Securities companies struggle to make profits in unfavorable market

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The instability of the world market makes investors cautious when making investment decisions. Photo: Internet

Gloomy profits

Although inthe leading position on both Hanoi and Ho Chi Minh City’s stock exchange, revenue of SSI Securities Company still decreased by VND22 billion in the third quarter of 2019 over the same period last year, reaching nearly VND839 billion. According to SSI, the decline in profit was mainly due to the decline in the trading size of the market, leading to a 33% decrease in brokerage revenue, reaching only VND148 billion, and financial advisory revenue also fell by over 67%, less than VND28 billion. After deducting expenses, SSI recorded VND253 billionprofit aftertax, down 44% from the same period last year. In nine months, the company reachedVND644 billion profit aftertax, down by 44%.

Rong Viet Securities company also recordedVND9billion of net profit in the third quarter of 2019, while in the same period last year reached over VND21 billion. In nine months, accumulation ofprofit after-tax of Rong Viet decreased 55%, reaching only over VND34 billion. Similarly, Ho Chi Minh City Securities Company (HSC) also saw a 7% decline in revenue in the third quarter, reaching nearly VND389 billion, mainly due to the decline of brokerage and financial consultancy. Accordingly, HSC's profit after-tax was only VND112.6 billion, down 14% compared to the same period last year. In nine months, HSC's profit after tax dropped by nearly half, reaching only VND305 billion and completed less than 45% of the plan.

At Techcom Securities joint stock company, despite good revenue and profit in the first half of this year, by the third quarter of 2019, it also struggled. Financial statements for the third quarter of 2019 of Techcom Securities joint stock company recorded a 39% decrease in operating revenue compared to the same period last year, reaching only VND359 billion. Consequently, profit before tax also dropped sharply by 48%, reaching only VND268 billion.

Bao Minh Securities lost VND41 billion in the third quarter of 2019, while in the same period in 2018 it recorded a profit of approximately VND14 billion. Thanks to large profit in the first half of this year, in nine months, Bao Minh still saw over VND32 billion of EAT, up by 14.6% compared the same period last year. Similarly,with Bao Minh securitiescompany, Beta securities company also saw a loss of nearly VND6.7 billion in this period, while in the third quarter of 2018, the company saw a profit of VND9 billion. Similarly, Alpha Securities Company also lost VND590 million, Hai Phong SecuritiesCompany lost VND1.2 billion.

Expectations at the end of the year

The unfavorable market conditions and declining liquidity are the reasons given by securities companies to explain the decline of revenue and profit during the period.

According to SSI Securities Company, the average liquidity in the third quarter of 2019 reached about VND4,900 billion/session, down 6% compared to the same period last year. Many unfavorable factors appeared in the third quarter, most notably the escalation of the US - China trade warat the beginning of August.

Fearingunpredictable risks, investors around the world rushed to invest in safe assets, causing gold prices to increase sharply and drag the yield of US convertible bonds. Foreign investors in Vietnam continued to sell more than VND556 billion and the number of newly opened accounts decreased by 33% compared to the same period last year. Domestic investors also have become cautious in making investment decisions and narrowing the level of transactions.

These factors caused most companies to reduce revenue from brokerage services. For example, VNDirectstock decreased 24%, HSC decreased 26%, Saigon - Hanoi stock exchange (SHS) decreased 45%, Rong Viet stock fell 28%, Everest stock fell 24%, Ban Viet stock fell 18 %.

Besides, the proprietary trading activities of many securities companies also dropped dramatically. Typically, Rong Viet securitiescompanyearned only VND740 million from proprietary trading, down 81% from nearly VND4 billion in the same period last year. Proprietary trading activity once brought Bao Minh securities nearly VND57 billion in the third quarter of 2018, but this period only recorded revenue of VND11.6 billion, down 80%. Similarly, proprietary trading of Ban Viet Securities Company also decreased by nearly 13% to only VND100 billion; SHS decreased by 7%, reaching only VND104 billion.

In the fourth quarter of 2019, it is challenging and unpredictable about the context of the world market.According to analysts, the stock market will have more positive prospects than in the first months of the year. This is expected to bring better business results for securities companies in the last months of the year. In particular, the Securities Law (amended), likely to be passed in the ongoing National Assembly session, is also considered to bring positive effects tothe stock market. Accordingly, analysts forecast that the VN-Index may exceed 1,000 points in the fourth quarter of 2019. This will increase hopes for securities companies in the last quarter of this year.