While the market eagerly focuses on the third-quarter business results of securities firms, the weak market's liquidity and declining performance of the brokerage sector are undermining the group’s health.
Traders work at a trading floor of Everest Securities. The securities company's profit dipped 88 per cent in the first nine months of 2024. (Photo courtesy of EVS)
A number of securities firms that have disclosed their financial statements for the third quarter (Q3) of 2024 are witnessing a significant downturn in profits compared to the previous year, with some even posting substantial losses.
Declining profits
Everest Securities JSC's (EVS) operational revenue plummeted by 74% from last year in Q3, dwindling to 36 billion VND (1.4 million USD).
Nearly all sectors, including proprietary trading, lending and brokerage, experienced notable declines. The escalation of operational expenses exacerbated its losses to over 35 billion VND, making it the most severe loss-making securities company in the sector to date.
The third-quarter losses have led to a steep drop in EVS's accumulated profits before tax for the first nine months of 2024, which now stand at just under 5 billion VND, marking an 88% decrease from the same period last year.
Similarly, Wall Street Securities Company (WSS) disclosed a net loss of 8.8 billion VND in Q3, attributing part of this downturn to increased losses from fair value through profit or loss (FVTPL) proprietary trading activities. This marks the fifth consecutive quarter of losses for Wall Street Securities.
This performance has propelled the company's cumulative losses to 33 billion VND over the first nine months, casting a shadow over the previously projected profit after tax of 4.4 billion VND for the year.
CV Securities Corporation (CVS) reported a nearly 10 billion VND loss before tax in Q3, marking the company's ninth successive quarter of operating losses.
At the end of September, CVS had generated over 7 billion VND in operating revenue, a 115% surge from the corresponding period last year, yet posted a loss before tax of nearing 24 billion VND.
While Capital Securities JSC (CASC) managed to secure a 3.2 billion VND profit in Q3 through stringent cost controls, it reported a loss after tax of 2.6 billion VND for the first nine months, compared to a 10.6 billion VND profit during the same period last year.
Stanley Brothers Securities Incorporation (SBSI) also registered a loss of nearly 6 billion VND in Q3.
Several other securities firms witnessed reduced profits, such as FPT Securities JSC (FPTS) recorded a profit before tax of 103 billion VND in Q3, down significantly 51% year-on-year.
Thanh Cong Securities JSC (TCSC) announced a profit before tax of 20 billion VND, reflecting a 3% decrease.
KIS Vietnam Securities Corporation disclosed a net profit of close to 106 billion VND, down 27%.
In contrast, VIX Securities JSC (VIX) reported a Q3 profit of 265.3 billion VND, a 33% rise from last year and a notable 113% increase compared to the second quarter.
Nevertheless, for the first nine months, the company only managed to achieve a profit after tax of 551 billion VND, down nearly 30% and fulfilling just 52% of the annual target.
Waiting for recovery
In the recent business cycle, the stock market has traded sideways due to global macro-economic concerns and domestic natural disasters, restricting cash inflows.
While the market benchmark’s VN-Index has risen by approximately 12% this year, corrections in April and August have tempered its growth to as low as 5%.
This volatility has deterred investors from disbursing funds, with the index repeatedly failing to breach the 1,300 mark, constraining liquidity.
Many securities firms have reported dwindling revenues and profits, with some even posting losses, notably in brokerage services.
Analysts say that operational challenges not only impact financial metrics but also threaten the long-term sustainability and recovery prospects of companies.
On the brighter side, increased liquidity is expected to return to the stock market, attracting more trading activities and new investors, thereby aiding firms in their resurgence.
The GDP growth story is more optimistic, with a projected 7% for 2024 following strong growth in the first nine months.
As the economy rebounds, corporate profits are expected to surge. Bloomberg forecasts a 16% profit growth in 2024 compared to 2023, reaching 26% in 2025.
Growing corporate profits will attract funds back into the stock market, creating investment opportunities, according to Tran Hoang Son from VPBank Securities.
Monetary policy has historically influenced stock market trends. Data in the last ten years showed that lower refinance rates have historically driven market growth, with fluctuations corresponding to shifts in bond yields.
Anticipated central bank rate cuts will narrow currency differentials, easing exchange rate pressures. This move could lead to a 25-point refinance rate cut by year-end, bolstering stock market recovery.
Additionally, Vietnam’s market upgrade potential remains promising, with recent positive evaluations and regulatory changes facilitating foreign investor participation.