CITIC Securities Brokers' 2024 Annual Report Overview and Quarterly Report Outlook: Performance Flexibility Fully Demonstrates Multi-channel Enhancing Continuity of Profit Growth

The Zhitong Finance App learned that CITIC Securities released a research report saying that under the guidance of China's Nine Rules and the spirit of the Central Financial Work Conference, securities companies are expected to continue to return to their roots, improve and strengthen around the goal of building first-class investment banks, and fully demonstrate their potential by serving five major articles to promote medium- to long-term capital entry into the market. Focusing on 2025, the securities industry is expected to further demonstrate its performance flexibility by relying on high turnover, continued recovery in capital markets, and cost control. Currently, the valuation of the securities industry is in the 42% quantile since 2018, and it is expected that valuation repair will be achieved as capital market reforms continue to advance.

CITIC Securities's main views are as follows:

Profits in the securities industry increased 21% year over year, and small to medium brokerage firms showed greater profit flexibility.

In 2024, 150 securities companies in the securities industry achieved net profit of 167.257 billion yuan, an increase of 21.35% over the previous year. TOP10 brokerage firms achieved a total net profit of 101,611 billion yuan, an increase of 18.13% over the previous year. The profit increase was slightly lower than the industry average, and the industry's TOP10 profit concentration fell from 62.4% to 60.8%. Relying on the increase in market activity in the second half of 2024 and the positive trend in the stock and bond market, the performance of securities companies improved significantly in the first half of 2024 with a 22.08% year-on-year decline. Under the low performance base in the first half of 2024, the year-on-year growth rate of net profit in the securities industry is expected to remain high in the first half of 2025. The securities industry's diluted ROE level in 2024 was 5.3%, up 0.7 percentage points from the previous year; TOP10 brokers' diluted ROE level was 6.9%, an increase of 0.6 percentage points over the previous year, and the operating efficiency of leading brokerage firms remained leading.

Fee-based business: Transactions are active and brokerage business expectations are stable, and investment banking businesses focus on repair opportunities.

In 2024, the average daily turnover of the market stock base was 1.21 trillion yuan, an increase of 22.03% over the previous year. The increase in turnover has effectively boosted agent trading revenue generation. The total trading revenue of 21 listed brokerage agents was 54 billion yuan, up 24.9% year on year. The increase was higher than the average increase in brokerage business revenue. The average turnover reached 1.75 trillion in 2025Q1, and high transactions continued to increase brokerage revenue flexibility. In 2024, the securities industry achieved investment bank fee revenue of 35 billion dollars, a year-on-year decline of 35.5%, due to a contraction in equity financing. In 2024, the scale of IPOs and refinancing decreased by 81.1% and 70.0%, respectively. The financial advisory business centered on mergers, acquisitions and restructuring bucked the trend, and the financial advisory business revenue of TOP10 brokerage firms increased 3.5% year-on-year. In 2025, the normalization of IPOs will drive a recovery in underwriting sponsorship revenue and the continued development of mergers, acquisitions and restructuring to expand financial advisory revenue space, which is an important opportunity for investment banking business revenue to increase.

Capital business: Focus on the downward trend in interest spreads and changes in asset allocation ratios.

Since 2024Q4, the scale of securities financing has recovered significantly. At the end of the year, the A-share market's financing and securities lending scale was 1.86 trillion yuan, up 12.6% from the beginning of the year. However, the increase in scale is more difficult to withstand the impact of fee cuts. The interest income of 21 listed brokerage firms that disclosed their annual reports in 2024 was 53.1 billion yuan, down 12.4% year on year. Listed brokers' two finance rates fell by about 9.1% year on year. Narrowing interest spreads are still the core constraint on the recovery of credit business revenue. In terms of investment business, the securities industry achieved investment income of 174.1 billion yuan in 2024, an increase of 43.0% over the previous year. The fixed income business became an important driver of performance growth. Of the 21 brokerage firms that disclosed annual report data, the scale of self-operated non-equity assets increased year-on-year, and the overall scale increased by 76.4% year-on-year. Since 2025, market interest rates have risen due to low market interest rates, recovery in equity markets, and fiscal policies, and the trend of rapid expansion of income from fixed income investments in 2025Q1 may be suspended. However, in an environment of impact from overseas tariffs and domestic interest rate cuts, changes in income from fixed income investments are still worth looking forward to.

Cost side: The pace of fee and impairment confirmation increases brokers' performance potential in 2025.

Industry management expenses expanded markedly in 2024Q4. The 21 listed brokers' management expenses for each quarter of 2024 were 369, 405, 422, and 54.6 billion yuan, respectively. In the face of a decline in the number of employees and no significant increase in per capita remuneration, changes in the pace of confirmation of management expenses are expected to ease the cost pressure on listed brokerage firms in 2025 to a certain extent. Impairment losses also showed significant quarter-on-quarter changes. The total impairment losses of listed brokerage firms for each quarter of 2024 were -4.76, 6.74, -6.91, and 2,587 billion yuan, respectively. The 2024Q4 impairment losses also increased significantly compared to the previous three quarters. Looking ahead to 2025, the maintenance guarantee ratio of securities financing and securities lending has not yet reached the risk range, and the risk of a bond storm is gradually mitigated. In an environment where active assets continue to shrink, the asset quality of securities companies is expected to be further consolidated. For example, risk exposure to credit business can be reasonably controlled, and the fundamentals of securities companies are expected to benefit from credit impairment in 2025.

Risk factors:

There is a risk of a decline in A-share market turnover, continued sluggish equity financing in the investment banking business, risk of loss in investment business, exposure to credit business risks, and capital market reforms falling short of expectations.