Shen Zhen under the fierce medicine, the original and clear the source!
Author: Rock.
Editor: Mondo.
Style: Tranquility.
*: Rhodium Finance - Rhodium Finance Research Institute.
In 2009, Wu Qing wrote an article in the magazine "China**" bluntly saying that the self-regulation and supervision willingness of financial institutions are often unreliable, so there can be no gaps in financial supervision.
At the beginning of 2024, the person who fills the "gap" at the end of regulation is coming!
On February 7, Wu Qing, known as the "butcher of the brokerage", succeeded Yi Huiman as the chairman of the China Securities Regulatory Commission. Only three days after taking office, the "head fire" burned to the brokerage.
On February 9, on the Chinese New Year's Eve when people across the country bid farewell to the old and welcomed the new, the China Securities Regulatory Commission ** disclosed a number of punishment letters. Among them, the largest number of people were fined for investment promotion, with a total of 63 people being administratively punished, with a total fine of 81.73 million yuan. Xiong Jiantao, the executive director and president at the time, was banned from the market for life. Han Fei, the former vice president of the Great Wall, was fined nearly 1 in total for illegal trading200 million yuan, and was banned from the market for 10 years.
Combined with the heavy penalty of the Shanghai Sierxin fraud case, the supervision of "long teeth and thorns" and "zero tolerance" for violations are not empty words. In the turbidity and the alarm bells, are practitioners ready? What should those who "overturn and get shot" think about?
The proportion of wealth management has declined
Performance growth "depends on the sky"?
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On January 29, 2024, Great Wall ** released a performance forecast, and the net profit attributable to shareholders of listed companies in 2023 will be 13931.8 billion yuan-14830.6 billion yuan, a year-on-year increase of 55% to 65%.
The third quarter report of 2023 shows that the net profit of the company is 121.3 billion yuan, a year-on-year increase of 11387%。Such a big increase" ** contributed a lot. Fair value change income for the first three quarters became 42.5 billion yuan, an increase of more than 900 million yuan year-on-year. As of September 30, 2023, Great Wall has invested a whopping 5755.3 billion yuan.
The consideration lies in the ever-changing capital market, whether it is an institution or an individual, there is no eternal stock god, "* income is more "dependent on the sky" and unstable. For example, in 2022, the net profit of Great Wall ** will be 89.9 billion yuan, a year-on-year decrease of 4909%。The self-operated business saw the largest decline, down 139 percent year-on-year17%。
In terms of business review, in addition to investment income**, the company's other business performance is not satisfactory. For example, in the first three quarters of 2023, the brokerage revenue was 60.8 billion yuan, down 1437%。
Guo Xing, an industry analyst, said that with the slowdown in the number of new account openings, the securities brokerage business has shifted from incremental competition to stock competition. The leading brokerages and new Internet brokerages continue to encroach on the market share of small and medium-sized brokerages through scale advantages and model innovation, resulting in a decline in the income of securities brokerage business. Under the aggressive attack, the latter's business transformation is imperative.
Focusing on the Great Wall**, the direction of transformation is aimed at wealth management. As reported in the 2022 annual report, the wealth management business is a key business, with revenue accounting for 76% of total revenue43%。In order to promote the transformation and upgrading of the wealth management business, a total of 5 branches in Liaoning, Shanxi, Jiangsu and Yunnan were cancelled during the year. It will comprehensively promote the integrated development model of online and offline, empower the transformation and upgrading of wealth management with digital technology, and continue to develop online customer acquisition channels.
The 2023 interim report once again emphasized that as a strategic pillar business, the big wealth business is the core business supporting the company's "14th Five-Year Plan" strategy and the key business direction for long-term development.
What is striking is that the proportion of wealth management business, which is so important, has not risen but declined, from 76 in 202243% slipped to 52% in the first half of 2023. Revenues 114.5 billion yuan, down 6 percent year-on-year40%。
Although the balance of margin financing and securities lending increased by 373% to 2249.1 billion yuan, but the net interest income was only 1625050,000 yuan, down 91 percent year-on-year75%。
From 2018 to 2022, the interest income of the Great Wall increased from 57.6 billion yuan to 119.3 billion yuan. Net income also fluctuated between $200 million and $400 million. The sudden and rapid decline in 2023 must be observed, is there room for improvement in the pricing power of the company's financing costs?
In August 2022, the Great Wall **7.6 billion yuan fixed increase landed, of which 425.3 billion yuan was used for capital intermediary business. The heart of expanding and strengthening the wealth management business and building a differentiated moat is visible to the naked eye. Is the above transcript enough?
Three hurdles to be broken
Violations" ** when to close
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Funding is not a panacea.
* Yang Liu, an industry practitioner, said that most of the wealth management business was born out of the first-class brokerage business, and is currently mainly based on the capital market, providing customers with services such as trading, asset allocation, information consulting, and sales of financial products.
Under the background of stricter supervision, intensified competition in the industry, and large fluctuations in the capital market, it is not easy for Great Wall to rely on wealth management business to achieve differentiated overtaking.
1. The wealth management model is not sufficient. At present, the wealth management business of securities companies mainly relies on product consignment sales, financial business, and investment advisory services.
2. The high-end customer base is insufficient. High-end customer service capabilities need to be improved. At present, China's capital market is mainly dominated by the best and the scale of funds is small, which is not conducive to securities companies to carry out investment consulting and information value-added business.
3. Business homogeneous competition. At present, the wealth management business models of various brokerages are not much different, and there is a lack of differentiated products and services. Under the homogeneous competition model, the advantages of the head brokerage are obviously higher than that of small and medium-sized brokers.
For the Great Wall, how to break through the shortcomings of these three industries is the key to breaking the "relying on the sky" and the success or failure of the transformation of wealth business.
For a long time in the past, A-share brokerages have been "relying on the sky" to eat. The bull market is coming, and the trading commissions are making a lot of money, and the bear market is coming, and the collective tightening of the waist for the winter. With the improvement of the maturity of the capital market, since 2017, CITIC**, GF** and other heads have established wealth management departments. Some securities firms have begun to set up asset management subsidiaries, and even transferred their wealth management business to investment banking subsidiaries to give full play to their synergistic advantages and broaden the depth and breadth of wealth management.
In the view of industry analyst Sun Yewen, wealth management, as the name suggests, needs to help customers achieve stable capital appreciation, investment and research capabilities are the core moat, and the advantages of the Great Wall in this regard still need to be cultivated and excavated. Replenishing capital is not a "panacea", professionalism, finesse, and management level are indispensable.
According to the 2022 annual report, Great Wall ** has a stake in Invesco Great Wall and Great Wall**, two companies, respectively holding06% equity. As of February 1, 2024, according to the daily ** website, the management scale of Invesco Great Wall** is 5152$8.1 billion. As of December 31, 2023, the Great Wall** was 3051$2.8 billion.
In terms of scale, the two ** are not considered heads, and in comparison, Invesco Great Wall ** has a better influence. However, public information shows that the ** is held by Wall Street giants Invesco Asset Management and Great Wall ** respectively 49% of the shares of Invesco Great Wall, both of which are the largest shareholders. According to the statistics of the Financial Associated Press, the 5 chairmen of Invesco Great Wall ** all have Huaneng background, and the 3 general managers have Invesco asset-related backgrounds.
In addition, the wealth and investment business sectors also need to be strengthened. Taking 2022 as an example, Baocheng**'s revenue decreased by 74% year-on-year42%, net profit decreased by 65 year-on-year02%。Great Wall Investment's business declined23%。The Great Wall Changfu fell by %.
How to improve business competitiveness tests the comprehensive operation ability of the management and the coordination of the internal team.
Back to the above-mentioned executive violations" ** of the nearly 1A huge fine of 200 million yuan, looking at the past, the Great Wall has already learned from the past in the absence of internal control.
For example, in January 2017, the China Securities Regulatory Commission announced the punishment decision of Song Chang, an independent director of Great Wall, who was banned from the market for 10 years and fined a total of 1.1 million yuan for insider trading and trading.
In April, the Guangdong Securities Regulatory Bureau issued an administrative penalty decision on Zhao Cheng, an employee of the Great Wall **, for illegal trading, with a total of 228,251 fines and confiscations51 yuan.
In November 2018, the single scene of illegal transaction fines was repeated again. The Chongqing Securities Regulatory Bureau disclosed that Luo Yuanyuan borrowed her father Luo Mouqing**'s account to hold, trade, and sell ** in violation of regulations during her employment in the business department of Chongqing Jintong Road** on the Great Wall, with a cumulative amount of 17,062,779 yuan and a cumulative sale of 16,764,29906 yuan.
From ordinary employees to independent directors to senior executives, they have repeatedly overturned on illegal transactions, torturing the company's internal control and risk control, compliance awe, and business professionalism.
Behind the gratifying recovery
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Compared with the Great Wall**, as the first echelon of domestic brokerages, China Merchants ** also has obstacles and troubles in terms of growth and compliance.
In the first half of 2023, the company's revenue will be 1079.4 billion yuan, a year-on-year increase of 163%；Net profit 472.7 billion yuan, an increase of 10 percent year-on-year14%。
Segmented business, investment and trading are outstanding, with revenue of 247.6 billion yuan, an increase of 104 percent year-on-year19%。In contrast, investment banking, investment management, wealth management and institutional businesses all declined, with revenue declining58%。
In the first three quarters of 2023, revenue was 1487.1 billion yuan, a year-on-year decrease of 279%；Net profit attributable to listed shareholders was 640.1 billion yuan, a year-on-year increase of 19%。It is worth noting that this is still the result of a low comparable base, with revenue down 29% and net profit down 26% in the same period in 2022.
Throughout the year, this is also the case. On February 18, China Merchants ** released a performance report, with a total operating income of 197 in 20239.5 billion yuan, a year-on-year increase of 3%; Net profit attributable to the parent company was 874.4 billion yuan, a year-on-year increase of 835%。But you must know that the company's revenue in 2022 will only be 1921.9 billion yuan, down 346%, net profit 807.2 billion yuan, down 3068%。If compared to 294 in 20212.9 billion yuan, 1164.5 billion yuan, the gap is still obvious, and the recovery of vitality is still on the way.
In terms of business, investment banking business is an important indicator to measure the specialization of domestic leading securities firms. In the first three quarters of 2023, the net income of China Merchants ** investment banking business was 74.6 billion yuan, down 316%；Brokerage business fell by 139% to 427.9 billion yuan. Net income from asset management54.9 billion yuan, down 13%.
In 2022, the investment banking business income was 138.6 billion yuan, a year-on-year decrease of 4361%。The weak performance was mainly related to the sluggish equity underwriting.
Wind data shows that in 2022, the lead underwriting amount of China Merchants ** IPO projects will increase from 219 in 20215.7 billion yuan fell to 1013.2 billion yuan, a decrease of 5386%。The total IPO underwriting and sponsorship income was 6100 million yuan, up from 12200 million yuan, down 50%.
The reason for this is not unrelated to the company's compliance and internal control shortcomings under the strong supervision of the industry. In that year, China Merchants ** was fined many times for compliance issues in investment banking business.
For example, in April 2022, Ge Qi and Wang Zhipeng were punished, and the project involved was the on-site inspection of Shandong Taipeng Environmental Protection Materials Co., Ltd., which was sponsored by China Merchants ** Dafeng Rural Commercial Bank was denied listing that month, and it was also the first bank IPO project in the history of A-shares to be rejected.
In August 2022, China Merchants was filed by the China Securities Regulatory Commission for violating laws and regulations during the independent financial advisory business of China Security Branch Co., Ltd. The IPO projects of more than 30 companies sponsored by China Merchants ** were once "suspended from review".
In September, China Merchants announced that it was fined 63 million yuan because China Security Branch Co., Ltd. failed to provide financial advisory services diligently.
The sponsor was fined for intensive rollover, which is undoubtedly a minus for the investment banking business. In the first quarter of 2023, as many as 6 IPO projects were voluntarily withdrawn, exceeding the whole year of 2022.
As of November 2023, China Merchants** has voluntarily terminated and withdrawn 10 IPOs. In 2022, only 4 companies will voluntarily withdraw from the home.
Industry analyst Sun Yewen believes that the IPO was withdrawn as soon as it was checked, reflecting that the sponsoring brokerage did not perform its "gatekeeper" duties well and had the mentality of "heavy contracting and light quality control". With the strict supervision of the whole process and the 10-year backcheck and other regulatory moves, the compliance strings are getting tighter and tighter, and the chances of "breaking through with illness" are becoming more and more slim, forcing intermediaries to enhance professionalism and compliance awe.
Chance and necessity cherish the "feather" of trust
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That's right, the so-called Shen Zhen is a fierce medicine, and it is very important.
After the new commander took office, the China Securities Regulatory Commission (CSRC) has released a clear signal that a standardized, transparent, open, dynamic and resilient capital market needs to reward the good and punish the bad, and have a strong and good currency effect.
On February 9, the China Securities Regulatory Commission (CSRC) released the first case of voluntary withdrawal of IPO and being fined. The company was fined 4 million yuan for illegal matters such as inflated income; At that time, Huang Xueliang, the actual controller and chairman of Sierxin, and other management were fined 12.5 million yuan, with a total fine of 16.5 million yuan.
Focusing on this brokerage fine, compared with the heaviest fine of the president of the Great Wall, the largest number of fines were imposed on China Merchants **, with a total of 63 administrative penalties and a total of 81.73 million yuan confiscated. Second, one person suspected of insider trading was transferred to the judicial authorities for handling, and administrative supervision measures were taken against 46 people.
At the same time, the chairman of the company was given a warning letter, the two then compliance directors were given administrative supervision measures such as regulatory talks, and administrative supervision measures were taken to order an increase in the number of compliance inspections, and internal accountability was supervised to be initiated, and full accountability coverage was implemented.
For a leading listed securities firm, the issuance of a warning letter to the chairman of the board of directors and the administrative supervision measures of the compliance director are undoubtedly high-level penalties and "three-dimensional punishments". At the same time, it also exposes the huge hidden dangers of enterprises in the construction of internal control and compliance. Compliance is the basic skill of the company's sponsorship business, and in addition to increasing the difficulty of subsequent sponsorship projects, it also damages brand power and credibility. How to cherish the feather of trust, repair the credibility as soon as possible, and resist the pressure of performance is a soul test question for investment promotion.
According to the market ban decision disclosed by the China Securities Regulatory Commission, Xiong Jiantao, the former executive director and president of China Merchants**, began his violation in 1995, and he also used other people's accounts** for a period of 26 years. During the transaction** the total transaction amount is 51.9 billion yuan, with a profit of 335660,000 yuan.
On August 9, 2022, China Merchants ** received a warning letter from the Shenzhen Securities Regulatory Bureau: it failed to fully investigate the debt undertaking business and assetization business; In terms of sponsorship business, due diligence on the issuer's revenue recognition, core technology, R&D expenses and other due diligence is also insufficient, pointing to the existence of compliance risks in a number of investment banking businesses. On August 12, China Merchants ** also announced that it had received a notice from the China Securities Regulatory Commission to file a case, which was related to the acquisition and fraud case of China Security Branch 8 years ago.
In July 2020, the China Judgment Document Network published a second-instance criminal ruling, in which Du Moumou, the former investment manager of the Wealth Management and Investment Department of China Merchants ** Asset Management Headquarters, violated the rules during his tenure and privately accepted the entrustment of customers to buy and sell**, and was suspected of insider trading, and finally the court ruled that he was guilty of using undisclosed information to trade and was sentenced to one year and six months in prison.
In December 2017, the China Securities Regulatory Commission (CSRC) notified Du Changjiang that from September 2007 to June 2014, he successively served as an analyst at the China Merchants Research and Development Center and an investment manager at the Wealth Management and Investment Department of the Asset Management Headquarters. During his employment, Du Changjiang used the ** account of his spouse Ma Moumou to conduct ** transactions, of which the cumulative profit of illegal trading as an employee was 38460,000 yuan.
Obviously, similar to the Great Wall, China Merchants has long been in the absence of internal control and risk control. The punishment of "rising" this time seems to be accidental, but it also contains inevitability.
How to learn from the pain, effectively consolidate the "compliance valve", build a long-term mechanism of "dare not, can't, and don't want to" violations, and not overturn the car for the second time, the two brokerages have a long way to go, and time is not waiting.
Authentic and clear
Be a good "gatekeeper" of the capital market
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It doesn't work anymore. The so-called original and clear source. To consolidate the responsibilities of gatekeepers, we should first start by purifying the ecology, eliminating "internal ghosts", and strictly abiding by the basic norms and codes of conduct of practitioners.
*Employees are not allowed to buy and sell** is the basic requirement of the ** Law of the People's Republic of China. Only by adhering to this red line can we truly safeguard the interests of investors and stimulate the long-termism of listed companies. If you look at it from this point of view, this concentrated punishment is also a snake hitting seven inches and with good intentions.
According to data from the Financial Times, from 2019 to 2023, the China Securities Regulatory Commission investigated and handled a total of 67 cases of illegal activities by practitioners and imposed administrative penalties on 139 people. According to the statistics of Shanghai ** Daily, since 2023, most of the cases investigated by the China Securities Regulatory Commission have been suspected of illegal information disclosure.
The regulatory signal of "cracking down on violations as soon as they appear", and earnestly achieving "not crossing the bottom line, not seeking profit, not rushing for quick success, not deviating from reality to fiction, and not acting arbitrarily" is full. In this regard, brokerages can only take advantage of the trend and constantly strengthen the corresponding professionalism and awe.
Of course, no one is perfect, no one is perfect. While correcting the problem, it is also necessary to have a pair of eyes to find the strengths.
Focusing on the Great Wall**, since 2021, when it proposed to build a comprehensive investment bank with the goal of "digital brokerage", it has continued to promote the iteration of the mobile customer service platform "Great Wall Alchemy" APP. Realize asset analysis covering all product categories, five major investment capability evaluations, promote the construction of an integrated system for institutional customer service and six centers, and create a mini program matrix.
Great Wall** said that in 2023, the company's wealth management business will strengthen the empowerment of financial technology, continue to expand the scale of customers, optimize the customer structure, steadily increase the scale of the two financial institutions, and continue to enrich the shelves of high-quality financial products.
Looking at investment promotion**, there is no shortage of bright spots in brokerage and wealth management. As of the end of June 2023, the number of normal trading customers exceeded 17 million, a year-on-year increase of 997%；The size of the client's assets under custody380 trillion yuan, an increase of 3 from the end of 202283%；*Market share increased to 524%。
At the same time, the holding scale of non-monetary public offerings and mixed public offerings was 80 billion yuan and 72.6 billion yuan respectively, ranking 5th and 4th in the industry respectively.
In response to the above-mentioned fines, the official website of China Merchants ** responded that it firmly supports the CSRC's penalty decision and will carry out "zero tolerance" control over employee violations.
It can be seen that the Great Wall and China Merchants still have solid business fundamentals, innovation and enterprising, and compliance awareness.
It is said that setbacks are the ladder of growth, and it is not too late to make amends. It is hoped that this punishment will be like a slap in the air, so that the two will self-awaken and innovate, and after compacting the responsibilities of the gatekeepers and practicing their internal strength, they will be ashamed and amazed with better growth and compliance.
Shame and courage, resolute and newborn.