Weak trading, bleak commissions drag profits drown for China's brokers

Julie Zhu and Engen Tham

* GF Sec, CITIC Sec,Changjiang Sec post drop in 2016 profits

* CITIC plans cut in CLSA operating costs

* 2017 bright spots include bonds, IPOs, M&A

(Recasts with overview on brokerages; adds background on other


HONG KONG, March 24 (Reuters) - Chinese brokerages,

including the country's biggest, CITIC Securities Co Ltd

, reported a sharp drop in profits in 2016

as lacklustre stock market activity dragged down commission


Brokers in China have been struggling after a stock market

boom came to a turbulent end in 2015. The reality of continued

weakness on the Shanghai and Shenzhen markets has prompted some

brokerages to slash commissions and scale back staff benefits to

keep costs in check.

Two of China's top listed brokerages - GF Securities

and Changjiang Securities - saw their

2016 net profit dive 39.2 percent and 36.8 percent,

respectively, last week.

CITIC Securities posted its lowest annual profit in three

years, of 10.4 billion yuan, down 47.6 percent from 2015, as

lacklustre stock market activity pushed down net fee and

commission income by almost a quarter.

Amid bleak prospects at home, CITIC plans to cut operating

costs of its international arm, CLSA, by 25-30 percent, CLSA

Chairman Tang Zhenyi said on Friday. The brokerage also plans to

increase the revenue it gets from CLSA to 30 percent of its

total in five years, from 10 percent now, Tan said.

CITIC is looking to acquire advisory assets in the United

States and a deal could be announced by the end of this year,

CLSA Chief Executive Jonathan Slone said.

"We are looking at everything. But we are certainly in no

rush to acquire anything," Slone said.


Many Chinese brokers, highly dependent on trading fees, have

been badly hit by a 50 percent plunge in average daily turnover

in stocks and funds to 500 billion yuan last year, according to

a January report by Haitong Securities.

Government curbs on margin financing continued to weigh on

trading, while crackdowns on property-related and other

structured products also hit revenues.

"Asset management ... is shrinking under the management of

the China Insurance Regulatory Commission," said Jiahe Chen,

chief strategist at Cinda Securities.

One of last year's worst performers was Shanxi Securities

, whose annual profits cratered 67.8 percent,

preliminary results show. The brokerage said it plans to issue

public corporate bonds worth 2 billion yuan.

However, this year, bond issues, IPOs as well as mergers and

acquisitions will remain bright spots for China's brokerages,

according to analysts.

(Reporting by Julie Zhu in Hong Kong and Engen Tham in

Shanghai; Writing by Sumeet Chatterjee in Hong Kong; Additional

reporting by Lawrence White in London; Editing by Himani Sarkar

and Leslie Adler)