Dongfang Securities Absorbs And Merges Dongfang Investment Bank To Highlight The Advantages Of Full License Securities Companies

On June 22, the stock price of Dongfang securities rose slightly by 0.21%.

On the evening of the previous day, Dongfang securities announced that in order to further integrate resources, improve efficiency, and effectively improve business development and comprehensive customer service capabilities, the company intends to absorb and merge the wholly-owned subsidiary of investment banking business of the merger company (hereinafter referred to as "the merger") of Orient Securities underwriting Co., Ltd. (hereinafter referred to as "Oriental Investment Bank").

According to the relevant arrangements, Dongfang securities intends to merge all the assets, liabilities, business and personnel of Dongfang investment bank by means of absorption and merger.

After the merger, all the assets of Dongfang investment bank, including but not limited to fixed assets, current assets and customer agreements, will be merged into the company. All creditor's rights and debts of Dongfang investment bank will be inherited by the company. All employees of Dongfang investment bank will be accepted by the company, and its independent legal personality will be cancelled, The branch of the former Orient Investment Bank is to be changed into a branch of the company after being approved or filed by the regulatory authorities.

For the merger, Dongfang Securities pointed out: "after the merger, the division of investment banking business license of the company will be solved, which is conducive to give full play to the advantages of full license, improve the efficiency of business development, and then improve the comprehensive financial service level of the company."

Dongfang investment bank has made remarkable achievements in recent years

According to the public information, as of December 31, 2020, the total assets, total liabilities and owners' equity of Dongfang investment bank were 2.6 billion yuan, 1.048 billion yuan and 1.551 billion yuan respectively. In 2020, it realized 1.036 billion yuan of operating revenue and 79 million yuan of net profit.

In recent years, with the opening of the registration system, the business performance of Orient Investment Bank is quite beautiful.

According to the performance ranking of securities companies released by the China Securities Association in 2020, in terms of commission income from the main underwriting of stocks, Dongfang investment bank achieved a revenue of 507 million yuan, ranking the 14th in the industry, and the commission income of equity main underwriting broke through a new high in recent five years. From 2016 to 2019, Dongfang investment bank's equity underwriting commission income was RMB 300 million, RMB 447 million, RMB 186 million and RMB 182 million respectively, ranking No. 20, No. 13, No. 11 and No. 18 in the industry respectively.

In the first half of this year, the performance of Orient Investment Bank was also brilliant. Wind data shows that as of June 21, 2021, the principal underwriting amount of Orient Investment Bank this year was 17.102 billion yuan, ranking the seventh in the industry. The scale of the half year of 2021 has exceeded that of last year, and the ranking has been greatly improved. In 2019 and 2020, the IPO underwriting and recommendation amount of Dongfang investment bank is 1.34 billion yuan and 9.715 billion yuan, ranking 33rd and 11th in the industry.

Among them, IPO underwriting and recommendation business is the main grasp of Orient Investment Bank. As of June 21, the number of IPO underwriters of Dongfang investment bank in 2021 reached 11.108 billion yuan, and the market share of IPO underwriting amount reached 5.95%, ranking fifth in the industry after CITIC Securities (13.15%), Haitong Securities (8.60%), Huatai United Securities (8.45%) and China Construction Investment Securities (6.40%).

In terms of IPO underwriting income, as of June 21, 2021, Dongfang investment bank realized 358 million yuan of revenue in 2021, accounting for 3.43% of the market share. Both indicators ranked 12th in the industry.

From the perspective of performance, in recent years, Dongfang investment bank has performed well and created high value for its parent company.

However, since Dongfang investment bank is already a wholly-owned subsidiary of Orient Securities, there will be no change in the financial data of the two companies. So, why should Dongfang securities make great efforts to adjust its organizational structure?

In the view of industry insiders, the merger is mainly due to the internal business structure of Dongfang securities.

"The core is that Orient Securities takes back its investment banking license, which is mainly reflected in the carding of its internal business structure, which has no significance at the industry level. In the past, Dongfang investment bank existed in the form of subsidiary companies. The license plate of securities dealers operated in the subsidiary companies. There was a split in the internal part of Dongfang securities. After taking back, Dongfang securities became a complete full license securities company. " Zehao investment partner Cao Gang pointed out to the reporter of the 21st century economic report.

In fact, Dongfang securities also believes that after the merger, the division of investment banking business license will be solved. At the same time, it can effectively solve the influence and restriction of liquidity risk and other indicators on the development of investment banking business; As a whole, the management and decision-making efficiency of the company's investment bank will be effectively improved, which is conducive to the overall development of the company's investment banking business.

The 21st century economic reporter noted that in its 2020 annual report, Dongfang Securities pointed out that according to the company's new strategic planning, the company takes "becoming a modern investment bank with domestic first-class core competitiveness and providing customers with comprehensive financial services" as its vision, striving to achieve a new round of strategic development goals.

In order to become a modern investment bank and enhance the industry status of investment banking business, it is necessary to integrate the investment banking business into the listed companies, or bring the advantages of investment banking business to securities companies in primary market products such as direct investment.

Joint venture securities companies gradually withdraw from the stage of history

It is worth mentioning that the predecessor of Orient Investment Bank is Oriental Citibank Securities Co., Ltd. (hereinafter referred to as "Oriental Citibank").

At that time, with the acceleration of China's financial opening-up, especially the complete liberalization of the proportion of shares in domestic financial enterprises newly established or participated by foreign investors, more and more foreign investors turned to holding or wholly-owned enterprises.

In this context, in June 2012, Dongfang securities and Citigroup Global Finance (Asia) Co., Ltd. (hereinafter referred to as "Citi Asia") jointly established Oriental Citigroup to carry out investment banking business. However, with the end of the strategic cooperation period with Dongfang securities, Citigroup Asia transferred its 33.33% equity of Oriental Citigroup to Dongfang securities in early 2019.

On April 22, 2020, Dongfang securities announced that it had completed the industrial and commercial registration of acquisition of 33.33% equity of Dongfang Citigroup and the renaming of Dongfang Citigroup, and obtained a new business license issued by Shanghai market supervision and Administration Bureau. The enterprise name of Oriental Citigroup was changed to orient securities underwriting and recommendation Co., Ltd. (i.e., Dongfang investment bank) and became a wholly-owned subsidiary of Dongfang securities.

With the completion of the merger, the Oriental Investment bank officially withdrew from the historical stage, and the joint venture securities companies which were popular earlier also came to an end.

Earlier than Citigroup Orient, similar cases included BFQ securities in Paris, fortune Lyon securities, haijidahe securities and Huaying securities, which became wholly-owned subsidiaries of domestic investment banks due to the withdrawal of foreign capital, and finally further evolved.

Up to now, there are only four Chinese foreign joint venture securities companies in China, namely, Sino German securities (jointly established by Shanxi securities and Deutsche Bank), Credit Suisse Founder Securities (jointly established by Founder Securities and Credit Suisse Bank), UBS Securities (established by Swiss bank and Beijing state-owned assets management company) and Guangzhou securities Hengsheng (formerly established by joint venture of Guangzhou securities and Hengsheng securities), At present, the shareholders have been changed to CITIC Securities and Hang Seng securities).

"At present, most of the other joint venture securities companies have failed, except CICC, which was set up by Morgan Stanley. The reasons include many aspects. First, the Chinese side and foreign side have different ideas. In addition, there are also differences in positioning. Foreign shareholders prefer to use joint venture securities companies as a platform for China's industry development, such as promoting overseas listing of enterprises, while the Chinese side hopes to upgrade to a higher level with the help of the control level of foreign shareholders. Second, in the past two decades, China's investment banks have been separated from the international market. The pricing and sales of investment banks in the international market are the most important, while the Chinese investment banks are writing materials, and the foreign advantages are almost worthless in IPO. Third, China's investment banking incentives are in place, even excessive incentives. They are basically small teams and highly independent. Therefore, the so-called decision-making and institutional advantages of Sino foreign joint ventures are difficult to play. " The head of Investment Banking Department of a medium-sized securities firm in Shanghai pointed out in an interview.

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