Citic Securities tops China’s brokerage industry charts, beating peers in assets, revenue and profit
- Beijing-based brokerage’s assets of US$192 billion in 2021 was the highest among the nation’s 117 firms, according to the Securities Association of China
- While Citic Securities’ stock has fallen 19 per cent this year in Shanghai, analysts surveyed by Bloomberg expect it to rise 32 per cent in the next 12 months
Citic Securities was the top ranked Chinese brokerage in 2021, surpassing its rivals in all major metrics including assets and revenue, data from an industry guild showed.
The Beijing-based brokerage had total assets of 1.28 trillion yuan (US$192 billion) at the end of last year, the most among the nation’s 117 firms, the Securities Association of China said. It was followed by Huatai Securities and Guotai Junan Securities, with assets of 806.7 billion yuan and 791.2 billion yuan, respectively. Citic also ranked first in revenue and net profit.
It was the second year that Citic Securities topped the charts compiled by the industry association. The brokerage is a unit of state-owned conglomerate Citic Group, which is also the parent of Hong Kong-listed Citic.
Citic Securities rose 0.7 per cent to 20.11 yuan in Shanghai on Tuesday, paring its loss to 19 per cent this year. Its Hong Kong-traded stock was unchanged at HK$16.90, taking its year-to-date decline to 16 per cent.
The stock’s fall this year mirrors the broader sell-off in the sector, which is a barometer of market sentiment. A gauge of 57 brokerages trading on the mainland’s exchanges has dropped 23 per cent in the span, as the most severe flare-up in Covid-19 infections in more than two years in China has rattled the world’s second-largest stock market.
China’s ramped-up efforts to revive growth has brightened the outlook of the brokerage sector, as the performance of brokerage stocks is highly correlated to easing of monetary policies, according to Shenwan Hongyuan Group. Investment banks including JPMorgan Chase and UBP predict that China will extend cuts in the reserve requirement ratio and interest rates to further spur growth.
“A cut in interest rates will be the catalyst for the sector,” said Xu Yishan, an analyst at Shenwan in Shanghai. “Brokerage stocks tend to perform well amid clear expectations for interest-rate cuts or a cycle of such cuts. The current stock prices have pretty high safe margins.”
Revenue at Citic Securities increased 41 per cent year on year to 76.5 billion yuan in 2021, according to the industry data. Shanghai-based Haitong Securities took second spot with revenues of 43.2 billion yuan and Guotai Junan Securities came third with 42.8 billion yuan.
Citic Securities posted a net profit of 23.1 billion yuan in 2021, an increase of 55 per cent from the year before. It was followed by Guotai Junan with a profit of 15 billion yuan and Huatai Securities with 13.3 billion yuan.
Citic’s first-quarter profit growth eased to 1.2 per cent, as the broader market rout dented interest among small investors in trading stocks and slowed new share sales.
The brokerage will probably rise 32 per cent in the following 12 months to 26.94 yuan in Shanghai, according to the consensus price target of 15 analysts compiled by Bloomberg. It is valued at 1.3 times the book value, about a fifth below the five-year average, the data shows.
“Its current valuation and stock price have left the door open for allocations,” said Wei Dapeng, an analyst at China Post Securities. “Future earnings will achieve high growth when things improve.”