The net profit attributable to the parent company will continue to maintain a year-on-year growth of 55% in the case of a high base in 2020. The bright performance of 60 Hefei Lifeon Pharmaceutical Co.Ltd(003020) 21 will attract attention as soon as it is announced. In addition to outstanding performance growth and balanced business development, what are the layout ideas of the “first brother of the securities industry” for wealth management, asset management, investment banking and other businesses? How to deal with challenges and seize opportunities under the new development pattern?
At the same time, judging from the weighted roe of 12% in 2021, the company has reached a level equivalent to that of overseas investment banks. So for Citic Securities Company Limited(600030) , how to expand the overseas business layout and realize the transformation from first-class in China to the forefront in the world? After the implementation of the “largest allotment in the history of the securities industry” in January 2022, what help will it bring to Citic Securities Company Limited(600030) future development?
In response to these issues of common concern in the market, at the performance conference held on March 29, the company’s chairman Zhang Youjun, general manager Yang Minghui, financial director Shi Benliang and other executives gave detailed answers one by one.
focus 1: fluctuating market environment will strengthen the development of wealth management business and activate customers’ demand and dependence on professional services
Citic Securities Company Limited(600030) the effectiveness of wealth management transformation in 2021 can be explored from three aspects of data.
First, the rapid growth of asset scale of wealth customers and high net worth customers. The annual report shows that in 2021, the number of wealth customers (assets of more than 2 million yuan) of the company reached 158000, and the asset scale was 1.8 trillion yuan, an increase of 25% and 21% respectively over the end of 2020; The number of high net worth customers (with assets of more than 6 million yuan) reached 35000, with assets of 1.5 trillion yuan, an increase of 29% and 19% respectively over the end of 2020. If compared with 2018, the number and asset scale of the above two types of customers will double.
Second, in 2021, the number of wealth customers who realized profits through effective wealth allocation continued to significantly exceed that of pure trading customers.
Third, in terms of diversified asset allocation, Citic Securities Company Limited(600030) built a diversified financial product line, covering stocks, bonds, futures, macro strategy, market neutrality, goods strategy and other asset and investment strategies. “Our business philosophy of wealth management has always been consistent and clear, that is, we adhere to the customer-centered approach and help customers maintain and increase their wealth.” General manager Yang Minghui said.
Recently, with the huge fluctuation of the equity market environment, the wealth management market has also entered the most challenging stage in recent three years. In terms of wealth management institutions, coping with market fluctuations and improving customer experience is the most urgent pursuit under this volatile market. In the short term, the impact from the market also tests the belief and practice of securities companies on the concept of wealth management.
In response to a reporter’s question from the financial Associated Press, Yang Minghui said that short-term market fluctuations will not affect the long-term trend of wealth management, and even strengthen the development of business to a certain extent. In particular, it may activate customers’ demand and dependence on standardizing the services of professional wealth management institutions.
“Volatility itself is also the basic feature of the capital market, and the volatile market environment itself can also play a role in educating investors.” Yang Minghui said that wealth management institutions should help customers establish correct investment ideas in fluctuations, such as asset diversification, asset allocation and long-term investment, and iron out the impact of short-term fluctuations of single type assets through portfolio.
From the data results, it also confirms the implementation of Citic Securities Company Limited(600030) in the buyer’s investment advisory service. By the end of 2021, since the investment consulting business of Citic Securities Company Limited(600030) mutual fund was launched (November 1, 2021), there have been more than 90000 contracted customers and more than 7 billion yuan of contracted customer assets in two months.
focus 2: the comprehensive registration system will enable securities companies to give better play to their professional ability, and investment banks should provide more diversified services besides financing
In 2021, Citic Securities Company Limited(600030) investment banking continued to lead the industry, ranking first in many indicators Citic Securities Company Limited(600030) especially in the annual report, it was mentioned that with the reform of registration system, the company continued to increase the coverage of IPO customers such as the science and innovation board and the gem, completed 68 IPO projects, and issued a total of 85.922 billion yuan.
The comprehensive registration system has become the main line of capital market reform in 2022, and has driven the growth of securities companies’ investment banking business. Zhang Youjun believes that the full implementation of the registration system is conducive to the professional ability of securities institutions in the capital market. In the past listing approval environment, securities companies only played the role of channel business in the process of enterprise listing. The market pricing ability, research, customer sales and comprehensive financial service ability of securities companies have not been brought into full play, and these problems will be solved after the registration system.
Zhang Youjun said that the promotion of the comprehensive registration system is a favorable opportunity for securities institutions with preparation and comprehensive development, and can give better play to the role of securities companies in the capital market, serving the real economy and serving listed companies.
The report of the 19th National Congress clearly pointed out that China’s economy has changed from a high-speed growth stage to a high-quality development stage, which also means that the past extensive development model of some industries needs to be changed.
Zhang Youjun believes that for investment banks, it is their duty to help the real economy achieve and complete high-quality development. Under the background of double circulation strategy, securities institutions should play more roles in the whole industrial chain and help Chinese enterprises really go out and participate in the competition in the international market.
In addition, securities institutions should provide diversified services, not only for enterprises to finance in the capital market, but also provide support in many aspects, including risk control ability, market development ability and product pricing ability, so as to provide more suggestions for the development of the real economy.
focus 3: CITIC asset management focuses on institutional customers, and Huaxia Fund goes deep into the retail market
According to the data of the annual report, the asset management business had the most prominent year-on-year growth rate among all business segments in 60 Hefei Lifeon Pharmaceutical Co.Ltd(003020) 21, with a revenue of 13.514 billion yuan, a year-on-year increase of 41.35%. The total asset management scale was 1.63 trillion yuan, a year-on-year increase of 19%; The profitability of Huaxia Fund, the holding platform, continued to grow, with an operating revenue of 8.015 billion yuan and a net profit of 2.312 billion yuan, both of which increased by nearly 45% year-on-year, making a prominent consolidated income for Citic Securities Company Limited(600030) contribution.
In February 2021, Citic Securities Company Limited(600030) said that it would invest 3 billion yuan to set up a subsidiary, CITIC asset management, whose main business scope includes securities asset management business, public offering securities investment fund management business and other businesses approved by the regulatory authority. Yang Minghui said that compared with the original business, after applying for public fund management qualification, it will promote the transformation and sustainable development of large collection products. At the same time, it is also conducive to the establishment of the third pillar products and improve the product pedigree of pension products.
From the perspective of positioning, the development trend of CITIC Capital Management Company and Huaxia Fund has its own emphasis, which is mainly reflected in the customer structure. Yang Minghui emphasized that Citic Securities Company Limited(600030) originally had some advantages in the scale of institutional customers, with an overall number of about 500000 customers, mainly institutional customers; Huaxia Fund has accumulated competitive advantages in terms of retail customers. At present, the number of customers of Huaxia Fund is about 150 million, and the main customers are individual customers.
This clear positioning layout also responds to the customer development strategy of “based on institutions and expand retail” of asset management business proposed by Citic Securities Company Limited(600030) in the annual report.
focus 4: the allotment is mainly invested in innovative business, which will increase roe in the long run
In January 2022, Citic Securities Company Limited(600030) completed the allotment of shares, and the fund-raising scale can be called “the largest in the history of the securities industry”. Among them, the total amount of funds raised by A-share allotment was 22.396 billion yuan (the net amount of funds actually raised was 22.318 billion yuan); The total amount of funds raised by H-share allotment is about RMB 4.93 billion (the net amount of funds actually raised is about RMB 4.88 billion)
On March 28, Citic Securities Company Limited(600030) while disclosing the annual report, it also issued an announcement on using the funds raised by allotment to replace the self raised funds invested in advance. According to the announcement, as of January 27, the actual investment amount of the company’s self raised funds in advance into the investment projects with raised funds was 3.517 billion yuan, of which 1.517 billion yuan was invested to strengthen the construction of information system and 2 billion yuan was invested to increase the investment in subsidiaries.
The allotment and fund-raising will greatly supplement the financial support required for the company’s future development, but it also means the short-term decline of the company’s roe level.
In this regard, Shi Benliang, the person in charge of Citic Securities Company Limited(600030) finance, said that it takes a cycle to raise funds from investment to benefit. In the short term, the allotment may temporarily have a pull-down impact on the company’s leverage level and roe level. However, in the long run, the allotment is for the different needs of capital in the company’s long-term strategic layout. Through the allotment, it can further reduce the pressure of some businesses of the company on health indicators, enhance the company’s capital strength, and improve the company’s ability to resist risks, which will be of great benefit to the company’s long-term development.
From the perspective of the fund use planning of allotment and fund-raising, the company plans to use about 13.318 billion yuan (accounting for nearly 60%) to develop capital intermediary business, including several business directions, one is such financing business represented by two financing business, and the other is QFI and ficc business.
Shi Benliang said that from the perspective of business composition, the above-mentioned business segments basically belong to market innovation businesses with good development prospects. From the perspective of financial performance in recent years, the development of these businesses has also significantly thickened and improved the company’s roe level. From the perspective of the company’s overall business layout and the company’s strategy for business development, the overall business scale and income level will be significantly improved after the replenishment of raised funds.
focus 5: market fluctuations bring new opportunities for derivatives and ficc, which will promote benign innovation in the industry
Recently, the global capital market fluctuates due to various reasons such as the international situation. For securities companies, will changes in the external market environment have an impact on the demand for business funds?
Shi Benliang believes that the fluctuation is temporary, and the overall situation of China’s capital market remains unchanged for a long time. From the perspective of the company’s own development, the market has also fluctuated in recent years, but the company’s risk business based on the balance sheet has still achieved sustained and steady development.
On the other hand, the fluctuating market environment will also bring some incremental investors to the capital market, especially institutional investors with hedging demand or allocation demand, which is a very good business opportunity for the company.
Citic Securities Company Limited(600030) has accumulated great competitive advantages in the layout and product services of equity derivatives business and ficc, but at the same time, the derivatives business has also been placed in an overall stricter regulatory environment recently.
Shi Benliang pointed out that the main purpose of regulatory policy is to regulate and guide market behavior, not to restrict market development. With the continuous improvement of China’s derivatives market system and infrastructure, it is also conducive to promote the healthy development of the capital market and the benign innovation of the industry.
Shi Benliang believes that in a standardized and orderly market environment, Citic Securities Company Limited(600030) will serve the real economy with first-class professional service ability and excellent risk management level. The standardized development of the market will also be more conducive to the improvement of the company’s competitive advantage and service ability.
focus 6: the reorganization of CITIC Lyon has increased the impairment of goodwill, and overseas business focuses on four directions
It is worth mentioning that the annual report shows that in 2021, the company accrued impairment loss of other assets of RMB 2.605 billion, reduced total profit of RMB 2.605 billion and net profit of RMB 2.440 billion, and the impact on net profit exceeded 10% of the audited net profit of the company in 2021. Among them, the provision for impairment of goodwill is 2.069 billion yuan and 81 million yuan in 2020; The provision for impairment of intangible assets is 285 million yuan and 5700 yuan in 2020. Among them, one of the reasons for the significant increase in goodwill impairment is the restructuring of CITIC Lyon in 2021.
Zhang Youjun said that Citic Securities Company Limited(600030) has always been committed to promoting the good development of international business. In 2013, after Citic Securities Company Limited(600030) acquired CLSA, it effectively integrated with Citic Securities Company Limited(600030) international, and implemented global integrated vertical management in early 2020, driving the growth of overseas business in recent two years. In 2021, the revenue from overseas business exceeded 6.1 billion yuan. Although this revenue accounts for only about 8% of the total revenue, the revenue scale has set a new high of Citic Securities Company Limited(600030) overseas business revenue.
With the reform and opening up of China’s economy, China investment bank has gradually grown and expanded. The development of China investment bank cannot be separated from the development of China’s economy, the growth of Chinese economy and the important position of China as the world’s second largest economy. Then, as a Chinese head securities firm with the corporate vision of “becoming a leading and world-class Chinese investment bank most trusted by global customers”, how does Citic Securities Company Limited(600030) continue to develop international business and realize the development path of benchmarking international excellent investment banks?
Zhang Youjun said that developing into a Chinese investment bank that satisfies and trusts global customers requires all-round preparation in terms of capital, talents and market. “We will take advantage of any possible opportunity to develop and expand ourselves in the process.”
Turning to the focus and development direction of overseas business in the future, Zhang Youjun said that first, expand the scale of capital investment to enable overseas business to achieve good development under the support of a certain capital scale.
Second, improve the profitability of each business line overseas. “Profitability is actually an important standard to test whether a company can survive in the competition for business development.”
Third, accumulate Citic Securities Company Limited(600030) characteristics in the customer service market, “we hope Citic Securities Company Limited(600030) can serve more Chinese enterprises to go global and overseas enterprises to come to China.” Zhang Youjun said.
Fourth, by promoting the development of overseas business, cultivate more excellent talents with international vision and global business ability. Zhang Youjun said that the development of Citic Securities Company Limited(600030) is inseparable from the cultivation and contribution of talents, and the company will invest more time and energy in human resources in the future.
Meanwhile, in the process of overseas business development, the company will also strengthen risk compliance control to ensure the orderly development of overseas business under the premise of legal compliance and controllable risk.
Zhang Youjun expressed his belief that the position of China’s investment banks in international investment banks will continue to strengthen. I hope Citic Securities Company Limited(600030) in the development process, I can have the opportunity to get the recognition of global investors and global markets together with other excellent colleagues in China’s investment banking industry in the development process.
