Restructuring of securities firms is inevitable: experts

An analyis of the structure of revenue of securities companies in 2008-2010 shows that securities firms are facing many risks.
Continuously from 2008-2010, income from stock trading accounted for 35-42 percent of total revenue.

In 2010, 88 out of 94 securities companies reported that they had revenue from stock trading with a total value reaching 5.164 trillion dong, accounting for 36.14 percent of total revenue.

A leading company in stock trading was SBS (1.131 trillion dong), SSI (710 billion dong) and AGR (642 billion dong).
Particularly, firms that had income mainly from stock trading were Asia-Europe Securities (82.61 percent), SBS (82.12 percent), Ban Viet Securities (70.11 percent) and others.

The big securities companies listed on two floors were SSI, HPC, and SHS also with revenue from stock dealing activities accounting for a quite large proportion.

With the current context of the stock market, the stock dealing activities of securities companies has yet to show any bright sign. In 2008, there were up to 70 percent (61/88) of securities posting losses mainly due to stock trading, this figure in 2010 was only 26.59 percent (25/94) and in the first quarter of 2011 was up to 50 percent of listed companies making loss.

Meanwhile, stock brokerage accounted for a relatively modest rate of securities companies’ revenue. Since 2008, revenue from their brokerage activities was only from 12-22 percent of total revenue. This shows that the brokerage is not the main activity of securities firms at present.

According to the financial statements in 2010, the company that had the largest revenue from brokerage activities was Thang Long Securities (TLS) with 234 billion accounting for 17.88 percent; SSI 176 billion dong, accounting for 11.71 percent; HCM City Securities (HCM) 151 billion dong, accounting for 32.08 percent of total revenue.

Currently, more than 100 securities companies must share the quite small pie of the market. Brokerage revenues of all companies in 2010 reached 2.398 trillion dong, negligible compared to total equity of 34.538 trillion dong. Of the 94 companies surveyed recently, there have been some 40 companies that gained revenue from brokerage with less than 10 billion dong.

In 2010, other income items at securities companies posted the highest percentage of 38.66 percent and reached 5.454 trillion dong, and also in the first quarter of 2010, with the figures of 27 securities companies, the rate of other revenues to nearly 50 percent of total revenue.

Specifically, according to financial data in 2010, some securities companies that had other fairly large revenues were AGR (975 billion dong), KLS (855 billion dong) and SSI (473 billion dong).

According to the explanation of financial statements of securities firms, the other revenue was mainly earnings from deposit interest rates and securities repo contracts. Thus, the other revenue accounting for a significant proportion also showed securities firms used strong financial leverage support for investors.

It can be seen that operation of financial support for investors would bring significant revenue for many securities companies, but are facing with many risks. The State Bank of Vietnam is forcing commercial banks to reduce non-production loans to 16 percent by year’s end, which also means that credit for securities investment have been narrowed. The risks of this activity are also increased when the market continue plummeting, along with low liquidity.

Concerning the other operations such as investment consulting and underwriting, the revenue was only a very small percentage of total revenue of securities companies. In 2010, only 23 securities companies gained revenues from underwriting activities and issuance agent service of securities. The company that posted the largest revenue from this activity was SBS, but with only 35 billion dong.

In 2010, although revenues from consulting was said to be rather high, the total was only 712 billion dong. In particular, FPTS posted the largest revenue with 187 billion dong and SSI with 108 billion dong.

According to the explanation of financial statements, the amount of financial leverage accounted for a rather large percentage of other revenue items. According to Thoi Bao Kinh Te Saigon, the total value of “other receivables” of securities firms in 2010 was estimated at 21.806 trillion dong. In the first quarter 2011 alone, only 26 companies listed on the floors, “other receivables” already climbed to more than 10.500 trillion dong.
This is a pretty big figure compared to the current liquidity of the stock market.

A negative prospect of securities firms is apart from the slippages of the stock market, another very important reason that the competition from the securities industry is getting tougher. Therefore, restructuring and merger at securities companies to improve their capacity, performance is necessary, or a number of companies that may go bankrupt are inevitable, according to financial experts. – TBKTSG

Tags: Vietnam securities firms, vietnam stock, Vietnam stock market