The scale of derivatives business of listed brokers continued to expand.By the end of the third quarter, derivative financial assets totaled 147.9 billion yuan.
On the evening of October 30, all the third quarterly reports of listed brokers were disclosed, and 41 companies realized a total operating income of 371.038 billion yuan, down 21.03% year-on-year; The total net profit was 102.125 billion yuan, a year-on-year decrease of 31.2%. Only two brokers, Everbright Securities and Founder Securities, achieved a year-on-year increase in net profit.
Although the overall performance of the securities industry is under pressure, the scale of derivatives business of listed brokers continues to expand and develops rapidly. By the end of the third quarter, the scale of derivative financial assets of listed brokers increased by 82% compared with the end of 2021. At the same time, derivatives business has also played an important role in serving the high-quality development of the real economy.
Derivative financial assets
Rapid growth in scale
In the field of derivatives, which reflects the professional level of investment, many listed securities firms have grasped the trading opportunities brought about by market fluctuations, and continued to increase the layout of derivatives business. In the first three quarters, the scale of derivatives financial assets has expanded rapidly.
Wind statistics show that by the end of the third quarter, the scale of derivative financial assets of listed brokers totaled 147.912 billion yuan, an increase of 82% compared with the end of 2021. Among them, the derivative financial assets of CITIC Securities, CICC, Huatai Securities and Shenwan Hongyuan all exceeded 10 billion yuan, which were 47.662 billion yuan, 29.665 billion yuan, 25.116 billion yuan and 10.599 billion yuan respectively, increasing by 53.75%, 103.68%, 64.72% and 20.599 billion yuan respectively compared with the end of 2021. The market share of OTC derivatives business is highly concentrated, and the derivative financial assets of the above four brokers account for 76% of the total derivative financial assets of listed brokers.
Wu Pingping, a non-bank financial industry analyst in china galaxy, said that head brokers continued to promote the transformation and development of investment trading business, de-oriented, promote the development of customer-oriented business, reduce performance fluctuations and improve their anti-cyclical ability. The scale of derivative financial assets of securities firms has achieved rapid growth. Under the trend of institutionalization, securities firms, especially head brokers, regard securities lending business as an important starting point for institutional customer service, tap the strategic demand of securities lending transactions, expand the supply of securities sources, and enhance institutional customer service capabilities.
It’s not just the head brokers whose data are bright. Among the 41 listed brokers, the scale of derivative financial assets of 20 companies in the first three quarters increased by more than 100% compared with the end of 2021. Among them, 8 listed brokers, including Great Wall Securities, Founder Securities, soochow securities, Huaan Securities, changjiang securities, Nanjing Securities, Industrial Securities and Guangfa Securities, all increased by more than 500%. Of course, there are also listed brokers whose derivative financial assets have shrunk dramatically due to the scale of derivatives, the reduction of over-the-counter derivative business and the impact of changes in fair value.
However, some insiders told reporters that "the scale of derivative financial assets fluctuates greatly, and there is no linear relationship with profits. The increase may only be due to the low base last year, and it is not easy to judge from the trend. Moreover, the current market fluctuates greatly, and there is still a big gap between domestic and foreign means of hedging risks. "
Actively serve the real economy.
High-quality development
The reporter combed the third quarterly report of listed brokers and found that the substantial increase in derivative financial assets was mainly due to the rapid development of OTC derivatives market and fierce market competition.
According to the latest list of OTC options dealers (the sixteenth batch) issued by China Securities Association, there are currently 45 OTC options dealers, including 8 primary dealers and 37 secondary dealers, among which 5 secondary dealers are in the "transition period". OTC derivatives business of securities firms has become an important financial tool to serve customers’ risk management and asset allocation, and it is also an important growth point of operating income. The scale of OTC derivatives business of securities firms continues to grow. By the end of June 2022, the outstanding initial nominal principal of OTC financial derivatives of securities companies was 2.21 trillion yuan, an increase of 9.52% over the end of last year.
Chen Fu, chief non-bank analyst of GF Securities, said that the capital market has been accelerated to open, the derivatives business of securities companies has developed rapidly, and the high moat has created high concentration. Derivatives business has a natural legal person qualification barrier, and its business qualification is strictly restricted by the regulatory authorities. Up to now, there are only eight primary dealers (who can directly hedge the risks of on-site stocks with customers), and OTC derivatives business requires brokers to have strong capital strength, strong risk control ability and rich customer resources.
At present, a number of listed securities firms have ironed out market fluctuations by developing and applying derivative financial instruments, such as Everbright Securities and Founder Securities (both secondary dealers), whose net profit increased year-on-year in the first three quarters, and the development of their respective derivative businesses has also enhanced the stability of their performance. By the end of the third quarter, the scale of derivative financial assets of Everbright Securities was 1.394 billion yuan, an increase of 154.68% compared with the end of 2021, mainly due to the increase in equity swap and OTC options. The scale of derivative financial assets of Founder Securities was 438 million yuan, a substantial increase of 1725.85% compared with the end of 2021, mainly due to hedging and financing income swap business.
Among them, vigorously developing derivative business, neutral strategy business and non-directional business of sales and trading has always been the strategic direction that Founder Securities adheres to. According to the data of the first half of the year, the survival scale of OTC options of Founder Securities increased by 109.05% year-on-year, and the survival scale of income swaps increased by 1486.07% year-on-year.
In recent years, the OTC derivatives business of securities firms has ushered in a period of rapid development, and the market scale has increased substantially, which has effectively complemented the OTC market and played an important role in serving the high-quality development of the real economy.
Guotai Junan said that it takes advantage of futures and derivatives tools to effectively help entities reduce operational risks. Guotai Junan Futures comprehensively uses hedging, OTC options and other service tools to help entities cope with the epidemic situation and the risk of market price fluctuations. By the end of September 2022, the customer’s rights and interests had exceeded 100 billion yuan, an increase of about 27% over the end of last year, accounting for 5.74% of the national futures market turnover, a record high in recent years; The company actively carried out the business of "Guotai Junan Hedging". In the first three quarters, the cumulative turnover of equity business exceeded 110 billion yuan, up 52% year-on-year.
At the same time, in response to market challenges, in the first three quarters, Shen Wanhongyuan grasped the core positioning of derivatives business in serving the real economy and the overall situation of national development and reform, and in serving the construction of the capital market system, and strived to create value for the development of the real economy and enterprises. Through investment and research empowerment and financial technology empowerment, we will continuously improve pricing and hedging trading capabilities, and continue to provide differentiated product creation to customers, helping customers to conduct portfolio management in an unfavorable market environment and smooth market fluctuations.
In the first three quarters, the investment banking business of A-share listed brokers performed steadily.Expert: Further growth may be achieved in the fourth quarter.
A-share listed brokers closed in the third quarterly report. As of press release on October 30, all 41 A-share listed brokers have handed in their "transcripts" in the first three quarters. Overall, in the first three quarters of this year, although listed brokers generally suffered from downward pressure on their performance, the investment banking business of head brokers performed steadily, which became an important guarantee for their performance.
According to the data of Eastern Fortune choice, 41 listed brokers achieved revenue of 371.038 billion yuan in the first three quarters of this year, down 21.03% year-on-year. Among them, under the pressure of self-operated brokerage and investment income, the operating indicators of investment banking business were relatively stable, and the net income of securities underwriting business totaled 42.998 billion yuan, a year-on-year increase of 5.35%.
Dong Zhongyun, chief economist of AVIC Securities, told the Securities Daily that since the beginning of this year, due to internal and external factors, the A-share boom has declined, and brokerage, asset management, credit and other businesses with high market relevance have been negatively affected. China’s capital market continued to deepen reform in an all-round way, IPO maintained normal issuance, and the scale of equity financing reached a new high this year. The ability of investment banks to serve entities continued to increase, and investment banking became the highlight of brokerage business in the first three quarters.
Ming Ming, chief economist of CITIC Securities, said in an interview with Securities Daily that in the first three quarters, due to the poor performance of the equity market as a whole and the decline of investors’ risk appetite, the economic business, asset management business, investment business and net interest income of listed brokers declined as a whole, while the investment banking business performed steadily. This reflects that with the continuous improvement of multi-level capital market construction, the function of securities firms to support the financing needs of the real economy is also increasing.
Head brokers performed well. In the first three quarters of this year, CITIC Securities ranked first with 6.271 billion yuan, while CICC and CITIC Construction Investment ranked second and third, achieving 4.657 billion yuan and 4.566 billion yuan respectively. In terms of increase, the net fee income of investment banking business of CITIC Jiantou Securities increased by 32.40% year-on-year, while Guotai Junan and Guangfa Securities increased by 28.61% and 28.56% year-on-year, respectively.
According to Ming Ming, the investment banking business of securities firms showed three characteristics in the first three quarters: first, the investment banking business was fiercely competitive. Although the overall business scale expanded, the pricing power of securities firms was slightly insufficient, resulting in relatively slow profit growth; Secondly, the Matthew effect of investment banking has intensified. From the perspective of net income of investment banking, the top seven brokers account for over 61%; Finally, with the integration of IPO, additional issuance, mergers and acquisitions and other businesses, investment banking has become an important channel for investment banks and other departments within the brokerage to play a synergistic effect.
Dong Zhongyun also believes that the concentration of investment banking business continues to rise. He analyzed that "since the pilot of the registration system, the total scale of stock bond underwriting has continued to rise, but in terms of breakdown, investment banking resources, especially high-quality resources, are further concentrated in the head and large brokers, and small and medium-sized brokers can only seek breakthroughs by creating quality and differentiated positioning."
"At the same time, with the continuous deepening of the reform of the registration system, in addition to the core sponsorship and underwriting functions, the pricing ability and investment ability of the brokerage investment banking business have become increasingly prominent. Brokerage investment banks are gradually moving from channel value to collaborative value, and the synergy between investment banking, research business, investment business and wealth management business is becoming more and more important. " Dong Zhongyun said.
Combined with the situation of brokerage investment banking business in the first three quarters, it is clearly predicted that with the gradual weakening of various factors that suppress the A-share market, A-shares are expected to gradually start to repair the market, and brokerage investment banking business may usher in further growth in the fourth quarter.
Obviously, there is still room for improvement in the investment banking business of securities firms. It is suggested that securities firms can seize the opportunity of high-quality development in multi-level capital markets and provide differentiated products for customers with different financing needs, thus strengthening the core competitiveness of the company.
With the deepening of the reform of the registration system, the importance of core competencies such as sponsorship, pricing and underwriting of securities firms has become prominent. Dong Zhongyun suggested that the investment banking business of securities firms can continuously improve the quality of practice from three aspects: strengthening the linkage with other business lines such as research and investment, continuously improving the practice ability and industry research ability of investment banking employees, improving the ability to judge and screen projects, and screening high-quality projects from the source; Continue to strengthen the construction of internal control system, improve the quality control and risk control system, further consolidate the internal control defense line with reasonable division of labor, clear rights and responsibilities, mutual checks and balances and effective supervision, and do a good job in risk prevention and control; Continue to improve the level of specialization, improve pricing power, and truly play the role of value discoverer.
Editor: Gao Shuai | Audit: Li Zhen | Director: Wan Junwei
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