The Risk Of Thunderbolt In The New Year Of Securities Industry Erodes Securities Companies' Large-Scale Provision Of Impairment, And The Asset Loss Of The Whole Industry Will Exceed 20 Billion In 2020

With the disclosure of securities companies' performance, the "good year" of the securities industry will gradually show in 2020.

As of January 28, 15 listed securities companies have issued performance forecast or performance express in 2020. From the net profit index of parent company, all the 15 securities companies have achieved positive growth in net profit. CITIC Securities, with the slowest growth rate, has a year-on-year growth of 21.82% in 2020, while Everbright Securities has a year-on-year increase of 325%, ranking first among the disclosed securities companies.

However, out of step with the industry's performance growth, large amount of impairment is becoming a huge shadow over the head of securities companies.

According to the incomplete statistics of 21st century economic report, eight listed securities companies have issued the announcement of withdrawing credit impairment in 2020, with a total scale of 6.5 billion yuan. If superimposed with the withdrawal data of other listed securities companies in the first three quarters of last year, the withdrawal scale of listed securities companies in 2020 will easily exceed 20 billion yuan.

"The whole securities industry began to compress the stock pledge business since 2019, but in 2020, the high-ranking entities in the bond market began to default, similar to the Yongcheng Coal and brilliance events, which increased the impairment of asset management and self operation. On the other hand, in 2020, the share price of small and medium-sized companies will fall, and the remaining business related to stock pledge will increase in impairment. " For the problem of large amount of impairment of securities companies, the general manager of domestic medium-sized securities companies said so.

At the same time, he also pointed out that the overall revenue performance of the securities industry in 2020 was good, "we have room to make full provision for impairment and consolidate the asset base."

Equity pledge and other credit intermediary business has become the biggest risk point of the securities industry. Visual China

Top securities companies' withdrawal drags down performance

According to the announcement of withdrawal credit impairment of 8 listed securities companies in 2020, Everbright Securities has the largest scale of impairment.

According to the announcement data released by Everbright Securities, in 2020, the company is expected to realize an operating revenue of 15.776 billion yuan and a net profit of 2.415 billion yuan attributable to the shareholders of the listed company, increasing by 56.86% and 325.21% respectively over the same period of last year.

However, at the same time, Everbright Securities also made provision for estimated liabilities and single major assets impairment by 2020 to reach 2.247 billion yuan, which also led to a sharp decrease in the company's net profit of 2.073 billion yuan. In contrast, credit impairment will cut the performance of Everbright Securities in 2020 by half.

Compared with other securities companies, the reasons for the impairment of Everbright Securities are more special.

As early as 2016, storm capital signed a partnership agreement with Everbright linhui and qunchang finance to jointly initiate the establishment of Linxin fund, and planned to purchase 65% of the equity of overseas MPs companies with this fund, while Everbright capital, as one of the inferior partners of the project, contributed RMB 60 million.

Subsequently, MPs company was in a dilemma. By February 2019, the investment term of the investment fund of Jinxin fund expired and failed to exit as planned. As a result, Everbright Securities fell into the vortex of investment failure.

Prior to that, Everbright Securities had accumulated estimated liabilities of RMB 3.011 billion for this matter from 2018 to 2019. According to its latest announcement, Everbright Securities will withdraw 1.55 billion yuan of estimated liabilities for MPS matters again in 2020, and the cumulative withdrawal has exceeded 4.5 billion yuan.

In addition to being deeply involved in the MPS storm, in 2020, Everbright Securities actually held a receivable with a book value of 759 million yuan for Jinghui fund, a structured entity incorporated into the investment and merger of Everbright fuzun, a wholly-owned subsidiary. Everbright Securities made a provision for bad debts of up to 256 million yuan.

However, from the perspective of the whole securities industry, as of the third quarter of 2020, the largest scale of credit impairment provision is CITIC Securities.

CITIC Securities has previously announced that as of the third quarter of 2020, the company has made a total of 5.027 billion yuan of various assets impairment reserves, including 3.518 billion yuan of financial assets for repurchase only.

CITIC Securities said that from January to September 2020, the company's provision for impairment of credit assets increased compared with that in 2019, which was mainly due to the rise of credit risk of fixed repurchase project of stock pledge type repurchase contract. The company prudently assessed the project risk and made full provision for impairment. In addition, compared with the end of last year, the scale of margin trading and other creditor's rights investment of the company increased significantly, and the provision for asset impairment increased accordingly.

In this regard, CICC believes that the credit impairment of CITIC Securities in the third quarter of 2020 alone will reach 3 billion yuan, accounting for 59% of the pre tax profit, which will drag down the profit performance. Corporate credit impairment should mainly come from two aspects, one is equity pledge and financing business, on the other hand, corporate bond assets are also affected by the third quarter bond market fluctuations.

"The performance of securities companies in 2020 is good, but the risks of bonds and financing have been accumulating, so we will choose to make some provision in such a year with good returns." Some senior executives of small and medium-sized securities companies believe that CITIC Securities will make full provision for impairment in 2020, reflecting the willingness of prudent development.

From the disclosed performance forecast, although the year-on-year growth rate of China CITIC Securities's parent company's net profit will slow to 21.82% in 2020, it is expected that the company's net profit attributable to parent company will still be close to 15 billion yuan, still ranking first among securities companies.

The risk of equity pledge should not be underestimated

In 2020, there are not a small number of securities companies that have significantly increased the provision of impairment due to equity pledge business, and credit intermediary business such as equity pledge has become the biggest risk point of the securities industry at present.

Among them, many securities companies have disclosed the concrete thunder stepping projects of equity pledge business.

Guoyuan Securities said that the company's provision for impairment of stock pledge repurchase business would reach 348 million yuan in 2020. The main reason is that the stock prices of its underlying securities "Jiawei Xinneng", "St Zhongfu", "Shenzhen Datong", "delisted Huaye" and "aiglass" continued to decline, and were lower than 100% of the guaranteed ratio.

In addition, the company also made provision for impairment of default assets for the stock pledge projects of "Huaye capital" and "Huanghe whirlwind".

Western securities stepped on the thunder "Xinwei group", "Zhongnan culture", "Jinyi culture" and the famous "LETV network". These projects lead to an increase of 163 million yuan in the company's provision for impairment in 2020.

In addition, Western securities also announced the specific situation of financial assets explosion. The company purchased and held financial assets "17 Yinji entertainment cp001", "16 Sanshun B" and "17 Kunlun 01" held in the secondary market, which resulted in substantial breach of contract due to the failure of the issuer to pay the principal and interest. For this reason, the Western securities made a total of 44.3294 million yuan for impairment.

In addition, other listed securities companies have also made a large amount of impairment on the financial assets purchased for resale, such as China Securities Construction Investment Corporation, Guohai Securities, Founder Securities and Changjiang Securities, respectively, with a large amount of impairment, such as RMB 989 million from China Securities, RMB 392 million from Guohai Securities, RMB 270 million from Founder Securities, and RMB 247 million from Changjiang Securities.

It is worth mentioning that the provision for impairment of financial assets under repurchase of CAITONG securities in 2020 is - 44.3089 million yuan. In this regard, the company said that it was caused by the recovery of early projects, which also made CAITONG securities the only securities company with negative provision for repurchase assets.

However, CAITONG securities has made a large amount of provision for impairment of its financing funds in 2020, with a scale of 449 million yuan. The main reason is that the scale of the company's financing has increased significantly, and some of the financing business has a large amount of impairment risk.

"Since 2018, with the gradual exposure of equity pledge risk, the overall pledge scale has been gradually reduced, and securities companies have been more cautious about this, and risk control has been stricter, and the risk is on the decline. In addition to stepping on thunder's equity pledge business, the expansion of credit business based on the two financing business also allows securities companies to increase the withdrawal. " Some non bank analysts of small and medium-sized securities companies told reporters of the 21st century economic report that strict withdrawal of bad debts by securities companies will also contribute to the steady development of heavy assets business.

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