Review of CITIC Securities' annual report: Significant changes in investment banking business, wealth management data "hidden", cash flow "shifted"

On the evening of March 26th, the "Number One Broker" disclosed its annual report!

CITIC Securities revealed: in 2023, it achieved operating income of 60.068 billion yuan, a year-on-year decrease of 7.74%; net profit attributable to the parent company was 19.721 billion yuan, a year-on-year decrease of 7.49%.

In addition, CITIC Securities plans to distribute a cash dividend of 4.75 yuan (tax included) per 10 shares this time.

Recently, CITIC Securities has attracted market attention due to issues with the listed companies it sponsors, leading to on-site supervision by the exchange. The disclosure of this evening's annual report will further "enlarge" the investment banking business of this top brokerage.

Significant Changes in Investment Banking Business

The annual report shows: in 2023, CITIC Securities completed 34 A-share IPO projects, with a main underwriting scale of 50.033 billion yuan and a market share of 14.03%; 106 refinancing projects, with a main underwriting scale of 227.88 billion yuan.

Although the market share of the above two investment banking businesses ranks first in the entire market, there have been significant changes compared to the same period last year.

In fact, in 2022, CITIC Securities' main underwriting scales for IPO and refinancing projects were 149.8 billion yuan and 226.4 billion yuan, respectively.

The shrinkage mentioned above is closely related to the overall market environment over the past year.

Data shows: in 2023, the number of A-share IPO companies and the issuance scale have both decreased, with a total of 313 companies completing IPOs, a year-on-year decrease of 26.87%, and an issuance scale of 356.539 billion yuan, a year-on-year decrease of 39.26%.

Addition of 1 Million Wealth Management Clients

CITIC Securities disclosed: as of 2023, the cumulative number of wealth management clients reached 14.2 million; the scale of custodied client assets remained at the 10 trillion yuan level, a 4% year-on-year growth; the scale of non-monetary market public fund holdings was 190.2 billion yuan.

The long string of numbers above hides a certain "mystery".

Compared to the 2022 annual report, the number of wealth management clients of this brokerage was 13 million.

In other words, in the past year, over 1 million new clients have been added.

As wealth management is a new battleground for large brokerages in recent years, attracting new clients naturally provides a strong "backing".

However, there is one data point that CITIC Securities has "stopped" disclosing - "large clients".

Upon review, it was found that the 2022 annual report disclosed that there were nearly 160,000 clients with assets of over 2 million yuan, but this level of client data is not recorded in the latest annual report.

Risk Assessment

What investors should pay attention to is the business risks mentioned by CITIC Securities in this annual report:

Firstly, the risk challenges facing the current world economy have increased. Under a high-interest rate environment, the US and European economies face downward pressure, the risk of recession in major developed economies overseas has increased, and there is a high probability of a rate cut by the Federal Reserve in 2024.

Secondly, geopolitical disturbances continue, with an increase in local conflicts and confrontations. The complexity, severity, and uncertainty of the external environment are rising. The domestic economy will continue to recover and improve towards high-quality development Thirdly, the main domestic risks are mainly concentrated in insufficient effective demand, overcapacity in some industries, weak social expectations, and still many hidden risks. However, from a comprehensive analysis, favorable conditions outweigh unfavorable factors.

Cash Flow "Shift" Worthy of Attention

In 2023, CITIC Securities' net cash flow from operating activities was -40.837 billion yuan, compared to 785.23 billion yuan in the same period in 2022, with a net outflow increasing by 119.36 billion yuan year-on-year.

CITIC Securities explained that this was mainly due to the increase in net cash outflow from operating activities caused by holding financial assets for trading purposes and lending funds.

39 People Supporting 1 Billion Profits

It is noted that CITIC Securities' holding subsidiary, CITIC Securities Investment, achieved operating income of 1.494 billion yuan in 2023, with a net profit of 1.144 billion yuan.

The main business of this company includes financial product investment, securities investment, equity investment, with 39 employees.

According to the annual report, CITIC Securities Investment focuses on track investments in advanced manufacturing, new energy, information technology, new materials, and biotechnology.

In addition, CITIC Securities also has a team responsible for equity investment - Jinshi Investment, with as many as 120 employees, achieving a net profit of 1.114 billion yuan in 2023, investing in new materials, new energy, next-generation information technology, high-end manufacturing, and medical health tracks