nanjing Securities, Capital Securities, and Pacific Securities all increased their net fee income from asset management business by more than 100% year-on-year. Western Securities' asset management business also performed well, with a growth rate of nearly 60%, and the company's quarterly report revealed that this was mainly due to the increase in net fee income from collective asset management business. In contrast, there are 9 brokerages whose fee income from asset management business has declined, such as Hualin Securities and Zhongyuan Securities, which have fallen by more than 40%.

In terms of net interest income related to the two financial businesses, more than seventy percent of brokerages declined. Among them, the brokerages with a decline of more than 40% include CITIC Securities, Industrial Securities, First Capital, China Merchants Securities, etc.

On the whole, the performance of brokerages in the first quarter is hardly good, resulting in the attention of the brokerage sector being suppressed. Zheng Jisha, a non-bank analyst at China Merchants Securities, mentioned in a research report released on April 26 that the current equity market is more volatile than expected, and the attention of the brokerage sector has declined, and the proportion of positions in the brokerage sector in the first quarter continued to decline by 0.22% to 0.46%. In terms of individual stocks, comprehensive brokerages have been reduced to varying degrees, and the proportion of positions held by CITIC Securities, Huatai Securities, and CICC has continued to decline.

However, Zheng Jisha also said that the current industry has entered a painful period of reform, revenue is facing impact, and the reform direction of the sales business is not clear, but investors should not be overly pessimistic about the development of the industry. Whether it is a comprehensive brokerage, a small and medium-sized brokerage with research business as the core, or a local brokerage that relies on local capital, deeply cultivates the region, and creates a differentiated local brokerage, it has a certain unique advantage in this round of industry clearance storm, and there is the possibility of outperforming the industry and opening the second growth curve. Looking to the future, under the new reform cycle, a virtuous cycle of the capital market has finally been constructed, with the recovery of investors' confidence, the recovery of risk appetite, the sustained and high-quality development of the economy, reasonable and abundant liquidity, and the market of the securities sector will not be absent.