What drove MBS's record profit?

This is also the largest quarterly profit in the history of this securities firm. According to the standalone financial report for Q2 2024, MB Securities Joint Stock Company (HNX: MBS) reported operational revenue of 883 billion VND, up 120% year on year. Pre-tax earnings was 271 billion VND, up 75% from the same time in 2023. Net profit increased by 74% from Q1 2023 to approximately 217 billion VND, creating a new quarterly profit record for the firm.

In Q2 2024, interest on loans and receivables provided over 262 billion VND to MBS, representing an 88% increase over the same period the previous year. As of the end of Q2 2024, MBS's loan balance was 9.979 trillion VND, with margin lending (margin) of about 9.823 trillion VND, an increase of 549 billion VND from Q1.

The brokerage business also performed well in the second quarter, with revenue topping 179 billion VND, a 32% increase year on year. The business reported that the value and volume of securities transactions in the market grew considerably when compared to the same period last year.

Profits from financial assets recognized through profit and loss (FVTPL) were 341 billion VND, about five times more than the same period previous year. Profits from available-for-sale financial assets (AFS) were 33 billion VND, compared to a loss of more than 4 billion VND in the same time previous year. Profits from held-to-maturity investments (HTM) fell to 36 billion VND, a 22% reduction from the previous year.

By the end of Q2 2024, MBS's FVTPL products had a market value of almost 1.6 trillion VND, up roughly 480 billion VND from the start of the year, with listed bonds worth 843 billion VND and other valued papers totaling 689 billion VND accounting for the majority.

The AFS category at the end of Q2 2024 was mostly made up of unlisted bonds worth 1.889 trillion VND and almost 118 billion VND in unlisted shares. However, the firm did not disclose precise information on this item. In addition, revenue from other operations such as consulting and securities custody increased significantly, adding to the company's overall revenue growth.

For the first half of 2024, MBS's operating revenue reached 1.557 trillion VND, up 111% year-on-year. Pre-tax profit was 500 billion VND, up 63% compared to the same period; net profit was 399 billion VND.

In 2024, MBS established a business plan objective of 2.786 trillion VND in total revenue and 930 trillion VND in pre-tax profit, up 53% and 36% from the previous year. Thus, in the first half of the year, the firm met 56% of its sales targets and approximately 54% of its annual profit targets.

According to Phu Hung Securities (PHS), the securities sector's revenue and profit have reached a new high due to sufficient liquidity and the availability of "bottom fishing" capital, despite the market's adjustment challenges from adverse circumstances. The results for the first quarter of 2024 were much higher than the previous eight quarters.

PHS believes that the above results were mostly driven by proprietary trading and margin lending by securities firms, showing a significant shift in revenue structure. Securities firms are now all involved in the margin lending competition, boosting margin balances to record highs and anticipating them to rise more in the future since there is still plenty of opportunity.

PHS added that the brokerage segment's income and profit have been declining since 2021, indicating severe rivalry among securities firms over decreasing fees to fight for market share and attract more consumers to other revenue streams, including margin lending. Recently, bank-backed securities businesses such as TCBS and MBS have aggressively pursued this strategy and achieved considerable market share, with the goal of increasing income from margin lending by taking advantage of low mobilization interest rates.

"Thanks to their parent banks, bank-backed securities companies have quickly risen to the top in terms of charter capital by continuously increasing capital over the years. With the capital advantage, this group has been boosting business activities such as proprietary trading, underwriting, and margin lending, thereby leading in profits," PHS assessed.

However, PHS noted that the stock industry's revenue would concentrate on major players, with the resource advantage, especially capital, helping the leading compnies increasingly outpace other competitors. In the first quarter, the total revenue of the top 15 stock companies by equity size accounted for more than 69% of the industry's total revenue.