Brokerage firms are busy with "blood replenishment": 1.43 trillion yuan of bonds issued during the year increased by 66% compared with the same period last year

  China-Singapore Jingwei Client, September 24 (Luo Kun) With the support of the low interest rate environment and the superimposed policy, the issuance of bonds by securities companies is showing a blowout trend.

Wind data shows that as of September 23, securities firms issued bonds during the year have exceeded 1.43 trillion yuan, surpassing the 1.19 trillion yuan in the whole year of last year and an increase of 66.3% over the same period last year.

  Analysts pointed out that in the current loose market environment, if long-term low-cost funds can be supplemented, it will help brokerage firms to expand their asset scale and increase leverage and profitability.

In the future, the asset-liability management capabilities of securities firms will become the focus of competition, and large-scale securities firms will have more advantages.

Policies encourage brokers to replenish capital through multiple channels

  In recent years, the policy makers have been enthusiastic about replenishing capital through multiple channels for securities firms.

In 2019, the Central Bank increased the short-term issuance limit of leading brokers, supported the issuance of financial bonds by leading brokers, and broadened the unsecured financing channels for leading brokers.

  At the end of March this year, the relevant person in charge of the China Securities Regulatory Commission pointed out in response to reporters that the China Securities Regulatory Commission will gradually allow participating pilot institutions to try out a more flexible risk control indicator system in accordance with the "Risk Control Measures".

In the initial stage, the calculation coefficient for the risk capital reserve of the parent company of the pilot institution was reduced from 0.7 to 0.5, and the calculation coefficient for the total on-balance sheet assets was reduced from 1 to 0.7.

Cinda Securities pointed out that this move will further increase the leverage of leading brokers.

  On May 29, the China Securities Regulatory Commission issued the "Decision on Amending the Regulations on the Administration of Subordinated Debts of Securities Companies". The main contents include allowing securities companies to publicly issue subordinated bonds and reserve space for securities companies to issue write-down bonds and other types of bonds. , Unify the application of laws and regulations and increase the basis for higher-level laws.

  Zhongtai Securities analyst Jiang Qiao pointed out that subordinated debt is the only bond that can supplement the net capital of the brokerage.

Allowing securities companies to publicly issue subordinated bonds can reduce the financing costs of securities firms, help them replenish capital, increase risk coverage, and better meet the requirements of risk control indicators.

Subordinated debt becomes an important "blood" channel

  Recently, information from the Shanghai Stock Exchange shows that China Securities Co., Ltd. has been accepted for the public issuance of subordinated bonds to professional investors in 2020, and raised funds of 40 billion yuan.

Such a large amount of subordinated debt is not uncommon in the near future. Huatai Securities' proposed issuance of 25 billion subordinated bonds and Zhongtai Securities' proposed issuance of 10 billion subordinated bonds have been accepted recently.

In addition, CITIC Securities and Dongxing Securities have recently announced that they have been approved by the China Securities Regulatory Commission to issue subordinated corporate bonds, with a total amount of not exceeding 30 billion yuan and 10 billion yuan respectively.

  It is understood that subordinated bonds of securities companies are securities issued by securities companies to institutional investors among professional investors, and the order of repayment is after ordinary bonds.

The order of repayment of the principal and interest of this bond is after the issuer’s general liabilities and before the issuer’s equity capital; unless the issuer closes out, goes bankrupt or liquidates, investors cannot require the issuer to accelerate the repayment of the principal of this bond.

  Expanding the scale of self-owned funds, especially the medium and long-term funds, is not only the general trend of the securities industry, but also the top priority of various securities firms.

At present, many listed securities companies have raised funds through IPOs, additional issuances, allotments, and corporate bonds to expand their capital strength. Some non-listed companies have also raised long-term funds through the issuance of securities company bonds and subordinated bonds.

  As a leading brokerage firm, China Securities Construction Investment stated in the prospectus that, compared with the company’s various operating indicators, business indicators, and competitive position in the industry, the company’s net capital scale and its own capital scale have been seriously To a certain extent, it restricts the future development space of the company's various businesses, especially innovative businesses and self-operated businesses.

In recent years, other domestic securities companies have shown a momentum of accelerated development. Only by accelerating the expansion of medium and long-term capital scale and strengthening competitive advantages can the company respond to the fierce industry competition in the future, support the development of various businesses, and consolidate and enhance its current market position.

Lower interest rates increase profitability

  In the abundant liquidity atmosphere, if the timing of bond issuance can be grasped, brokers can obtain a large amount of low-cost funds.

Judging from the situation in the first half of this year, the coupon rate of bonds issued by many brokerage firms is between 2% and 4%, and some leading brokerage firms can even lower the coupon rate below 2%.

  Founder Securities issued a report in July that debt financing is still the most important channel for securities firms to replenish capital.

In terms of issuance interest rate, since the beginning of 2020, the issuance interest rate has fallen further. The average issuance interest rate of short-term securities has dropped by 80BP to 2.13%, and the average issuance interest rate of securities company bonds has fallen by 58BP to 3.42%. Bring an increase in the profitability of the industry.

  The above report believes that the increase in the issuance of short-term securities with lower interest rates will significantly optimize the financing channels and structure of securities firms, improve financing costs, replenish capital, and help securities firms leverage their operations; the main investment direction is the development of fund intermediary business, which represents Brokers' confidence in the development of capital intermediary business and their willingness to increase leverage and capitalize on transformation.

  Judging from the recent bond issuance by brokerage firms, the cost advantage of leading brokerage firms in obtaining funds has become prominent.

For short-term financing bonds with a maturity of 0.25 years, the coupon rate of the top brokerage is about 2.5%, while the lower-ranking brokerage may exceed 4%.

  Founder Securities pointed out that small and medium-sized securities firms cannot catch up with the expansion speed of leading securities firms in terms of their ability to raise funds, whether in bank credit lines, or in the scale of refinancing and debt financing.

Therefore, in the context of the decline in profits of traditional asset-light businesses, in addition to focusing on the subdivisions of key advantages and creating special business boutique brands, small and medium-sized brokers must unite with each other and move closer to the head to narrow the gap in capital strength and keep up with the trend of the times. , Seize the last window period and move closer to the first echelon.

  Recently, Guolian Securities and Guojin Securities announced that they are promoting joint reorganization.

Analysts pointed out that refinancing methods such as fixed increase and allotment are slow to improve capital strength. At the same time, domestic securities companies are subject to quota restrictions on debt financing. Only the combination of strong and powerful can accelerate the process of building aircraft carrier-level securities companies.

(Zhongxin Jingwei APP)

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