Relying on the background of Nanjing state-owned assets and Jiangsu's profound customer resources, Nanjing Securities continues to cultivate the Jiangsu market. At the same time, by holding Ningxia equity trading center and other ways to improve the financial services for retail customers and small and micro enterprises in the western region, it is expected to create a strategic development pattern with the Yangtze River Delta as the core and Ningxia as the strategic foothold in the central and western regions. In the short term, Nanjing Securities benefits from the improvement in performance rankings and is expected to maintain the current valuation level; in the long run, PB valuation is expected to be closer to the industry average.
Deep layout of Jiangsu and Ningxia markets, ROE in the past two years is lower than the industry average. The current comprehensive strength of Nanjing Securities is about 40 in the industry. Relying on the background of Nanjing state-owned assets and Jiangsu's profound customer resources, Nanjing Securities continues to cultivate the Jiangsu market. At the same time, by holding Ningxia equity trading center and other ways to improve the financial services for retail customers and small and micro enterprises in the western region, it is expected to create a strategic development pattern with the Yangtze River Delta as the core and Ningxia as the strategic foothold in the central and western regions. In terms of profitability, the ROE of the 2022H1 securities industry in the past three years from 2019 to 2019 was 6.30%, 7.27%, 7.83% and 3.03% respectively, while the ROE of Nanjing Securities was 6.55%, 6.74%, 6.06% and 2.16% respectively in the same period. The ROE in the past two years is lower than the industry average.
Brokerage business: the proportion of income has declined slightly, with a deep layout in Jiangsu and Ningxia. In 2021 and 2022H1, the net income of securities brokerage fees in Nanjing was 7.12 yuan and 253 million yuan respectively. In the past five years, the share of brokerage revenue in operating income has dropped from 34% in 2017 to 26% of 2022H1, while the share of revenue has declined slightly. Among them, stock agency trading is the main body of brokerage business income, 2022H1 stock agent trading income (200 million yuan) accounts for 79.4% of the total revenue of brokerage business. In terms of channels, Jiangsu and Ningxia are the focus of the layout of Nanjing Securities. Of the 104 business departments of Nanjing Securities by the end of 2021, 51 are located in Jiangsu and 15 in Ningxia, accounting for 63.46% of the total number of branches.
Credit business: the company's core source of income, credit impairment risk is stable and controllable. The net interest income of 2021 and 2022H1 Nanjing Securities is 9.86 yuan and 445 million yuan respectively, accounting for 36% and 46% of the total income, which is the most important source of income for the company. Among them, the interest income of 2022H1 margin trading and equity pledge business is 2.39 yuan and 28 million yuan respectively. At the end of 2022H1, the balance of Nanjing securities margin trading business was 7.435 billion yuan, down 12.31% from the same period last year, and the stock pledge balance was 869 million yuan, down 27.52% from the same period last year. At the risk level, by the end of 2022H1, the average guarantee ratio of margin trading and short selling of Nanjing securities was 281.10%, and the proportion of equity pledge performance guarantee was 447.00%, which was significantly ahead of the industry average, and the credit risk was stable and controllable.
Investment business: the fixed income business is led, and the scale of self-supporting business continues to expand. In 2021 and 2022H1, the profit and loss of investment income plus fair value changes in Nanjing Securities was 6.10 yuan and 137 million yuan respectively, and the proportion of income was 22% and 14% respectively. In the past five years, investment income accounted for about 20% of total income. The fixed income business is absolutely dominant in the Nanjing securities investment plate. At the end of 2022H1, proprietary equity securities and securities derivatives / net capital and proprietary non-equity securities and their derivatives / net capital were 5.02% and 178.13% respectively, an increase of 1.38% and 13.74% over the end of 2021, and the scale of proprietary business maintained the trend of expansion.
Investment banking business: implement the "base area" strategy and improve the in-depth layout of Jiangsu market. In 2021 and 2022H1, the handling fee income of Nanjing Securities Investment Bank was 3.46 yuan and 83 million yuan respectively, accounting for 13% and 9% respectively, and the proportion of investment bank income remained about 10% in the past three years. At the level of development, Nanjing Securities firmly implements the "base area".
Strategy, strengthen the channel construction of Jiangsu, and strive to create location advantages. In terms of equity financing, 2022H1 Nanjing Securities completed a single IPO project with a joint principal underwriting scale of 204 million yuan; in terms of bond financing, Nanjing Securities 2022H1 completed 16 bond main underwriting projects with an underwriting amount of 5.177 billion yuan.
Asset management business: income share is gradually declining, holding 49% stake in Fu Anda fund. In 2021 and 2022H1, Nanjing securities management fee income is 0.25 yuan and 9 million yuan respectively, and the proportion of asset management income has continued to decline in the past five years, from 6% in 2017 to 0.9% of 2022H1. At the end of 2022H1, the total scale of Nanjing securities asset management business is 10.384 billion yuan, of which the collective, single and special asset management scale is 42.24,44.97 and 1.662 billion yuan respectively. At the same time, Nanjing Securities operates private equity and public fund businesses through its wholly-owned subsidiary Jushi Venture Capital and its shareholding subsidiary Fu Anda Fund. 2022H1, Stonehenge Venture Capital and Fu Anda Fund achieved net profits of 4 million yuan and-14 million yuan respectively, with net profit contribution rates of 1.11% and-1.91%, respectively.
Risk factors: credit business risk exposure, agency turnover decline, investment business losses, wealth management market development is lower than expected, regional competition intensified.
Investment suggestion: with the reform of the capital market and business innovation of the securities industry, the concentration of the securities industry is expected to increase.
Nanjing Securities ploughs Jiangsu and Ningxia markets and has formed a certain location competitiveness. By deeply ploughing the high-quality customer resources of the two places, Nanjing Securities is expected to take the Yangtze River Delta as the core and Ningxia as the strategic foothold in the central and western regions to form a new differentiated competitiveness. In the short term, Nanjing Securities benefits from the improvement in performance rankings and is expected to maintain the current valuation level; in the long run, PB valuation is expected to be closer to the industry average. It is estimated that in 2022-23-24, the BVPS will be 4.53, 4.68 and 4.87 yuan respectively.
