What are the prospects for the security industry?

The business results of the securities industry declined sharply in 2Q.

As of September 15, 2022, the three-month average trading volume reached VND13,583 billion, down 37.4% YoY. The T2 trading regulation after two weeks of implementation has not yet brought about clear differences in liquidity due to the cautious sentiment in the negative global macro context.

The business results of the securities industry declined sharply in 2Q. In the 30 securities companies with the largest equity, operating profit and NPAT decreased by 31% YoY and 57% YoY, respectively. Industry-average ROE in 2Q reached 18.3%, down from 21.6% in 2Q21.

The brokerage segment's gross profit in 2Q decreased by 35% YoY and 49% QoQ due to a sharp drop in market liquidity. In terms of market share, securities companies that focus on MASS customers such as VPS Securities and Techcom Securities have risen strongly in the past two years, entering the top five companies with the largest brokerage market shares, while securities companies focusing on institutional clients such as Viet Capital Securities (VCI), Ho Chi Minh City Securities (HCM) gradually lost market share.

The gross profit of margin lending in 2Q gained 37% YoY thanks to capital raising to meet the needs of customers for margin loans in the recent period, but dropped 9% QoQ due to the decline in momentum in the stock market.

The market fell sharply, with the VN-Index down 21% in 2Q, making the gross profit from securities trading lose VND340 billion versus the 2Q21 profit of VND3,102 billion. The group of securities companies with losses from proprietary trading can be mentioned as Tien Phong Securities (ORS), Saigon - Hanoi Securities (SHS), Viet Dragon Securities (VDS), and ACB Securities.

Gross profit of investment banking segment in 2Q decreased by 9.0% YoY and 40% QoQ due to (1) tightening corporate bond market management, (2) delayed equitization and divestment of state capital, and (3) unfavorable market movements, which led to capital sales and divestments of enterprises stalling.

According to KB Securities' analysis, income of securities businesses will increase in part as a result of proprietary trading when market movements bottom out and rebound in 3Q. However, low liquidity combined with unfavorable macroeconomic circumstances would make it challenging for enterprises to generate big profits like in the second half of 2021, when the market reached its pinnacle in terms of trading volume and value. Investment prospects in SSI, HCM, and VCI, the top securities businesses in the sector with a steady client base to continue and recover well after the challenging period of the market, can be taken into account when the market corrects to appealing price ranges.