The annual report data released successively reveal the thrilling behind the international business of Chinese securities companies.
As of the last day of March, the top 5 players in the international business of Chinese securities companies finally disclosed the overall performance of 2021. A huge change is that not all securities companies have continued the indomitable growth trend of the past two years: except CICC Hong Kong continues to maintain its head position, the net profits of the other three securities companies have shown a downward trend. What is striking is that Huatai international continues its unstoppable growth rate and ranks second with an operating revenue of nearly HK $10 billion. So far, a new pattern of CICC Huatai double super leading securities companies has been formed.
By comparing the financial reports of listed companies, it can be found that the earnings of equity and fixed income products in Hong Kong in 2021 were poor, and the low trading sentiment and insufficient liquidity brought great pressure to market making business and investment trading. According to the analysis of some market participants, especially some securities companies are equipped with high-yield bonds, so they are obviously affected by the market impact in the fourth quarter of 2021.
three securities companies’ total assets increased year on year
It should be noted in advance that in the financial report data quoted below, CICC Hong Kong data comes from the A-share annual report of its parent company, Huatai international and CITIC International Data come from the H-share annual report of their parent company (RMB to Hong Kong dollar, calculated according to 1:1.23), Guotai Junan Securities Co.Ltd(601211) International and Haitong international come from their H-share annual reports because they are listed securities companies in Hong Kong stocks.
According to the statistics of Chinese reporters of securities companies, by the end of 2021, the total asset scale of CICC Hong Kong had increased by 22% year-on-year, and finally successfully exceeded the HK $200 billion mark, but it was still inferior to the RMB 207698 billion (about HK $255469 billion) of CITIC International. The total assets of Huatai international increased by 50% year-on-year to 141081 billion yuan (about HK $173.53 billion), further narrowing the distance with the other two giants, but its growth rate ranked first among Chinese securities companies in Hong Kong.
meanwhile, the total assets of Guotai Junan Securities Co.Ltd(601211) international and Haitong international decreased by 13% and 28% respectively to HK $106288 billion and HK $104992 billion. In this regard, Haitong International said that this was due to the remarkable results of its asset light strategy, and the leverage ratio decreased from 4.45 times at the end of 2020 to 3.33 times, the lowest level since 2012
Guotai Junan Securities Co.Ltd(601211) international admitted that the decrease in total assets was mainly due to the year-on-year decrease of 20% to HK $31.6 billion (accounting for 30% of total assets) in financial assets held for customers, and the year-on-year decrease of 26% to HK $23.2 billion (accounting for 22% of total assets) in financial assets held for trading and investment, mainly due to the sharp fluctuation of Chinese dollar bonds, the company’s reduction in financing exposure of relevant financial products and its position in bond market making and other businesses.
secondary change of international business position of securities companies
If the total assets inventory is only the first dish, the competition between the operating revenue and net profit of the five securities companies can better show the high wind and waves of the securities companies going to sea.
First of all, from the perspective of operating revenue, the operating revenue of Huatai international in 2021 increased by 42% year-on-year to RMB 7.892 billion (about HK $9.707 billion), second only to HK $10.535 billion of CICC Hong Kong.
compared with the 43% revenue growth of CICC Hong Kong, CITIC International achieved a revenue of RMB 6.164 billion (about HK $7.582 billion) in 2021, a year-on-year increase of 15%, slightly less than that of CICC Hong Kong. At the same time, the operating revenue of Haitong international and Guotai Junan Securities Co.Ltd(601211) international securities companies decreased by 37% and 19% respectively year-on-year in 2021, and finally achieved revenue of HK $5.252 billion and HK $3.966 billion respectively
From the perspective of net profit, CICC Hong Kong successfully defended its title and achieved a net profit of HK $5.112 billion at a growth rate of 108%. The growth rate of Huatai international is amazing. According to the data, Huatai international achieved a net profit of 1.176 billion yuan (about HK $1.446 billion) in 2021, an increase of 442%.
It should be noted that the net profits of Guotai Junan Securities Co.Ltd(601211) international, CITIC International and Haitong international all declined in 2021. Among them, the net profit of Guotai Junan Securities Co.Ltd(601211) international was HK $1095 million, down 30%; CITIC International’s net profit fell 23% to 628 million yuan (about 772 million Hong Kong dollars); Haitong International’s profit decline was the most serious. Its net profit in 2021 was only HK $300 million, a decrease of 84%.
CICC Hong Kong continues to lead
China International Capital Corporation Limited(601995) financial report shows that its international business revenue accounted for about one quarter in 2021, which shows the position of CICC Hong Kong in the financial report of the parent company China International Capital Corporation Limited(601995) CEO Huang Zhaohui said that CICC actively serves the “double cycle” through internationalization, takes the initiative to tell the Chinese story well, and wants to win more voice and pricing power in the international capital market.
In 2021, CICC continued to expand its “internationalization” and further strengthened its international layout. Among them, CICC (Hong Kong) continues to take the lead in cross-border business, and the share of interconnection transactions remains at the forefront of the market; CICC (the United States) and CICC (the United Kingdom) have further expanded their local influence, and CICC (Singapore) trading desk has officially launched its business. At the same time, its stock business continued to expand in other international markets such as Germany and Switzerland, actively promoted China Europe communication, and overseas teams cooperated in the implementation of more than 90 primary and secondary market projects to introduce overseas strategic and cornerstone investors for listed companies.
Specifically, CICC’s overseas investment banking business is far ahead of Chinese securities companies. In terms of equity financing, CICC, as the Bookrunner, took the lead in underwriting 41 Hong Kong stock IPO projects in 2021, with a lead underwriting scale of US $4 billion, ranking first in the market; As the bookkeeper, he has mainly underwritten eight US stock IPO projects of Chinese enterprises, with a lead underwriting scale of US $1.256 billion, ranking fourth in the market.
In terms of bond financing, CICC ranked the first in the whole market in terms of overseas bond underwriting scale of Chinese enterprises in 2021, ranked the first in the industry in terms of overseas convertible bond underwriting quantity of Chinese enterprises, and maintained the first in terms of investment grade US dollar bond underwriting scale of Chinese enterprises and Chinese securities companies for six consecutive years.
In addition, CICC has continuously expanded its cross-border business capacity and improved its internationalization level through the acquisition of American Jinrui fund and other measures. According to Dealogic data, CICC’s M & a business ranked first in China’s M & a market for the eighth consecutive year in 2021, including 21 cross-border and overseas M & A transactions, involving a total amount of about US $9.147 billion.
Huatai International’s comprehensive strength is developing rapidly
According to Huatai Securities Co.Ltd(601688) financial report, Huatai International’s business revenue reached a record high, accounting for 15.2% of the total revenue.
Huatai Securities Co.Ltd(601688) CEO Zhou Yi said in a letter to shareholders that Huatai’s overall operating performance hit a record high, and its comprehensive strength at home and abroad ranked among the top institutions in the industry. It shows full recognition of the development of international business.
In the face of the continuous turbulence of the overseas capital market, Huatai International’s excellent risk control ability and forward-looking sales and trading platform have increasingly highlighted its strategic advantages in the agency business. According to its performance press conference, Huatai International’s revenue composition will continue to be optimized in 2021. In the context of re inflation in overseas markets, we have actively hedged risk exposures and effectively resisted market fluctuations, stabilized ficc’s leading position in Chinese securities companies, with a proxy trading volume of nearly 200 billion yuan, and led the industry in capital intermediary business and southbound business.
In terms of equity business, in 2021, Huatai International’s cross-border derivatives business was firmly in the leading position in the industry. As the only GDR registered market maker in Asia, Hulun Tong ranked among the best in many indicators such as the proportion of market making volume; The stock sales and trading team provided one-stop financial services of “cash bond + cross-border main broker + QFII”. The share of cash bond trading in the Hong Kong Stock Exchange rose to the top 10%, the business scale of cross-border main broker increased by 4.2 times year-on-year, and the trading volume of Shanghai Shenzhen Hong Kong stock connect increased by 6.5 times year-on-year.
During the reporting period, the number of IPO sponsors of Hong Kong stocks ranked among the top five overseas Chinese sponsors, 10 financial consulting projects were completed, the refinancing scale increased by 58% year-on-year, and the bond underwriting scale increased by 60% year-on-year. The fund platform also gradually realizes the whole process management of “raising, investment, management and marketing”, and cooperates with well-known institutions to improve the management scale and popularity with the dual brand and dual GP operation mode.
In addition, assetmark, its US asset turnkey platform, maintained operational independence, completed the acquisition of voyant during the reporting period, maintained the steady growth of asset management scale through leading business model and advanced technology platform, and continued to improve international business revenue. By the end of the third quarter of 2021, according to cerulli associates and other public information, assetmark ranked third with a market share of 11.1% in the US tamp industry Huatai Securities Co.Ltd(601688) (USA) has completed two US stock IPO recommendation projects.
market is bleak, driving down the commercial performance of Chinese securities
It is worth noting that if we only look at the performance in the first half of 2021, the financial performance of the above-mentioned securities companies is commendable. For example, in the first half of 2021, the net profits of Haitong international and Guotai Junan Securities Co.Ltd(601211) international increased significantly by 107% and 55% respectively.
however, by the second half of 2021, Hong Kong’s equity and fixed income products had performed poorly. Hong Kong stocks performed poorly, with the Hang Seng index falling more than 14% for the whole year. A number of private real estate enterprises adopting high turnover and high leverage mode defaulted on their offshore US dollar bonds, and the annual return on High-yield real estate US dollar bonds reached – 27.6%, which brought great challenges and pressure to securities companies in Hong Kong participating in market making and investment
Haitong international mentioned in the announcement that its fee business revenue reached HK $3.257 billion in 2021, a record high. However, affected by market fluctuations in the second half of the year, its net profit fell by about 84%, mainly due to the significant decline in the net value of some investment funds held by it due to market fluctuations in the fourth quarter. Zhao Hongmei, a non banking analyst at Zhongtai international, said that this was mainly due to the sharp decline of 92% of the company’s trading and investment income due to the impact of the market, including a loss of more than 800 million yuan in investment income in the fourth quarter of 2021.
Guotai Junan Securities Co.Ltd(601211) international also said that its total revenue decreased by 19% year-on-year to HK $3.972 billion in 2021, mainly due to the sharp decline of market index and low interest rate environment during the year. According to the data, during the reporting period, the company’s net income from trading and investment decreased by 91% year-on-year to HK $59.8 million, and the income profit to loss of investment management division was HK $99.3 million.
While CITIC International did not disclose its international business income structure in detail in the financial report, the data showed that its overseas bond investment credit risk exposure reached 29.228 billion yuan, an increase of 129.65% over 12.727 billion yuan at the end of 2020, which may also affect the profitability of CITIC International to a certain extent. However, Citic Securities Company Limited(600030) chairman Zhang Youjun mentioned at the performance conference that although some market making varieties need to have some risks, the relevant scale can be ignored Citic Securities Company Limited(600030) of overseas investment risk exposures have been effectively managed, especially some high-yield bonds such as real estate dollar bonds.
