The Investment Banking Business Of "Three Middle Schools" In The Securities Industry Attracted 18 Billion Yuan Last Year. Can The IPO Harvest Continue After The Tightening Of Listing Audit?

In the past year, the development of investment banking business is becoming one of the core driving forces for the growth of securities companies' performance.

According to the statistics of the Securities Industry Association, driven by the pilot registration system of the science and technology innovation board and the growth enterprise market and the new regulations on refinancing, securities companies have realized the raising scale of 526.031 billion yuan and 731.502 billion yuan respectively in the stock IPO and refinancing projects in 2020, with a year-on-year increase of 74.69% and 41.67%. Even the scale of bond financing will increase by 28.02% to 13.54 trillion yuan in 2020.

The expansion of business scale has also set the tone for the "bumper harvest" of securities investment banks. The data shows that the net income of investment banking business of securities companies will reach 67.211 billion yuan in 2020, with a significant increase of 39.26% over the same period of last year. According to the annual report data of more than half of the listed securities companies in 2020, the "three middle schools" of the securities industry, namely, CITIC Securities, CICC and China construction investment, still dominate the list of investment banking business income, with a total net income of 18.695 billion yuan, accounting for 27.81% of the total revenue of the industry.

However, under the background of tightening supervision on IPO on-site inspection and supervision, guidance and acceptance in 2021, whether the securities investment banks, which have accumulated a large number of IPO projects, can continue to write brilliantly in 2021 has become a hidden concern of the industry.

Investment banks of the top five securities companies account for half of the industry's revenue

As of April 14, most of the performance of A-share listed securities companies in 2020 has been disclosed. In terms of net income of investment banking business, "big brother" CITIC Securities is still at the top of the list, with a net income of 6.882 billion yuan. CICC and China Securities construction investment, which have a difference of about 1 billion yuan, compete fiercely in the ranking. The investment banking income of the two securities companies is 956 million yuan and 5.857 billion yuan respectively. For example, Haitong Securities and Guotai Junan, whose investment banking business income will reach 4.939 billion yuan and 3.735 billion yuan in 2020, and the top five securities companies will account for 40.72% of the industry's investment banking business income.

Although the above securities companies have achieved "bumper harvest" in investment banking business, their business development strategies are different.

Taking CITIC Securities as an example, the underwriting scale of IPO projects completed by the company in 2020 accounts for 9.3% of the market share. In that year, the company completed 39 A-share IPO main underwriting projects, an increase of 11 compared with that in 2019, but the actual principal underwriting amount decreased by 1.548 billion yuan year-on-year. In 2020, the actual performance support of CITIC Securities investment banking business is more from the "refinancing" factor. In that year, the company's main underwriting projects for refinancing were 119, with the main underwriting amount of RMB 270.014 billion, a year-on-year increase of 15%. Only this one item was close to the total amount of main underwriting of the company's investment banking equity business in 2019.

In contrast, CICC, which ranks behind CITIC Securities, is a "full bloom".

In 2020, CICC, as the lead underwriter, completed 32 A-share IPO projects, with a lead underwriting of RMB 62.42 billion. The growth rate of the main underwriting projects and scale reached 50% and 70% respectively. Refinancing projects are more exaggerated. Although the company only completed 19 A-share refinancing projects in 2020, the underwriting finance reached 40.433 billion yuan, with a year-on-year growth of more than 400%.

In addition, CICC's investment banking business in the Hong Kong stock market is also very obvious momentum. In 2020, the company, as the sponsor, underwrites 13 Hong Kong stock IPO projects with a lead underwriting scale of US $5.44 billion, ranking second in the market; as a global coordinator, it mainly underwrites 29 Hong Kong stock IPO projects with a lead underwriting scale of US $6.22 billion, ranking first in the market; as the bookkeeper, it mainly underwrites 33 Hong Kong stock IPO projects with a lead underwriting scale of US $4.01 billion, ranking first in the market.

"Now CICC's strategy is" digitalization, regionalization and internationalization ", both of which are directly related to investment banking business." According to personnel close to CICC to 21st century economic report, in 2021, the company is also greatly expanding the recruitment of investment banking business team personnel.

It is worth mentioning that Huatai Securities, which has always been called "Three China and one China" together with "Three China and one China", will only rank sixth in the industry in 2020. However, the year-on-year growth rate of investment banking business income of the company reached 87.16%, significantly higher than that of other securities companies. In addition, according to wind statistics, the amount of equity underwriting of Huatai Securities in 2020 is 147.546 billion yuan, which is still in the top three of the industry.

Insufficient supply of new IPO projects

In the first quarter of 2021, the number of newly accepted companies to be listed on a shares decreased significantly compared with the fourth quarter of last year. A total of 34 new companies were accepted, only 11% of the fourth quarter of last year.

A person in charge of the investment bank of small and medium-sized securities companies in China explained that the IPO audit in 2021 has been significantly tightened, and the securities regulatory bureaus around the country have raised many problems from the guidance and acceptance link. According to the new rules of the Shanghai Stock Exchange, the recommendation agencies, law firms, accounting firms and other intermediary institutions need to submit self-examination forms on the listing conditions, information disclosure and verification of the issuers before and after submitting the listing application documents. All of these have slowed down the progress of IPO filing.

"At present, on-site inspection and supervision are also strict. If the project flow and shareholders' penetration are not clear, they dare not submit them for listing, for fear of being forced out by on-site inspection. The organization itself has also improved the quality control core standard. Recently, it is not easy to pass the core level even for the projects listed at the selected level. " The relevant person in charge of the above securities investment bank said.

The relevant person in charge of the company planning to be listed also told the reporter of the 21st century economic report that "enterprises and securities companies are cautious, and those with net profits of 50 million or 60 million are hesitant to report, afraid that the on-site inspection is not reliable."

"Generally speaking, this year's IPO market scale reduction can be determined under the same policy, but in fact, each company has declared a lot of projects before, and the final IPO scale may not decline significantly." The relevant person in charge of the above securities investment bank said.

According to wind data, as of April 14, as of April 14, there were as many as 468 companies that had applied for IPO, but had not yet passed the examination of the national development examination commission or the Shanghai Municipal Committee. Among them, CITIC Securities ranked first with 50 companies, while Huatai united and CITIC respectively sponsored 37 and 35. The remaining Haitong Securities, Guotai Junan, Minsheng securities, CICC and Guojin securities also have more than 20 sponsors.

In addition, as many as 225 companies have been successful. Among them, CITIC Securities, Minsheng securities, CITIC construction investment, Guotai Junan and Guoxin Securities respectively sponsored 29, 18, 12, 11 and 11, ranking among the top five in the industry.

According to CITIC Securities Analysis, as the CSRC's rejection of the companies that have passed the SFC is a small probability event and the approval documents have a valid period, these companies will probably enter the capital market one after another this year to ensure the stable IPO issuance. In the medium and long term, under the background that the main system objectives of the registration system are "system building, non intervention and zero tolerance", new shares are still expected to be issued We will maintain a normal distribution. Among the remaining projects, only 3% of the large companies expected to raise more than 3 billion yuan.

New changes in the status of investment banks

Entering 2021, the competition of investment bank ranking is still fierce.

According to wind data, based on the listing date, a total of 100 new shares will be listed in the first quarter of 2021, 10 less than that in the fourth quarter of 2020.

In the fourth quarter of last year, both CITIC Securities and CSCI completed 13 A-share IPO projects as lead underwriters, ranking first in the industry. However, in the first quarter of 2021, both securities companies were reversed by Haitong Securities. Wind data shows that Haitong Securities, as the lead underwriter, completed 11 A-share IPO projects from January to March, with a revenue of 712 million yuan, ranking first in the industry.

CITIC Securities and Huatai United Securities Co., Ltd. are the second largest underwriters of 8 IPO projects. In contrast, CITIC Securities project "gold content" is higher, the company's main underwriting income of 522 million yuan, 85 million yuan more than Huatai United. CSCI had seven sponsor projects listed in the first quarter.

It is worth noting that the small and medium-sized securities firm zhongchangjiang securities also "killed" in the first quarter. Among the company's recommended projects, six companies were listed in the first quarter. Only in terms of the number of projects, it has surpassed CICC and ranked behind CSCI.

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