Citic Securities Market Rescue Investment Suffers, as Net Annual Profit Drops 48%

(Beijing) — China’s leading brokerage Citic Securities Co. Ltd. is still losing money on the 21 billion yuan investment it plowed into the stock market in 2015 at the behest of the securities regulator, which was trying to shore up share prices.

Citic Securities was one of 50 brokerage firms that provided a total of 220 billion yuan ($32 billion) to buy the stock of companies listed in Shenzhen and Shanghai in the second half of 2015, in an effort to stem panic sales by other investors following a market crash in June that year. 

Citic Securities, China’s largest securities house by total assets, alone contributed 21.1 billion yuan, and the investment was worth 19.8 billion yuan as of Dec. 31, marking a 6.14% unrealized loss, according to the securities firm’s recently announced annual report.

The paper loss didn’t affect the firm’s profit last year.

Like the other 49 firms, Citic Securities transferred its capital to the state-controlled China Securities Finance Corp. Ltd. (CSF), which conducted the investment through special accounts.

Guotai Junan Securities Co. Ltd., which posted a 1 billion yuan paper loss on its market rescue investment as of the end of 2016, said earlier that it was “unclear how the CSF operates the special accounts and when the investment will be returned.”

Citic Securities made a net profit of 10.4 million yuan in 2016, down 47.7% from that of the previous year, according to its report. Still, it is the highest record among all 44 securities firms tracked by Wind Info., a financial data provider.

The firm’s operating revenue last year was 38 billion yuan. Its securities investment department saw revenue fall by 72.3% year-on-year to 4.9 billion yuan, and the revenue from brokerage services decreased by 44.2% to 12.1 billion yuan.

It made almost 5.3 billion yuan from underwriting securities issuance including initial public offerings, up 16% from the revenue for the previous year. Citic Securities served as the lead underwriter in the sale of equity shares worth nearly 241 billion yuan, making up almost 11.8% of the market.

Citic Securities said its revenue was affected because the secondary stock market was struggling with liquidity and yuan exchange rate issues. The market in 2016 was considerably less active than during 2015, with average daily turnover of equity-focused investment funds halving to only 53.2 billion yuan, according to the firm’s report.

Contact reporter Wang Yuqian (yuqianwang@caixin.com)