Trillion-dollar "Number One Broker", urgent statement! Just supervised by the exchange last week! Net profit of 19.7 billion yuan last year

On March 28, "the leader of brokerage firms" CITIC Securities (600030.SH) urgently issued a statement, stating that the company has recently noticed the spread of false information about CITIC Securities by self-media, individual accounts, etc. The remarks are contrary to the facts, seriously damaging the reputation of CITIC Securities and not conducive to the orderly and healthy development of the capital market.

In response, CITIC Securities solemnly declares: The company has always firmly implemented the various policies of the Party and the country, complied with various laws and regulations, respected the supervision and guidance of regulatory authorities, safeguarded the rights and interests of investors, and actively fulfilled the responsibilities of state-owned financial enterprises. In the future, the company will continue to conscientiously implement the policies of the Party and the country, adhere to lawful and compliant operations, safeguard the legitimate rights and interests of investors, and promote the healthy and stable development of the capital market. To safeguard the company's legitimate rights and interests, the company reserves the right to pursue legal responsibilities of those who spread false information.

CITIC Securities 2023 Annual Performance Presentation Responding to Multiple Hot Issues

On the evening of March 26, CITIC Securities released the "2023 Annual Report," stating that the operating income in 2023 was 60.068 billion yuan, a year-on-year decrease of 7.74%; the net profit attributable to shareholders of the parent company was 19.721 billion yuan, a year-on-year decrease of 7.49%. As of the end of the reporting period, its total assets were approximately 1.45 trillion yuan.

By segment, in 2023, CITIC Securities' brokerage business operating income was 15.201 billion yuan, a year-on-year decrease of 7.81%, with a gross profit margin of 23.08%, a decrease of 0.92 percentage points year-on-year; asset management business operating income was 10.846 billion yuan, a year-on-year decrease of 10.99%, with a gross profit margin of 43.13%, a decrease of 3.69 percentage points year-on-year; securities investment business operating income was 19.395 billion yuan, a year-on-year increase of 22.97%, with a gross profit margin of 66.96%, a decrease of 1.99 percentage points year-on-year; securities underwriting business operating income was 6.246 billion yuan, a year-on-year decrease of 26.61%, with a gross profit margin of 40.20%, a decrease of 17.51 percentage points year-on-year; other business operating income was 8.380 billion yuan, a year-on-year decrease of 31.05%, with a gross profit margin of 28.99%, an increase of 1.33 percentage points year-on-year On the same day, CITIC Securities announced its 2023 profit distribution plan, with a dividend of 4.75 yuan (tax included) per 10 shares, planning to distribute 7.039 billion yuan in cash dividends, accounting for 36.67% of the company's distributable profits in 2023, an increase of 1.79 percentage points compared to 2022.

According to Choice Financial Terminal, since CITIC Securities went public on the A-share market twenty years ago, it has distributed a total of 73.9 billion yuan to shareholders. In the past three years, its cash dividend ratio has remained above 30%.

On the morning of March 27th, CITIC Securities held its 2023 annual performance briefing. During the briefing, topics such as the countermeasures for the countercyclical adjustment of margin trading business, how to deal with the pressure on IPOs, and the future layout of international business in the Middle East, Southeast Asia, and other regions became hot topics of concern for analysts and other institutions.

In 2023, the number and scale of A-share IPO companies both decreased, with a total of 313 companies completing IPOs in the entire market, 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%. The scale of refinancing issuance also decreased, with a scale of 777.891 billion yuan for refinancing (cash and asset types), a year-on-year decrease of 29.26%.

In fact, the number of IPOs has been decreasing since the second half of last year, which has also affected the profitability of IPOs in investment banking business.

So, how should one respond to the decline in IPOs? Yang Minghui, the General Manager of CITIC Securities, believes that improving the quality of listed companies and strengthening relevant policies for the supervision of listed companies have brought incremental business opportunities to investment banking. Under the framework of an active capital market, vigorously supporting listed companies to improve development quality through mergers and acquisitions, the M&A business should have the potential to accelerate development. Regulatory requirements for strengthening the foundation and improving the quality of listed companies are expected to bring business opportunities to sponsoring institutions with strong professional and comprehensive service capabilities. Continuing to promote high-level opening of the capital market to the outside world, Chinese companies have the potential for international business development.

The rapid development of international business is a major highlight in CITIC Securities' 2023 annual report and was also the most frequently asked topic at this performance briefing. Li Chunbo, an Executive Committee member of CITIC Securities, believes that in 2023, the company continued to deepen its customer market, actively promote product and business innovation, and further enhance customer service capabilities. When discussing how to layout the Middle East, Japanese, and Southeast Asian markets, he stated that the company is currently actively researching and discussing the feasibility of laying out in the Middle East. The development of related markets provides the company with business opportunities for potential revenue growth, and the company will continue to expand and deepen related markets to seize the opportunities for the internationalization of Chinese corporate industrial chains and meet the needs of Chinese institutional investors for global asset allocation.

Since 2023, the market demand for financing business in margin trading has steadily rebounded, while the scale of securities lending business has decreased in the second half of the year.

During this performance briefing, CITIC Securities stated that the scale of the company's financing business increased by 11% year-on-year last year, while the scale of securities lending business decreased by 28% year-on-year, and the overall scale of margin trading business increased by about 3% year-on-year. The company has always maintained strict risk control standards for financing business At the end of 2023, the average maintenance guarantee ratio for stock financing and securities lending clients was 275%, and the average maintenance guarantee ratio for stock pledge repo business was 223%, both at relatively safe levels.

By the end of 2023, Citic Securities had accumulated a total of 14.2 million wealth management clients, with over 1 million new accounts opened. Its market share increased by 4% year-on-year, reaching a historical high. The scale of client assets under custody remained at the trillion level, with a 4% year-on-year growth. The proportion of client custody market value to the total A-share market value was 13%.

Recent Exchange Supervision on Site

At 11:00 pm on March 22nd, the Shenzhen Stock Exchange issued a major announcement regarding Citic Securities' sponsorship of Liangang Optoelectronics!

According to the Shenzhen Stock Exchange announcement, after Liangang Optoelectronics' IPO application was accepted, the Shenzhen Stock Exchange issued three rounds of audit inquiries and regulatory letters, requesting Liangang Optoelectronics and intermediary agencies to explain matters such as the effectiveness of corporate governance, the standardization of financial internal controls, and the completeness and accuracy of information disclosure. Liangang Optoelectronics and the intermediary agencies recently submitted inquiry replies, but the replies were not clear enough, and the issues involved have not been fully explained.

The Shenzhen Stock Exchange pointed out that in order to further strengthen the responsibility of the sponsor as the "gatekeeper" and ensure the quality of the listing entrance from the source, it has decided to conduct on-site supervision of Citic Securities, the sponsor of Liangang Optoelectronics.

According to the information, Liangang Optoelectronics is an enterprise mainly engaged in the research, development, production, and sales of signal transmission connection products, audio products, and 3C supporting products with optical and electronic signal transmission technology as its core. On June 28, 2023, the Shenzhen Stock Exchange accepted the company's IPO application. On July 19, the company received the first round of inquiries, and on September 19, it replied to the first round of inquiries. On November 17 last year, the Shenzhen Stock Exchange issued the second round of inquiries, and on January 16 this year, the company replied to the second round of inquiries. On January 29, the company received the third round of inquiries.

According to the prospectus, Liangang Optoelectronics' public offering of new shares this time is not more than 38.720408 million shares, accounting for no less than 25% of the total share capital of the company after this issuance. The original shareholders do not publicly sell old shares. The funds raised this time will be used for the following projects: approximately 369 million yuan for the construction of the intelligent manufacturing center project, 71.8252 million yuan for the construction of the research and development center project, and 100 million yuan for the supplementary working capital project.

In the second round of replies, the Shenzhen Stock Exchange pointed out that the actual controlling shareholders of Liangang Optoelectronics, the brothers Xu Yaoli and Xu Yaozhi, directly or indirectly control 91.34% of the issuer's voting rights. In addition, the two spouses collectively hold 6.66% of Liangang Optoelectronics' shares. The family of the actual controlling shareholders collectively controls 98% of the shares, and even after the completion of this IPO, the family will still control 72.70% of the company's shares. The risk warning in the prospectus only mentioned the high shareholding ratio of the two actual controlling shareholders and did not mention that the spouses of the two also hold shares in the company Therefore, the Shenzhen Stock Exchange requires Liangang Optoelectronics to explain whether the internal control system is sound and effective when the family holding ratio of the actual controller is high, whether the corporate governance structure is perfect, how to protect the rights and interests of small and medium investors, and to highlight relevant risks in the prospectus.

In response to this, Liangang Optoelectronics mentioned that 8 listed companies had a holding ratio of over 90% before listing, namely Dinglong Technology, Zhenbang Intelligent, Fengmao Shares, Huarong Chemical, Meishuo Technology, Weili Transmission, Galaxy Microelectronics, and Haobor, pointing out that they have all successfully listed.

As the sponsoring institution, CITIC Securities issued verification opinions consistent with Liangang Optoelectronics' response, believing that Liangang Optoelectronics has established a relatively complete governance structure and internal control system, with sound internal control systems that can play a necessary role.

This response has attracted market attention and discussion, with some calling it a "foot-dragging response." The question of whether companies with excessively high controlling stakes can go public has sparked much debate.

It is worth mentioning that in addition to sponsoring Liangang Optoelectronics, CITIC Securities' investment banking business has also encountered setbacks.

According to Wind data, as of March 20th, CITIC Securities has withdrawn 7 IPO projects, including Ranyang Yitou and Bonam Precision. The company has a total of 31 sponsored projects in 2024, with a withdrawal rate of 22.58%.

In addition, in 2023, the high-flying stock Zuojiang Technology (now *ST Zuojiang) was also sponsored by CITIC Securities. On November 24, 2023, the CSRC initiated an investigation into Zuojiang Technology. On January 30 of this year, the CSRC announced the progress of the preliminary investigation, stating that it has preliminarily found that the financial information disclosed by *ST Zuojiang in 2023 is seriously untrue and suspected of significant financial fraud.

There were also flaws in debt financing projects. On January 12, 2024, CITIC Securities received a warning letter from the CSRC. The CSRC pointed out that it was found that the convertible bond project of Hengyi Petrochemical (issuer) sponsored by CITIC Securities resulted in a loss in the year of securities issuance and a decline in operating profit of more than 50% compared to the previous year.

Source: Daily Economic News, original title: "Trillion-dollar 'Brokerage Leader', Urgent Statement! Just supervised by the exchange last week! Net profit of 19.7 billion yuan last year, cash dividends exceeding 7 billion yuan"