On the afternoon of the 30th, Haitong Securities Company Limited(600837) held a 2021 annual performance conference, which responded to market concerns such as the sharp decline in performance, low profit margin and decline in classification rating in the fourth quarter of 2021.
On the 29th, Haitong Securities Company Limited(600837) released the annual report for 2021: the revenue reached 43.205 billion yuan, a year-on-year increase of 13.04%; The net profit attributable to the parent company was 12.827 billion yuan, a year-on-year increase of 17.94%. However, by quarter, Haitong Securities Company Limited(600837) 2021 saw a sharp decline in revenue and net profit in the fourth quarter, and the provision for asset impairment loss reduced the net profit by 1.859 billion yuan.
Haitong Securities Company Limited(600837) the management said at the performance meeting that the decline in the fourth quarter was mainly affected by the decline in the activity of the external market, and “shouted” investors to objectively compare the financial statement data on the provision issue.
2021 Q4 performance decline is due to the decline of external market activity
Zhongxin Jingwei noted that after Haitong Securities Company Limited(600837) released its 2021 annual report, Bank of America Securities, Bank of Communications International, China International Capital Corporation Limited(601995) and other institutions lowered their target share prices one after another because their performance was lower than expected. According to bocom International Research Report, Haitong Securities Company Limited(600837) 2021’s trading and institutional / financial leasing segment performed well, with a year-on-year increase of 28% / 17%; The income growth rate of wealth management / investment banking / asset management division was less than 8%. Among them, the commission income of investment banks fell on a high base. In 2021, the asset impairment loss decreased by 16% year-on-year to 3.85 billion yuan on the high base, but it was still higher than that in other historical years, and the provision increased significantly in the fourth quarter. The company has sufficient investment bank reserves, and the lead underwriter of IPO ranks second in the industry this year However, it is expected that the fluctuation of A-Shares may intensify in 2022, and the growth rate of average daily turnover will slow down. Based on 0.4 times price to book ratio in 2022, BOCOM lowered the target price from HK $7.80 to HK $7.20, maintaining a neutral rating.
According to the annual report, compared with the revenue of 10 billion yuan in the previous three quarters, Haitong Securities Company Limited(600837) 2021’s fourth quarter revenue fell to 8.366 billion yuan, and the net profit attributable to the parent company also fell to 855 million yuan. The investment income (including fair value) decreased by 78% year-on-year and 83% month on month. One important reason is that Haitong Securities Company Limited(600837) in the fourth quarter, due to the purchase of resale financial assets, financial lease receivables, other loans and receivables, goodwill and other impairment provisions, a total asset impairment loss of 2.283 billion yuan was withdrawn, reducing the net profit of 1.859 billion yuan.
Haitong Securities Company Limited(600837) 2021 performance by quarter, source: Haitong Securities Company Limited(600837) 2021 Annual Report
Why is there a huge contrast in the fourth quarter Haitong Securities Company Limited(600837) chief financial officer Zhang Xinjun said that this was mainly affected by the month on month decline in the activity of China and overseas markets in the fourth quarter, during this period, the decline of equity and debt assets related to some industries in China and China concept shares was obvious, putting pressure on the company’s domestic and foreign business development and the valuation and impairment of financial assets
Faced with the question raised by analysts about whether Haitong Securities Company Limited(600837) investment or position has been adjusted after the “policy warm” in the first quarter of this year, Haitong Securities Company Limited(600837) chief risk officer Du Hongbo said that at present, in order to cope with the uncertain factors brought by the epidemic and the external environment and market risks, equity trend investments have reduced the exposure of market risks by optimizing the structure and asset allocation and using financial instrument hedging, Wait for the market to stabilize before seeking investment opportunities. At the same time, we have increased investment in fixed income interest rate bonds to achieve balanced allocation.
In view of investors’ concern about the substantial provision for asset impairment, Zhang Xinjun “shouted that investors need to make an objective comparative analysis when looking at the financial statements.
Zhang Xinjun said that although Haitong Securities Company Limited(600837) financial leasing business increased more provisions at the end of the year, it affected the net profit. However, on the whole, the contribution of this sector to the company’s net income continued to increase. In 2021, the contribution to net profit was more than 2.4 billion yuan, with a non-performing asset ratio of 1.07% and a provision coverage rate of 258.8%.
Haitong Securities Company Limited(600837) the provision for asset impairment in 2021, source: Haitong Securities Company Limited(600837) 2021 Annual Report
In view of the relatively low Haitong Securities Company Limited(600837) profit margin, Zhang Xinjun said that the company has continuously improved the profit margin index by adjusting the income structure in recent years, and will further tilt more resources to investment banking, asset management and wealth management in the future to increase the structure proportion of such business income.
unavoidable pain points: compliance issues
The content related to “compliance” was also mentioned many times at this performance conference.
Haitong Securities Company Limited(600837) general manager Li Jun said in response to the question on how to balance the internal control of supervision and business development, supervision and compliance is the lifeline. Only by consolidating the foundation of compliance risk control can the company develop healthily, sustainably and with high quality.
In fact, as a leading securities firm, compliance has become a “pain point” that Haitong Securities Company Limited(600837) has been unable to get around in recent two years. Public information shows that Haitong Securities Company Limited(600837) received more than 10 fines in 2021, most of which were directed to investment banking business. It was also investigated by the CSRC for suspected violations of laws and regulations during the continuous supervision of the financial consulting business of Southwest Pharmaceutical Co., Ltd. (now aoruide North Electro-Optic Co.Ltd(600184) Co., Ltd.).
According to the statistics of Zhongxin Jingwei, since this year, Haitong Securities Company Limited(600837) has also been issued regulatory measures by the securities regulatory system four times. The most recent one was on March 28. Because the issuer’s performance was greatly discounted in the year of listing, Haitong Securities Company Limited(600837) the two Baodai Guo Wei and Liu ailiang were determined as inappropriate candidates by the CSRC for three months, and the documents related to administrative license will not be accepted for three months.
According to the classification results of securities companies in 2021, Haitong Securities Company Limited(600837) was rated as BBB, with two consecutive grades compared with AA in the previous year. This is also the first time Haitong Securities Company Limited(600837) fell out of the level of A-level securities companies. Meanwhile, according to the “white list” of securities companies released by the CSRC on March 18, Haitong Securities Company Limited(600837) has been absent for 6 times.
In this regard, Du Hongbo said that Haitong Securities Company Limited(600837) will reduce the impact of the decline of classification rating from two aspects: on the one hand, maintain the good image of the company. By continuously strengthening public opinion monitoring, we can grasp the trend of public opinion at any time, make full use of the main positions of the company’s official website, official wechat and other self media, and timely push the latest performance trends of the company and the performance of social responsibilities, so as to gather people’s hearts and shape the image. The other is to further consolidate the foundation of compliance internal control. The company complies with the nine word policy of “building system, non intervention and zero tolerance” of the securities regulatory system, tamps its own internal control management, draws inferences from one instance and seriously rectifies the problems found in the regulatory punishment and internal control inspection. Including improving rules and regulations, strengthening the inspection of compliance risk control audit, and strengthening the construction of three lines of defense for internal control of investment banks.
