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CITIC Securities profit up 6 fold

(Shanghai Daily)
Updated: 2007-03-16 14:36

CITIC Securities Co, China's biggest publicly traded brokerage, said its profit rose almost six fold last year as stock trades boomed amid a soaring market.

Net income climbed to 2.4 billion yuan (US$309.9 million) last year, or 0.80 yuan a share, from 400 million yuan, or 0.16 yuan a share, a year earlier. Sales increased to 5.8 billion yuan from 918.3 million yuan, it said.

Income from commission fees and proprietary trading, which accounted for two-thirds of revenue, rose more than nine times to 3.9 billion yuan as the benchmark Shanghai and Shenzhen 300 Index more than doubled last year. China ended a one-year ban on domestic stock sales in May to draw more of the nation's US$2 trillion worth of household savings into equities.

"CITIC Securities is doing spectacularly, though like most Chinese brokerages its business model still heavily relies on riding the market up and lacks more stable sources of income," said Yuan Lin, a Beijing-based analyst at BOC International (China) Ltd.

China's stock market, powered by record initial public offerings, has more than tripled in size since reaching an eight-year low in June 2005. Stocks tumbled the most in 10 years on February 27, amid concern the government would crack down on lending for stock purchases.

"We expect the market to stay strong, but CITIC's performance will definitely be hit if we see a correction down the line," Yuan told Bloomberg News.

Still, CITIC is better prepared than most rivals to weather a market slump, Yuan said. Income from securities underwriting and asset management climbed more than six times to one billion yuan last year, making up 17 percent of total revenue.

China's more than 100 brokerages had a combined profit of 25.5 billion yuan last year after four years of losses, the China Securities Journal reported last month, citing unidentified industry officials.

CITIC Securities has been expanding in fund management and private equity, as China pushes its bigger and financially stronger brokerages to move into new businesses while closing or forcing mergers among weaker ones.

The firm plans to set up an asset-management venture with Australia's Macquarie Bank Ltd and increase its stake in Beijing-based China Asset Management Co to 61 percent from 41 percent.

Maurice Greenberg's Starr International Co said in January it will invest in a one billion yuan private-equity fund alongside CITIC Securities to invest in Chinese companies. That same month, CITIC said it bought an 8.1 percent stake in Qingdao Aucma Co, a Chinese appliance maker, for 82.9 million yuan.