Wang Yuanye, reporter from China Foundation News
Although the brokerage sector index did not perform well last year, judging from performance, as far as brokerage firms are concerned, last year was a year with a good harvest.
Up to now, a total of three brokerage firms have announced pre-increase results for 2021. Judging from the data, some brokers' net profit increased by up to 436.90% year-on-year last year, an astonishing growth rate. Some agencies pointed out that it is expected that brokerage performance will continue to grow definitively in 2021 under the high base in 2020, and the total revenue and net profit of the securities industry will increase by 20% year-on-year for the whole year.
The performance of the three brokerage firms is expected to increase last year
The net profit of Zhongyuan Securities increased by up to 4 times year-on-year
Up to now, three brokerage firms have issued advance announcements for 2021 results, namely CITIC Securities, Zheshang Securities, and Zhongyuan Securities.
On the evening of January 4, CITIC Securities, the “big brother” of the brokerage industry, announced a pre-increase in 2021 results. This is the first A-share brokerage firm to issue a pre-performance increase announcement.
CITIC Securities stated in the announcement that net profit attributable to shareholders of the parent company in 2021 is expected to be no lower than the level of the first three quarters of 2021, that is, no less than 17.645 billion yuan, an increase of no less than 18.41% over the full year of 2020.
On January 7, Zheshang Securities also received “good news”. It is estimated that net profit attributable to shareholders of listed companies in 2021 will increase by about 488 million yuan to 651 million yuan compared with the same period last year, an increase of about 30% to 40% over the previous year.
Compared with CITIC Securities and Zheshang Securities, the performance growth rate of Zhongyuan Securities is astonishing. On January 9, Zhongyuan Securities stated in an announcement that according to preliminary estimates by the finance department, net profit attributable to shareholders of listed companies in 2021 is expected to increase by 376 million yuan to 456 million yuan compared with the previous year, an increase of 360.20% to 436.90% over the previous year. The increase is truly amazing.
What is the reason for the increase in performance
Up to now, only these three brokerage firms have issued performance forecasts, and all have announced advance increases. So, what is the reason for the pre-increase in the performance of these brokerage firms?
Regarding the main reason for the pre-increase in performance, CITIC Securities stated that the domestic economy overcame the impact of the epidemic and continued to improve, the capital market was booming, and all businesses developed in a balanced manner and grew steadily in 2021.
By business, many of the brokers' main businesses ushered in relatively good performance growth last year.
In 2021, the average daily transaction volume of the two markets surpassed the record high in 2015. The average daily turnover of the two markets for the whole year was 105.83 billion yuan, an increase of 24.76% over 2020. This is undoubtedly beneficial to the brokerage business. In terms of investment banking business, 524 companies' IPOs in 2021, with a financing scale of 543.773 billion yuan, up 13.17% year on year; refinancing scale of 1.26 trillion yuan, up 5.68% year on year; debt scale of 11.37 trillion yuan, compared to 9.97 trillion yuan in 2020, up 14.04% year on year; in terms of asset management business, the transition period of the new asset management regulations is coming to an end, and targeted asset management centered around channels has been drastically compressed. The total asset management scale dropped from 17 trillion yuan before the new regulations to 8.64 trillion yuan in the third quarter of 2021. The pressure drop was close to 50%, along with the active industry Management capacity improved, and asset management revenue rebounded steadily. Asset management revenue in the third quarter of 2021 was 22 billion yuan, up 3% year on year. In terms of credit business, the average daily scale of the two loans for the full year of 2021 was 1762 billion yuan, +37% over the same period last year.
The high growth in the performance of Zhongyuan Securities is clearly supported by investment banking and other businesses. Zhongyuan Securities said that in 2021, the multi-level capital market was continuously improved and the capital market was booming. The company actively grasped market opportunities, continuously improved its core competitiveness, and major businesses such as investment banking business and primary and secondary market investment developed steadily. The company is expected to achieve a total consolidated profit of 700 million to 750 million yuan last year, an increase of 556 million to 606 million yuan over the same period last year.
Also, in the performance report of Zhongyuan Securities for the first three quarters of this year, we can also see the contribution of the investment banking business to the company's revenue. In the first three quarters of 2020, the company achieved net profit of 497 million yuan, mainly due to increased revenue from investment banking and securities investment businesses and increased profitability.
Zheshang Securities said that in 2021, China's overall economic development showed a steady, moderate and positive trend. The domestic capital market was booming. The company closely focused on the strategic goal of serving the real economy, actively grasping market opportunities, continuously improving the company's core competitiveness, and developing various businesses steadily, thus achieving a steady increase in net profit attributable to shareholders of listed companies.
Cinda Securities said that the market is in a performance vacuum in the coming quarter, but brokerage performance will definitely continue to grow in 2021 under a high base in 2020, and it is expected that the total revenue and net profit of the securities industry will grow 20% year-on-year for the whole year.
Continue to be optimistic
The brokerage performance is expected to achieve a positive growth of 8%-12% next year
With last year's performance improving, the industry is also quite optimistic about the brokers' performance this year. In particular, the comprehensive registration system reform is progressing steadily. It is expected to be implemented in 2022, and brokerage firms will also usher in a new round of development opportunities.
The non-bank team of Everbright Securities anticipates that 2022 will be a year of deepening capital market reforms. Brokerage firms will directly benefit from registration system reform, multi-level capital market construction, and broadening of main financing channels, and the policies will benefit the healthy and continuous development of the industry. Looking forward to the future, capital market activity will increase, and the brokerage industry's performance is expected to maintain a high level of growth. Under a neutral assumption, the brokerage industry's revenue and net profit are predicted to achieve positive growth of 8%-12% in 2022, and the industry's ROE is expected to be above 7.9%.
The team pointed out that under the catalyst of factors such as capital market reform dividends and increased space for industry development, some brokerage firms are expected to achieve excess profits. In the current context of an industry with undervaluation and high performance growth, the brokerage industry still has a lot of room for development in wealth management, investment business, and institutional business. The brokerage sector has a high allocation cost ratio, and the brokerage industry may show excess earnings in 2022.
The non-bank team of Shanxi Securities pointed out that brokers' customer-to-customer business mainly includes investment business, wealth management, and institutional business. Due to the different resource endowments of each brokerage firm, its business layout is somewhat differentiated. Overall, leading brokerage firms have a first-mover advantage, comprehensive layout, overall lead, and form an unbalanced advantage. Small and medium-sized brokerage firms follow up, maintain basic markets, and create regional or segmented advantages. The investment banking business is heavily affected by regulatory policies and shows cyclical changes. The rapid increase in distribution efficiency will gradually lead to competition for corporate customer stock. In comparison, wealth management business and institutional business have a higher ceiling and wider business space. It is estimated that in 2022, brokers' revenue will be $520.06 billion, up 10.7% year on year; net profit will be 20.862 billion yuan, up 13.6% year on year.
Cinda Securities said that brokerage firms may experience excessive earnings in the future as a liquidity sector that directly benefits. In the context of the development of wealth management, the scale of public funds exceeds 25 trillion dollars, and the 2022 issuance is expected to exceed expectations. The conditions for the entire market to achieve a registration system are gradually in place, and the 2022 registration system for the entire market is a foregone conclusion. Under the registration system, the number of companies that meet the listing standards will increase dramatically, issuance efficiency will be higher, and more high-quality companies will accelerate their entry into the A-share market; the registration system tests brokers' asset pricing and sales capabilities, and IPO rates are expected to rise, and the investment banking business in the securities industry is expected to rise sharply in volume and price. Leading brokerage firms with strong comprehensive investment banking capabilities such as asset pricing capabilities and sales capabilities will fully benefit from the implementation of a market-wide registration system.
Editor: Captain