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The mid-year reports of listed securities firms have come to an end, with 43 listed securities firms continuing to see a decline in overall performance in the first half of the year compared to the same period last year, with over 70% of securities firms experiencing a double decline in both revenue and net profit year-on-year. However, the performance of securities firms has shown a significant recovery on a quarter-on-quarter basis (compared to the second half of last year), with 80% of securities firms, including several leading firms, achieving an increase in net profit on a quarter-on-quarter basis.

In the first half of this year, the 43 listed securities firms collectively achieved a revenue of 235 billion yuan, a year-on-year decrease of 12.69% and a quarter-on-quarter increase of 3.12%; they achieved a net profit attributable to the parent company of 63.961 billion yuan, a year-on-year decrease of 21.92% and a quarter-on-quarter increase of 37.06%.

Among them, 35 securities firms achieved an increase in net profit on a quarter-on-quarter basis. Among the top 10 securities firms by revenue scale, 8 firms achieved an increase in net profit on a quarter-on-quarter basis or turned a loss into a profit, with only Huatai Securities and CICC experiencing a quarter-on-quarter decline of about 14%.

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In terms of main business income, the revenue from brokerage and investment banking business of the 43 listed securities firms continued to decline year-on-year in the first half of the year, while asset management and proprietary business were the main drivers of performance growth. Among them, proprietary income increased by 46.29% on a quarter-on-quarter basis, and 7 out of the aforementioned 10 securities firms achieved a quarter-on-quarter increase.

At the same time, the results of cost reduction and efficiency improvement by some securities firms have become apparent. The overall operating expenses of the 43 listed securities firms decreased by 4.27% year-on-year and by 10.56% quarter-on-quarter. Several securities firms, including Haitong Securities and CICC, saw a year-on-year decrease in operating costs of more than 20%.

The performance of several leading securities firms has warmed up on a quarter-on-quarter basis.

Looking at the performance of each securities firm, in the first half of this year, among the top 10 securities firms by revenue, the number of firms with a scale of over 10 billion was reduced to 6, and the revenue gap among leading securities firms has further widened.

Among them, CITIC Securities ranked first with 30.183 billion yuan, while the other 5 firms had a revenue scale of less than 20 billion yuan, including Huatai Securities, China Galaxy, Guotai Junan, GF Securities, and Shenwan Hongyuan, achieving revenues of 17.441 billion yuan, 17.086 billion yuan, 17.070 billion yuan, 11.778 billion yuan, and 10.876 billion yuan, respectively. Meanwhile, the revenues of China Merchants Securities, CITIC Securities, CICC, and Haitong Securities have all fallen below 10 billion.

Among the aforementioned 10 securities firms, 9 firms experienced a double decline in both revenue and net profit year-on-year in the first half of the year, with only China Merchants Securities achieving a slight increase in net profit of 0.44%.

The most significant performance fluctuation was seen in Haitong Securities, which achieved a revenue of 8.865 billion yuan in the first half of this year, a year-on-year decrease of 47.76%; the net profit attributable to the parent company was 953 million yuan, a year-on-year decrease of 75.11%. Last year, Haitong Securities was dragged down by a large loss at its subsidiary Haitong International, and in the second half of 2023, the net profit attributable to the parent company of Haitong Securities was a loss of 2.821 billion yuan. In the first half of this year, the revenue increased by 48.13% on a quarter-on-quarter basis, and the net profit turned a loss into a profit.CITIC Securities and CICC saw their revenue and net profit decline by about 30% year-on-year, achieving revenues of 9.528 billion yuan and 8.911 billion yuan, respectively, and net profits attributable to the parent company of 2.858 billion yuan and 2.228 billion yuan, respectively. The remaining several securities firms saw a year-on-year decline in both revenue and net profit of less than 20%.

Compared with the second half of last year, among the aforementioned ten securities firms, seven saw an increase in revenue in the first half of this year. Except for Haitong Securities, the other firms saw a sequential increase in revenue ranging from 5% to 18%; eight securities firms saw a positive sequential growth in net profit attributable to the parent company, with a significant difference in the sequential growth rate among them.

Among them, Shenwan Hongyuan's net profit fluctuated significantly, achieving a net profit attributable to the parent company of 2.128 billion yuan in the first half of the year, a year-on-year decrease of 43.22%, and a sequential increase of 147.85%. In addition, Guangfa Securities and China Galaxy also saw a significant sequential increase in net profit, achieving net profits attributable to the parent company of 4.362 billion yuan and 4.388 billion yuan, respectively, with sequential increases of 78.83% and 49.27%, respectively.

Huatai and CICC "lag behind"

As more than 80% of listed securities firms saw a sequential recovery in performance, among the top ten securities firms by revenue, only Huatai Securities and CICC "lag behind".

Huatai Securities ranked second in the industry in the first half of the year, achieving a revenue of 17.441 billion yuan, a year-on-year decrease of 5.05% and a sequential decrease of 4.21%; net profit attributable to the parent company was 5.311 billion yuan, a year-on-year decrease of 18.99% and a sequential decrease of 14.27%.

According to Huatai Securities' semi-annual report, the investment banking and investment business, as well as investment management income, saw a significant decline in the first half of the year. Among them, institutional service business income was 1.613 billion yuan, a year-on-year decrease of 60.44%, mainly due to policy and market impacts, leading to a year-on-year decrease in investment banking business and investment trading business income; investment management business income was 0.029 billion yuan, a year-on-year decrease of 98.10%, mainly due to the decline in valuation of private equity funds and alternative investment projects.

In contrast, Huatai Securities' wealth management and international business income performed well. Among them, wealth management business income was 7.286 billion yuan, a year-on-year increase of 7.12%; international business income was 6.491 billion yuan, a year-on-year increase of 67.50%, mainly due to the year-on-year increase in income from Huatai Financial Holdings (Hong Kong).

Similarly, CICC, which saw a decline in performance both year-on-year and sequentially, saw a sequential decline of 15.69% in revenue and 14.16% in net profit in the first half of this year. According to CICC's semi-annual report, except for the fixed income division, the revenue of the other four divisions of the company saw a year-on-year decline in the first half of the year. Among them, the investment banking division was in deficit, with operating income of 0.579 billion yuan, a year-on-year decrease of 70.10%, while operating expenses were as high as 1.362 billion yuan.

CICC stated that the decline in income of the investment banking division was mainly due to the change in net profit or loss from equity investment caused by the decline in market value of securities held due to the follow-investment in the STAR Market in the first half of 2024 compared to the increase in market value in the same period of 2023; at the same time, the net income from investment banking business fees and commissions also decreased.Additionally, the wealth management division, equity business division, asset management division, and private equity division respectively achieved revenues of 2.962 billion yuan, 1.602 billion yuan, 0.453 billion yuan, and 0.584 billion yuan, with year-on-year declines of 15.23%, 47.18%, 14.12%, and 26.17%, respectively.

Only the fixed income division's revenue growth stood out, achieving a revenue of 2.18 billion yuan, a year-on-year increase of 66.40%. According to CICC, this was mainly due to the net profit from the valuation increase of public REITs funds in the first half of 2024, compared to the net loss in the same period last year; at the same time, under the overall better performance of the domestic bond market in the first half of 2024, the net profit from holding and disposing of bonds has increased.

Can cost reduction and efficiency enhancement show effectiveness?

Looking at the main business, proprietary trading was still the main force in the performance growth of listed securities companies in the first half of the year, with each company showing different performances. At the same time, the "cost reduction and efficiency enhancement" of securities companies have been significantly effective, with the overall operating expenses of 43 listed securities companies decreasing by 4.27% year-on-year and 10.56% quarter-on-quarter.

In terms of main business income, each securities company showed different performances, with proprietary trading still being the main force for growth. In the first half of this year, the total income from fees and commissions of 43 listed securities companies was 84.9 billion yuan, a year-on-year decline of 16.81% and a quarter-on-quarter decline of 11.56%; net interest income was 16.8 billion yuan, a year-on-year decline of 29.07% and a quarter-on-quarter decline of 16.03%; proprietary business income was 75 billion yuan, a year-on-year decline of 8.66% and a quarter-on-quarter increase of 46.29%.

Looking at the above 10 securities companies, in terms of net income from fees and commissions, Shenwan Hongyuan, GF Securities, and CICC saw a year-on-year decline of more than 10%, with Shenwan Hongyuan experiencing a quarter-on-quarter decline of more than 10%; China Galaxy and CITIC Construction Investment saw a slight year-on-year increase and a slight quarter-on-quarter decrease; Huatai Securities saw growth both year-on-year and quarter-on-quarter.

Among them, China Galaxy and GF Securities, two securities companies, saw a year-on-year increase in investment banking fees and commissions, with increases of 42.16% and 13.47%, respectively; Huatai Securities, CITIC Construction Investment, and China Galaxy achieved a year-on-year increase in asset management fees and commissions, with an increase ranging from 2% to 7%.

In terms of net interest income, Huatai Securities saw a year-on-year and quarter-on-quarter increase of 10.81% and 93.97%, respectively, CICC saw a year-on-year increase of 93.97%, and a quarter-on-quarter decline of 11.13%, while the other 8 securities companies experienced varying degrees of decline both year-on-year and quarter-on-quarter.

In terms of proprietary income, 7 securities companies achieved quarter-on-quarter growth. Among them, GF Securities, China Merchants Securities, China Galaxy, and CITIC Securities all achieved year-on-year and quarter-on-quarter growth. GF Securities showed a significant increase, with a proprietary income of 3.655 billion yuan in the first half of the year, a year-on-year increase of 43.15% and a quarter-on-quarter increase of 260.61%. The largest decline was seen in Haitong Securities, with a proprietary income of 1.791 billion yuan in the first half of the year, a year-on-year decline of 45.51% and a quarter-on-quarter decline of 163.84%.

In terms of operating costs, among the above 10 securities companies, except for Huatai Securities, China Galaxy, and Shenwan Hongyuan, which saw an increase in operating expenses year-on-year, the other 7 securities companies all experienced a decline. Compared with the second half of last year, the operating expenses of these 10 securities companies all decreased quarter-on-quarter.In the report, the year-on-year decline exceeded 10% for Haitong Securities, CICC, China Merchants Securities, and CITIC Securities. A sequential decline of more than 15% was observed for Haitong Securities, Guotai Junan, and CICC. Haitong Securities and CICC experienced significant reductions, with year-on-year decreases of 40.87% and 21.22%, respectively, and sequential declines of 28.06% and 17.08%.

According to the semi-annual report, the main reasons for the reduction in operating expenses at Haitong Securities in the first half of the year included a decrease in employee costs, a reduction in impairment losses on funds lent out, and a decrease in the sales costs of subsidiaries.

CICC stated that the decrease in operating expenses was primarily due to the complexity, severity, and uncertainty of the external environment, as well as fluctuations in the capital market. The overall business operations of the securities industry faced challenges, leading to a decline in the group's operating performance compared to the same period in 2023, with a corresponding decrease in employee costs.