China’s ambitions of building giant securities firms was boosted by Citic Securities, the country’s largest brokerage, on Thursday after it reported double-digit percentile growth in revenue and net profit for 2019.
The Shanghai and Hong Kong-listed company’s total revenue rose 11.8 per cent year on year to 57.1 billion yuan (US$8.1 billion), reversing a 10.4 per cent drop in 2018. Its net profit surged by 30.2 per cent to 12.2 billion yuan, reversing a 17.9 per cent decline in 2018.
The China Securities Regulatory Commission, the country’s securities watchdog, last year said that Beijing wanted to encourage and help Chinese brokerages become “aircraft carrier-scale, top-tier security companies”.
China’s domestic players have been dwarfed by their international peers. For instance, as of the third quarter in 2019, the total assets of Goldman Sachs stood at US$1.01 trillion, equal to the total assets of Chinese security firms, Cinda Securities said this month.
As regulators encourage security firms to become stronger and expand their business sizes, large securities companies will continue to benefit
iang Xiaopei, senior analyst at China Chengxin International Credit Rating
“As regulators encourage security firms to become stronger and expand their business sizes, large securities companies will continue to benefit, and are expected to expand their market shares through mergers and acquisitions,” said Liang Xiaopei, senior analyst at China Chengxin International Credit Rating.
Citic wrapped up the acquisition of 100 per cent shareholding in Guangzhou Securities on March 11, and renamed it Citic Securities South China Company.
With the acquisition, Citic aims to enhance its services in South China and better serve Beijing’s goal of building the Greater Bay Area, the company said. The acquisition will allow it to cover all 31 provinces, autonomous regions and municipalities of mainland China.
Securities trading contributed the most to Citic’s revenue in 2019, at 22 billion yuan, or 38.6 per cent, followed by 13.1 billion yuan, or 22.9 per cent, by brokerage services. Investment banking contributed 4.6 billion yuan, while other businesses contributed 9.9 billion.
The revenue of its investment banking business surged 53.5 per cent year on year, while security trading rose 16.1 per cent. Its brokerage business, however, declined 1.2 per cent.
“As the outbreak of the coronavirus spreads globally, stock markets in China and overseas tend to edge down amid fluctuations,” Liang said.
“It will affect trading activities and financial investment, thus placing pressure on securities companies’ businesses.” In the first half, growth at securities companies’ investment bank businesses could slow, while their fixed-income investment segment will continue to rise, Liang added.
In an earnings call on Friday, Citic management said the coronavirus had no impact on its business in the first two months this year. But the officials also refused to give an estimate for the impact it might have over the rest of the year. They only said they were adopting new technologies to reduce shocks.
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