The First "Blood Transfusion" Of The Securities Industry In The New Year Was Spent, And The Two Major Businesses Of Western Securities, Namely, Ficc And Margin Trading, Were Repeatedly Supported By Capital

The first new year's bond industry will increase.

On the evening of January 17, Western securities announced that the company's 7.5 billion private placement has been completed. According to the announcement, the number of non-public shares issued by Western securities was 968 million shares, the issue price was 7.75 yuan per share, and the total amount of funds raised was 7.5 billion yuan. After deducting the issuance expenses, the actual net amount of funds raised was 7.463 billion yuan.

According to the fund-raising arrangement, 5 billion yuan out of 7.5 billion yuan will be invested in trading and investment business and capital intermediary business. Previously, Western securities has said that the raised funds will be mainly invested in margin trading and stock pledge in capital intermediary business. In terms of trading and investment business, some insiders close to Western Securities said that the relevant capital increase will be mainly used for ficc business (i.e. fixed income, currency and commodities business).

In fact, in recent years, trading and investment business and capital intermediary business have become the mainstream of the securities industry. After combing the data, the 21st century economic report found that among the fixed increase and share allotment projects implemented or disclosed by securities companies in 2020, 35.4 billion yuan of raised funds is intended to be used for capital intermediary business, and 56.8 billion yuan is planned to be used for investment and trading business.

"The main reason why securities companies increase investment in capital intermediary business is to expand the scale of financing and financing. Increasing investment in investment business is more focused on ficc business, especially OTC derivatives business, which is expected to become a new growth point for securities companies this year. " There are small and medium-sized domestic securities analysts said.

More than 60% of the funds are invested in two major businesses

The company's controlling shareholder, Shaanxi investment group, spent 2.8 billion yuan to subscribe for 360 million shares, and four securities companies invested billions to participate in the subscription.

Among them, CITIC Securities paid 443 million for 57.16 million shares; CITIC construction investment for 54.19 million shares; first venture capital invested 239 million for 30.83 million shares; and China Galaxy invested 140 million for 18.06 million shares. After this round of fixed increase, CITIC Securities and CITIC construction investment will also become the eighth and ninth largest shareholders of Western securities.

In terms of the investment of raised funds, Western securities announced previously that the total amount of funds to be raised in this non-public offering is no more than 7.5 billion yuan. After deducting the relevant issuance expenses, all the funds will be used to supplement the company's capital, working capital and debt repayment, so as to expand the business scale and enhance the company's anti risk ability and market competitiveness.

Specifically, no more than 2.6 billion yuan is used for trading and investment; no more than 2.4 billion yuan is used for developing capital intermediary business; and no more than 1.2 billion yuan is used for capital intermediary business RMB 100 million is used for capital increase of subsidiaries; no more than RMB 1.2 billion is used to increase investment in business outlets and channel construction; no more than RMB 400 million is used to repay debts; no more than RMB 200 million is used to increase investment in information technology and risk control system construction; and no more than RMB 500 million is used for other operating funds.

It can be found that of the 7.5 billion raised funds, 5 billion have been used to develop investment and trading business and capital intermediary business.

In this regard, Western securities has previously explained that the self operated investment business has become the main revenue and profit contribution point of the company. According to the company's business development plan, the company plans to use no more than 2.6 billion yuan of raised funds for trading and investment business, improve the transaction structure, expand new investment varieties, meet the capital needs of relevant business development, and improve investment income.

Some people close to Western securities disclosed to the 21st century economic report that the relevant raised funds will be mainly used for underwriting the bond balance, which will be included in the ficc business.

"In theory, ficc business includes fixed income, foreign exchange and bulk commodity business. Western securities is used to underwrite bond balance this time, which is classified as fixed income business. We may want to emphasize the fixed income of bond underwriting and the nature of serving institutional clients. " There are domestic small and medium-sized securities companies fixed income business related person in charge said.

In the capital intermediary business, Western securities thinks that margin trading and stock pledge are the main embodiment of securities companies playing the intermediary role of financial institutions, which can not only bring stable interest income and business interest spread, but also derive the innovation opportunities of brokerage business and other products. Related business is a powerful means for securities companies to serve core customers and increase customer stickiness. It is also an important source of income and profit for securities companies.

It is worth noting that in recent years, both the agreed increase of bonds and the issuance of shares have shown the logic of attaching importance to capital.

According to wind data, in 2020, a total of 14 listed securities companies implemented fixed increase and allotment of shares, with the actual financing amount reaching 106.736 billion yuan. Combined with relevant plans, the total raised capital in that year reached 175.81 billion yuan.

According to the 21st century economic report, 56.8 billion yuan is planned to be used for investment and trading business, and 35.4 billion yuan is to be used for capital intermediary business of nearly 180 billion yuan. The two are listed as the first and second major investment directions of securities companies.

What is more worth mentioning is that in the investment and trading business, securities companies clearly indicated that they invested 25.4 billion yuan in ficc business. For example, in 2020, Haitong Securities, which has the largest scale of fund-raising, will raise 20 billion yuan, of which 10 billion yuan will be used to expand the investment scale of ficc, accounting for half of the raised funds.

On January 15, Hongta securities, in reply to the feedback of the CSRC on the company's share allotment application documents, also said that no more than 4 billion of the 8 billion raised funds would be invested in ficc business, and no more than 2 billion would be used for capital intermediary business.

Securities industry to step up the distribution of ficc and financial services

"The ficc business, especially the OTC derivatives business, is still in the early stage of development. Now, the increasing investment of securities companies actually means to run horses and encircle the land. For example, small securities companies also hope to make use of this business to overtake the vehicles." For the phenomenon that securities companies have invested heavily in ficc business in recent years, the relevant person in charge of the fixed income business of the above-mentioned securities companies said. He disclosed that at present, the investment of securities companies in ficc business is mainly used for recruitment of trading team, product design and customer demand mining.

The above-mentioned non bank analysts also said that under the background of building an aircraft carrier for the securities industry, domestic securities companies hope to benchmark overseas investment banks, "like Goldman Sachs, ficc business contributed more than 40% of net profit before the subprime mortgage crisis". He said that domestic securities companies also hope that through the study of ficc, the transaction business will be de oriented. On the one hand, it reduces the fluctuation of investment business, on the other hand, it conforms to the trend of institutional securities business.

Taking CITIC Securities as an example, although there is no clear data on the revenue and net profit contribution of ficc business, as of June 30, 2020, the scale of its derivative financial assets has reached nearly 20 billion yuan, with a year-on-year increase of 171%.

Judging from the industry data, the OTC derivatives business of securities companies has also witnessed a surge in recent years.

According to the statistics of China Securities Association, in the first half of 2020, the initial nominal principal of securities companies' OTC financial derivatives business increased by 172.821 billion yuan, up 160.78% year-on-year. Among them, income swap increased by 860.93% and OTC option increased by 74.21% year-on-year.

"The potential demand of the two major buyers of OTC derivatives remains strong." Xia Changsheng, a non bank analyst of Tianfeng securities, said that after the net value management of financial products of commercial banks, the proportion of structured financial products has increased, and commercial banks need to smooth the fluctuation of net worth through derivatives hedging transactions. After the new regulation of refinancing is relaxed, private funds enter the capital market through the mode of OTC derivatives + fixed increase through securities companies. "The scale of over-the-counter options and over-the-counter swaps continues to increase, which is expected to bring considerable performance increment for securities companies."

In the capital intermediary business, market participants believe that securities companies will be more layout of margin trading business.

As a matter of fact, since 2020, the two financing businesses have met with favorable conditions again. The gem reform has optimized the margin trading mechanism and refinancing mechanism to enrich the supply of securities sources. In the future, the new third board will also pilot margin trading business at the selected level. Under the registration system reform and the opening of the securities market, the demand for financing business is expected to grow steadily.

The above-mentioned non bank analysts also said that the capital intermediary business mainly includes two financing and equity pledge, which is equivalent to the credit business in the equity market. The two financing businesses are for retail investors, and equity pledge is for major shareholders of listed enterprises. The former is less risky and the latter is more risky because it is constrained by the rules of reducing holdings. If the risk control of the two financing businesses is proper, the net profit of securities companies will be significantly increased.

"Although the two financing business is a little bit dependent on heaven, there is always a part of leverage capital in the market. Although the two financing businesses occupy a large amount of capital, the profit generated by unit net assets is small and roe is not high, it has obvious effect on the net profit itself. At present, the scale of the two cities and two financial institutions is close to 1.7 trillion yuan. Through the interest margin income and financing transactions, the brokerage commission is charged, and the securities companies can make two profits. " There are securities companies financing business personnel said.

The personnel said that at present, securities companies are mainly expanding the scale of capital intermediary business. "In the future, the focus of the two kinds of financing is securities lending business. After the domestic short making mechanism is further improved, investors or institutions with short demand will conduct securities lending on individual securities."

Xia Changsheng also predicted that the performance growth rate of the securities industry in 2021 will depend on institutional business, including derivatives, private equity investment, securities lending, investment banking, etc. If the refinancing mechanism of small and medium-sized board of the main board is optimized, it is expected that the margin balance of Shanghai and Shenzhen stock markets will continue to increase in the future.