On April 24, China Merchants Securities Co.Ltd(600999) disclosed the first quarterly report of 2022. This is the second leading securities firm to disclose the performance of the first quarter of 2022 after Citic Securities Company Limited(600030) disclosed the performance express of the first quarter of 2022 on April 13.
Performance pressure is a significant feature of China Merchants Securities Co.Ltd(600999) first quarter. The main performance indicators showed a year-on-year decline of more than double digits, and reached the most “dismal” first quarter after 2018.
According to the first quarterly report, China Merchants Securities Co.Ltd(600999) achieved an operating revenue of 3.697 billion yuan, a year-on-year decrease of 38.01%; The net profit attributable to the shareholders of the listed company was 1.49 billion yuan, a year-on-year decrease of 42.99%; Weighted roe decreased by 1.27 percentage points year-on-year to 1.36%.
China Merchants Securities Co.Ltd(600999) said in the first quarterly report that in the first quarter of 2022, the market volatility was intensified, the epidemic situation was still severe, the company’s business activities were facing challenges, and the company’s performance was under pressure.
Although there are only two securities companies that have disclosed the first quarter report, most non bank analysts are worried about the profit performance of securities companies in the first quarter of 2022. The overall performance of securities companies shows a significant decline or is an unavoidable fact. The competition pattern may show more significant polarization, and the huge fluctuation of the market is the most important leading factor.
investment bank’s only growth business
According to the first quarterly report of 2022, China Merchants Securities Co.Ltd(600999) operating income and net profit attributable to parent company showed a year-on-year decline of about 40% respectively. From the performance of each business segment, it also presents a certain degree of income structure differentiation.
Investment bank is the only business segment that achieved year-on-year growth in the first quarter of 2022. The first quarterly report showed that the net income of investment banking business was 449 million yuan, a year-on-year increase of 8.66%, and the proportion in total revenue increased by 5.22 percentage points to 12.2%. According to statistics, as of the end of March, China Merchants Securities Co.Ltd(600999) lead underwriting revenue totaled 278 million yuan, with a market share of 3.36%, ranking eighth.
From the perspective of revenue structure, brokerage business is the most important revenue support in the first quarter of China Merchants Securities Co.Ltd(600999) 2022, with a net income of 1.649 billion yuan, accounting for 44.6% of the total revenue, an increase of 13.34 percentage points year-on-year. But at the same time, the brokerage business sector also showed a year-on-year decrease of 11.57%.
Guotai Junan Securities Co.Ltd(601211) non bank analysts said that the brokerage business of securities companies may face pressure from two aspects in the first quarter of this year. First, due to the impact of market adjustment, the scale of new fund issuance has decreased, the difficulty of continuous marketing has increased, and the income of commission sales of securities companies has been under pressure; Second, despite the year-on-year increase in the trading volume of daily average shares in the first quarter, the commission rate continues the downward trend in recent years, so the brokerage business income may face some downward pressure.
self operation is the biggest drag
Affected by the market situation, in the first quarter of this year, China Merchants Securities Co.Ltd(600999) self operated investment, credit business, asset management and other business sectors failed to continue the good trend of 2021, showing a year-on-year decline of more than double digits.
Among them, the proprietary investment business was seriously damaged in the first quarter. According to the first quarterly report, in the first quarter of 2022, China Merchants Securities Co.Ltd(600999) self operated investment income was 176 million yuan (the calculation standard of self operated investment income is: net income from investment + net income from changes in fair value – investment income from associates and joint ventures), a year-on-year decrease of 90.97%, which is the business segment with the largest decline among all business segments.
“Self operation is the winner and loser of the first quarter performance growth.” Shenwan Hongyuan Group Co.Ltd(000166) said in the non bank research report that from the first quarter report of China Merchants Securities Co.Ltd(600999) the self operated business became the main drag on its first quarter performance.
Another sector with the largest decline is the credit business sector. The first quarterly report showed that the company’s net interest income was 188 million yuan, a year-on-year decrease of 63.01%, and its proportion in total revenue also decreased by 3.44 percentage points to 5.1%. The head brokerage non bank research and analysis believe that this may be related to the overall pressure on the balance of two financial institutions and the decline in the scale of stock pledge in February this year.
In addition, the net income from asset management business reached 207 million yuan, a year-on-year decrease of 21.65%, but the proportion in total revenue increased by 1.17 percentage points to 5.6% year-on-year.
industry as a whole “open door black”, performance differentiation or aggravation
Although only China Merchants Securities Co.Ltd(600999) one securities firm has disclosed detailed first quarter performance, most non bank analysts believe that the profit performance of securities firms in the first quarter of 2022 may not be optimistic.
Orient Securities Company Limited(600958) in the non bank research report, it is said that the performance of securities companies in the first quarter of 2022 is likely to encounter “black door”, and the overall performance of securities companies will decline to a certain extent year-on-year, with a high probability of double-digit decline, but at the same time, the performance differentiation among securities companies may intensify significantly.
Guotai Junan Securities Co.Ltd(601211) non bank research report also believes that due to the influence of market conditions, the revenue of different businesses differentiated in the first quarter of 2022. We expect that the revenue of 41 listed securities companies in the first quarter was – 10.31% year-on-year, and the net profit attributable to the parent company was – 11.77% year-on-year, and the profitability decreased.
Most analysts agree that the investment business may become the main inducement of the decline in performance in the first quarter and will exacerbate the differentiation pattern Guotai Junan Securities Co.Ltd(601211) said that the fluctuation of the market led to the decline of the rate of return on financial assets and the decline of investment business income. The investment business income of listed securities companies decreased by 23.27% in the first quarter of 2022. At the same time, the growth of institutional customer demand business is gratifying. Among them, the most representative OTC derivatives business developed rapidly. In the first quarter, its survival scale continued to expand and maintain the level of 2 trillion.
China International Capital Corporation Limited(601995) believes that when predicting the performance of securities companies in the first quarter of 2022, it is considered that the investment income of securities companies in the first quarter will be affected by market fluctuations. On the one hand, the directional self investment income may fall, and the passive directional exposure such as science and innovation board and PE follow-up investment will increase the current investment fluctuation; On the other hand, the cautious market risk preference may reduce the activity of capital intermediary business driven by customer demand.
Orient Securities Company Limited(600958) said that the self operated line will become the “winner” of the performance of securities companies in the first quarter of 2022. In the first quarter of 2022, the market fell unilaterally, but the daily average stock based turnover and the balance of two financial institutions remained at a high level. Therefore, the performance of proprietary business will affect the final performance of securities companies in the first quarter. Securities companies dominated by stock derivatives and ficc business are likely to achieve better performance. The performance of proprietary business and even the overall performance may show a situation of aggravating differentiation in the first quarter of 2022.
