Apocalypse Of The 2019 Annual Report Of Securities Industry: Investment Banks Continue To Make Good Use Of Capital Intermediary

The securities industry is heading for a new stage of development.

Wind data show that as of April 1st, there are not less than 31 A share brokers (including shadow stocks) have issued the 2019 annual report.

Overall, most brokerages achieved substantial growth in 2019. This is related to the revival of the A share market in 2019, leading to the recovery of trading. On the other hand, it also benefited from the trend of registration reform, and the head broker took more of the underwriting bonus.

In the industry view, along with the industry's efforts to build the traceability of the aircraft carrier head organization, and the regulatory management of securities dealers, the Matthew effect of the securities industry will be further strengthened, and the capital intermediary business of some head brokers may form a more obvious competitive power.

Full recovery of industry

Compared with the dismal harvest in 2018, 2019 was a good year for the securities industry.

According to the twenty-first Century Wind report, the 31 brokerages who had disclosed the annual report totaled 339 billion 14 million yuan, totaling 95 billion 420 million yuan to the parent company, and the average annual growth rate of earnings per share reached 119.57%.

In the industry view, the two level of market activity in 2019 is the main reason for the rapid recovery of industry performance throughout the year.

"Mainly in 2019, ushered in a relative sense of the Mavericks City, whether it is trading activity, two melting water level, or asset management scale, are more optimistic than 2018." The head of a brokerage firm in a household said, "at the same time, the industry in 2018 is not very prosperous, so it reflects the trend of recovery in 2019."

Indeed, 2019 showed higher market activity. According to Wind data, the total increase in the year of A2019 reached 33.02% in 2018, and the total turnover reached 126 trillion and 40 billion yuan, an increase of more than 40% compared with the 8 billion 964 million yuan in 2018. On the financing side, the Shanghai and Shenzhen Financial Balance rose from 756 billion 373 million yuan at the beginning of the year to 1 trillion and 19 billion 285 million yuan at the end of the year.

It is worth mentioning that the proportion of income from information management is increasing. For example, GF Securities achieved 6 billion 454 million yuan in revenue management business, accounting for 28.30% of the revenue, which was more than the sum of two business income of its own investment bank and investment bank. And, like the Bank of China Securities, its information management business contributed 747 million yuan in revenue, accounting for 25.69% of its revenue.

"A large collection of some brokerages is constantly transforming the public collection, and securities companies have some experience in the management of the two tier market, and the familiarity with the company is also relatively high, plus channel advantages, which can quickly be involved in the public offering products." A AMC securities broker said, "with the volume of public offering industry as a whole, the broker can get more room for development."

Head ROE protrusion

Behind the rapid rebound in the industry is the further exacerbation of Matthew effect between the head broker and the small and medium brokerages.

CITIC, Haitong, Guotai Junan are the top three brokerages in the industry, and their net profits are 11 billion 229 million yuan, 9 billion 523 million yuan and 9 billion 2 million yuan respectively. The total profits of three heads of brokerages are equivalent to those of 23 brokerages after ranking.

In the background of the whole industry's profit recovery, most of the ROE of brokerages also rose sharply. Statistics show that the ROE of 31 A share brokerages is positive, which is affected by the warming of the market. Some of the small and medium brokerages' ROE return faster, and their ROE of China, Guangda and first business increased by 5.5 times, 4.7 times and 3.1 times respectively.

"The recovery of small and medium brokerages ROE is mainly related to the low base effect caused by the downturn in 2018." The foregoing economic business responsible person said, "these brokers are more dependent on brokers and other traditional businesses, so the impact of the cycle is more obvious."

Correspondingly, the high ROE representatives in the industry still focus on the head office. Among them, CITIC investment, investment and Guoxin three brokerages rank the top three of ROE industry.

In fact, the weighted ROE of a brokerage firm is directly related to its asset liability ratio. For example, ROE reached 11.51% of CSC's assets and liabilities ratio in 2019, which exceeded 80%. It is the highest level of 31 A share brokers who have disclosed the annual report. Similarly, the negative debt rate of the CIC listed on the H-share market has reached 83.4% in 2019, and its weighted ROE has also reached 9.6%, the highest level in nearly three years.

"Behind the higher debt ratio, it often reflects the higher efficiency of capital operation of the securities firms, that is, if the net capital of the unit is reasonable, the assets are enlarged reasonably, and the higher profits are obtained through assets." "From this point of view, the ROE of the head broker will be more stable and the anti cyclical capability will be stronger," said a non silver analyst of a medium-sized brokerage in Beijing.

In terms of volume ranking, the leading institutions also showed a more obvious scale advantage.

From the annual report, the completion of Guangzhou securities and CITIC Securities is still the industry is difficult to shake the "faucet." The total assets of CITIC Securities as at the end of 2019 were close to 800 billion yuan, reaching 791 billion 722 million yuan, which was 154 billion 928 million yuan more than Haitong Securities, which ranked second in total assets, according to Wind data. The difference is only more than that of Huaan, BOC and Hongta three brokerages. In 2018, the scale difference between CITIC and Haitong was only 78 billion 509 million yuan.

The scale of assets is closely followed by Huatai Securities and Guotai Junan, and the total assets of the two brokerages reach 562 billion 181 million yuan and 559 billion 314 million yuan respectively.

"Head brokers will continue to expand, and we will see more mergers and acquisitions in the industry. We believe that in five years it is possible to see trillions of assets and volume of securities companies, and at the same time, their profitability will also be stronger." The above non bank financial analysts said, "at that time, some head brokers may have the same size as the joint-stock banks in the interbank market, and the securities industry's position in the financial market will also increase."

Investment banks and capital intermediaries

In the eyes of many brokerages, investment banking will continue to be an important development opportunity in the coming years.

In fact, the proportion of investment banking revenues of some brokerages is reaching the level of shoulder to shoulder brokerage business. Taking CSC, a ROE company as an example, its investment banking revenue in 2019 was 3 billion 675 million yuan, accounting for 26.84%, accounting for only 3.01 percentage points less than that of brokerage business.

"CITIC's brokerage business itself is relatively broad and comprehensive, but in terms of factors such as science and innovation board, the investment banking business in 2019 accounted for a prominent comparison." A person close to CITIC pointed out.

In twenty-first Century, the economic news reporter also found that many brokers indicated that they should seize the opportunity of registration system and vigorously develop investment banking business in the investment banking outlook.

China Merchants Securities said that we should continue to seize the opportunity of the science and technology board and the gem registration system, actively capture the business opportunities contained in the new third board selection layer, and intensify efforts to expand the quality IPO projects. Huatai Securities also said that we should seize the opportunity to set up the scientific innovation board and pilot the registration system opportunities, with the professional ability and reputation as the high-quality enterprises, especially the scientific and technological innovation enterprises. The transformation and upgrading of industry and real economy enterprises provide targeted and innovative solutions.

"Ke Chuang plate has brought a bonus to the head broker. The new three board selection layer and the gem system will continue to bring good benefits to the securities sector. Unlike the science and technology board, the further securitisation trend of selected small and medium enterprises will bring opportunities and opportunities for the investment and business of small and medium brokerages." A brokerage firm in Shanghai said.

At the same time, capital intermediary business is regarded as the next growth point of head broker. In the industry view, the size of the head broker business and profitability ultimately need to be reflected in the capital intermediary business.

"The use of capital to carry out related capital, securities merger, market making and other business is an important trend for securities companies to actively participate in the market." A listed company in the southwest wind control company said, "under the circumstances of classified supervision, some small and medium-sized brokerage businesses that do not conform to the comprehensive category may be outflowing to the head office, and at the same time, with the further innovation of varieties inside and outside, the capital intermediary business has larger imagination space."

In fact, the good policy of capital utilization is also being released to the head broker recently. A few days ago, CIC, merchants, CITIC, Huatai, CITIC, and Guotai Junan 6 brokerages were included in the first batch of consolidated supervision by the SFC. As a result, the calculation coefficient of the risk capital preparation of the six brokerages is reduced from 0.7 to 0.5, and the total assets of the external and internal assets are reduced from 1 to 0.7. At the same time, continuous monitoring of the effectiveness of the wind control system operation and the merger of the wind control index information has been established by the pilot institutions.

"These measures further raise the leverage level of the head broker, so that they can have more capital to participate in the capital intermediary business, which is equivalent to opening up the room for ROE upgrading. In the next 3-5 years or even longer, capital intermediaries will become the most important track for the head broker." The above non silver financial analysts said. (Editor: Wu Yan Ling)

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