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Brokerages still in the black

By Xu Shenglan (China Daily)
Updated: 2009-01-22 07:58

The capital market travails in 2008 have left most stockbrokers unscathed with nine out of 10 managing to stay in the black, the Securities Association of China said.

Related readings:  'Negative' outlook for securities brokers in 2009  China says to strengthen regulation of securities trade  Securities dealers in China may see 40% fall in profits

The association, of which most stockbrokers are members, said the combined profit of all 107 stockbrokers amounted to 48.2 billion yuan in 2008, down from 130.7 billion yuan earned by 106 firms in 2007.

Revenue declined 56 percent to 125.1 billion yuan from a year earlier. Ninety-five companies managed to stay profitable in the period, accounting for 89 percent of the total, the association said on its website.

Analysts attribute brokerages' profits in 2008 to the commission income and management fees, which together contributed 70.5 percent of total revenue.

Although stockbrokers' total assets of 1.2 trillion yuan and their clients' transaction balance of 696.9 billion yuan had fallen 30 percent and 40 percent, respectively, from 2007, net assets and capital increased slightly because stockbroking firms had allocated an average of only 20 percent of their profits for dividend payouts.

The association figures showed that leading securities firms had demonstrated they were better equipped to weather the business downturn than the smaller firms. Guotai Jun'an, China Merchants Securities, Guangfa Securities and other seven non-listed brokerages made a combined 28.038 billion yuan in net profit. They, together with the two market leaders, CITIC Securities and Haitong Securities, accounted for 58.17 percent of the total income of the industry.

Guotai Jun'an Securities posted the highest profit, 5.6 billion yuan, among the non-listed brokerages, with 4.36 billion yuan from securities broking and 523 million yuan from underwriting.

Capital Securities saw the largest decline in profits among the 107 brokerages. Its reported earnings for 2008 tumbled 92.38 percent from 2007 to 320 million yuan.

Well-capitalized brokers with large client bases are expected to do better than the smaller ones this year, according to a report released by China Chengxin International Credit Rating Co (CCXI).

The leading domestic credit rating agency had a "negative" outlook for Chinese securities brokers this year, as the nagging market uncertainties will continue to cloud business prospects in the coming one or two years.