In the past two years, China’s financial industry has accelerated its opening to the outside world, and the performance of foreign securities companies has attracted special attention. Recently, foreign holding securities companies have successively handed over their 2021 transcripts.
So far, there are 9 foreign holding securities companies in China’s exhibition industry, including Goldman Sachs Gaohua, UBS Securities, Credit Suisse Securities, Morgan Stanley Securities, HSBC Qianhai securities, Nomura Oriental international securities, JPMorgan securities, DBS securities and Daiwa Securities.
According to the relevant data disclosed by China Securities Association, five of the nine foreign-controlled securities companies suffered net profit losses in 2021, accounting for more than 50%, including DBS securities, Daiwa Securities, HSBC Qianhai securities, Goldman Sachs Gaohua and Nomura Oriental International Securities.
Specifically, DBS securities had a revenue of 48.85 million yuan and a loss of 130 million yuan. According to the financial report, its revenue mainly comes from investment banking business income (9.8946 million yuan), net interest income (174327 million yuan) and self operated business income (145626 million yuan). As the expenditure of business and management fees in that year was as high as 221 million yuan, the final net loss in 2021 was 130 million yuan.
DBS securities holds 51% of the shares. On June 4, 2021, DBS securities obtained the license for operating securities and futures business issued by the CSRC, covering securities brokerage, securities investment consulting, securities self operation, securities underwriting and recommendation.
In 2021, Dahe securities realized an operating income of 56.916 million yuan, including “other income” of 257755 million yuan, investment banking income of 102561 million yuan and proprietary business income of 123126 million yuan. The current business and management fee was 123 million yuan, resulting in a net loss of 660961 million yuan.
On June 10, 2021, Dahe securities obtained the business license from the CSRC, covering securities brokerage, securities underwriting and recommendation, and securities self operation. As of the end of the reporting period, Daiwa Securities Group Corporation held 51% of the shares.
In 2021, Goldman Sachs Gaohua, 100% owned by Goldman Sachs Group, realized an operating revenue of 602 million yuan, a year-on-year increase of 41.26%. However, the net profit loss of that year was 15.31 million yuan. Last year, Goldman Sachs Gaohua’s business and management fee expenditure increased to 620 million yuan from 344 million yuan in 2020.
Up to now, Goldman Sachs Gaohua’s business scope includes underwriting and recommendation, (brokerage, investment consulting and self operation are yet to be renewed by the CSRC).
The controlling shareholder of HSBC Qianhai securities is HSBC Bank of Hong Kong and Shanghai. As the first Hong Kong funded holding securities company, it has maintained a state of loss since its establishment in 2017, and it is no exception in the year when the securities industry generally has a good harvest.
In 2021, HSBC Qianhai securities achieved an operating revenue of 325 million yuan, a year-on-year increase of 24.94%. Similarly, due to the expansion of business and management expenses and the provision of a credit impairment loss, the net loss in 2021 was 159 million yuan. The existing business scope includes securities brokerage, securities investment consulting, underwriting and recommendation, self operation and securities asset management.
In addition, Nomura Orient International Securities also failed to escape the fate of loss. When the revenue increased by 39% in 2021, the net loss in that year reached 84.914 million yuan, and the scale of loss increased by 22.43%.
Last year, JPMorgan Chase securities, Morgan Stanley Securities, UBS Securities and Credit Suisse Securities all made profits.
JPMorgan securities was founded in 2019 and can make a profit in the second year, which is quite rare for newly established securities companies. In 2021, JPMorgan securities realized an operating revenue of 632 million yuan, with a year-on-year increase of 197.49%. There was a significant increase in income in brokerage, investment banking, management consulting services and other fields.
At the end of the reporting period, J.P. Morgan International Finance Limited was still the sole shareholder of JPMorgan securities, holding 100% equity of the company. The business scope of JPMorgan securities includes: securities brokerage, securities investment consulting, securities underwriting and recommendation, and securities proprietary trading.
Last year, Morgan Stanley Securities achieved a revenue of 414 million yuan, a year-on-year increase of 59%; The net profit was 30.19 million yuan, turning losses into profits year-on-year.
In July 2021, the name of the company was changed from “Morgan Stanley Huaxin Securities Co., Ltd.” to “Morgan Stanley Securities (China) Co., Ltd.”. In the same year, the company completed the equity change, with Morgan Stanley holding 90% of the company’s shares and Huaxin securities holding 10% of the company’s shares.
In 2021, the revenue of Credit Suisse Securities was 497 million yuan, a year-on-year increase of 75.6%; The net profit was 45.19 million yuan, a year-on-year increase of 283%. Last June, the name of the company was changed from “Credit Suisse Founder Securities Co.Ltd(601901) Co., Ltd.” to “Credit Suisse Securities (China) Co., Ltd.”. The business scope includes underwriting and recommendation, securities brokerage, etc.
UBS Securities had a revenue of 1.055 billion yuan last year, a year-on-year increase of 17.2%; The net profit was 147 million yuan, a year-on-year increase of 129%. During the reporting period, UBS Securities had four business departments, one in Beijing, two in Shanghai and one in Guangzhou. By the end of the reporting period, UBS was the largest shareholder, holding 51%.
Last June, the name of the company was changed from “Credit Suisse Founder Securities Co.Ltd(601901) Co., Ltd.” to “Credit Suisse Securities (China) Co., Ltd.”. At the end of the reporting period, the company had 237 employees; The business scope includes underwriting and recommendation, securities brokerage, etc.
It is understood that compared with China’s large securities companies, foreign holding securities companies still present the situation of “small cost and thin profit”, and the scale of self operated business is limited. Therefore, the traditional businesses such as brokerage and investment banking will mainly affect the performance in 2021.
According to the operating data of securities companies released by China Securities Association in March, in 2021, foreign securities companies achieved an operating revenue of 32.756 billion yuan, a year-on-year increase of 8.63%; Operating expenses amounted to 23.69 billion yuan, a year-on-year increase of 19.18%; The net profit was 7.956 billion yuan, a year-on-year decrease of 6.29%.
In 2021, with the expansion of the group scale, the performance of foreign securities companies was lower than the industry average, and the profits decreased as a whole, mainly due to the large rigid cost investment of many newly established companies.
The operation data also shows that the business licensing of foreign securities companies is mostly concentrated in underwriting and recommendation, securities brokerage, securities self operation and securities investment consulting, and there are only four companies with full business licenses. At the end of 2021, the total assets of foreign securities companies were 619802 billion yuan and the net assets were 167001 billion yuan, with a year-on-year increase of 12.08% and 10.26% respectively.
In addition, the average return on net assets of foreign securities companies in 2021 was 5%, a year-on-year decrease of 1.22 percentage points, which is a certain gap from the overall level of 7.84% of the industry.
