Vietnamese Securities Firms Make Small Money

Net profit of securities brokerage houses on the Hochiminh Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX) were just over VND200 billion, equal to only 6 per cent of the figure during their prime time 3-4 years ago. Brokerage revenues also tend to decline.

 

By the end of February 2013, 24 out of 27 securities companies listed on HOSE and HNX released their consolidated financial statements for fiscal year 2012. Saigon Securities Inc. (SSI), APEC Securities (API) and Trang An Securities (TAS) had not made public their earnings reports. Nine companies reported losses, led by Sacombank Securities (SBS) and Fortunes Securities (PHS) with individual loss amounting at hundreds of billions of Vietnamese dong.

 

Companies with net profit of VND50 billion upwards in 2012 had strong brokerage services. Most companies made very modest earnings, particularly An Phat Securities (VND468 million), Orient Securities (VND366.4 million) or Petroleum Securities Inc (VND817 million).

 

Profitability of securities companies plunged sharply from their heyday in 2009. The profit of VND203.4 billion of listed brokerage houses in 2012 equalled only 6 per cent of their net earnings in 2009. However, this amount was quite optimistic because companies securities suffered loss of nearly VND1,800 billion in 2011. Five brokers reported huge losses.

 

Propriety trading is an important source of earnings for securities companies but this business tends to contract over the past four years. By 2012, propriety trading revenue equalled less than 30 per cent in 2009. At that time, Sacombank Securities (SBS) shocked the marked with self-trading revenue of VND1,131 billion. Last year, the best performer, Agribank Securities, raked in just nearly VND460 billion.

 

Listed securities companies also witnessed shrinking brokerage revenues. According to statistics released by VNDirect Securities, gross brokerage revenue of listed securities companies was just VND538 billion in 2012, equal to a half in 2009. In particular, An Phat Securities stayed at the bottom with just VND1.1 billion.

 

Only very big companies had handsome brokerage revenues like Saigon Securities Inc (SSI), VNDirect Securities (VND), Ho Chi Minh City Securities (HCM) while others had just less than VND10 billion of brokerage turnover like Xuan Thanh Securities (VIX), Orient Securities (ORS) or Viet Nam Industrial & Commercial Securities (VIG). Meanwhile, in 2009, none earned less than VND10 billion of brokerage revenue.

 

Phan Dung Khanh, Head of Investment Advisory Department at Maybank Kim Eng Securities, said the market has been very bad since 2007. To have accurate assessment on the health of the market, according to Khanh, we must look at HNX-Index because the index does not have large-cap stocks which can support the market benchmark and is very sensitive to new changes.

 

VN-Index peaked at nearly 1,200 points but plunged to below 400 points in 2012. HNX-Index, which started at 100 points, topped 460 points in its heyday but slumped to 50 points in 2012, the low of all times. This means that HNX-Index is at a minus growth. This also tells the very hard time investors and securities companies have experienced.

 

"Most companies with self-trading business suffered losses. In 2008, I had a friend who placed orders at floor prices in 40 days but he could not sell,” he said.

However, they struggled with hopes to live through the crisis time but they could not imagine that the downward phase last so long. Until 2012, their difficulties were revealed out. Nearly a half of listed securities companies incurred losses. Only big companies, with market share in the Top 10 group, could live well. Their main sources of revenues were brokerage fees, advisory fees or M&As, Khanh noted.

 

According to Khanh, the market will revive in 2013 but it will be only better than 2012 but will impossibly go back to the past heyday. The primary trend will be value accommodation and there is unlikelihood of strong rally as before Tet, or Lunar New Year. Widened trading band will make stronger movements and help increase liquidity - a driver for increased earnings for securities companies, he added.

 

Meanwhile, independent economist Huynh Buu Son said profitability result of Vietnamese securities companies in 2013 will not depend on the market performance.

"Many domestic and international economists forecast that Vietnam’s GDP in 2013 is hardly equal to 2012. I see many companies planning consolidation in 2013 rather than growth. The economy in 2013 will be slightly better than 2012, not be a leap as in 2006 and 2008. As such, the good health of listed companies will be the foundation for the revival of securities companies,” he said.

 

Son said most securities firms have slashed proprietary trading business and focused on brokerage because they lack optimism about the market. However, the move means that securities firms accept reduced profits.

 

In addition, the State Bank of Vietnam (SBV) is implementing flexible credit policy. This means that credits will only go to worthwhile borrowers. Therefore, these activities without much impact on production and business activities like securities investment will hardly have the opportunity to access capital sources this year. Therefore, speculators may have to use their own capital for investment. In this case, the availability of cash on the stock market will decline and revenues of securities will fall as a result, he analysed.