Aug Export Growth Beats Forecast.

In the context of strict supervision and changes in business structure, the securities industry continues to reduce costs and improve efficiency.

Securities Times & Securities China reporters combed through the semi-annual reports of 43 listed securities firms and found that in the first half of this year, the total compensation package of the 43 listed securities firms decreased by about 12%, which is roughly equivalent to the decline in their total revenue in the first half of this year.

Among the 21 listed securities firms that disclosed the latest number of employees as of the end of June this year, 17 firms saw a reduction in the number of employees, with a total reduction of more than 5,700 people in the first half of the year. Among them, CITIC Securities and Guoxin Securities each reduced their workforce by more than 700 people, and CITIC Construction Investment reduced its workforce by more than 600 people.

Advertisement

In addition to reducing employee costs, securities firms have also reduced office expenses such as travel and entertainment costs. Among the 30 securities firms with available data, 23 have reduced their travel expenses. The highest reduction was at CICC, with a 40% year-on-year decrease in travel expenses in the first half of the year.

Total compensation shrinks by 12%

In the past year, news about securities firms reducing salaries and improving efficiency has often appeared in the media. With the disclosure of the semi-annual reports for 2024, the specific situation of listed securities firms in this regard has been revealed.

Securities Times & Securities China reporters calculated the total compensation of the 43 listed securities firms in the first half of this year to be 74.571 billion yuan, a year-on-year decline of 12.15% from the 84.885 billion yuan in the first half of 2023. Among them, 37 securities firms saw a year-on-year reduction in the total compensation paid to employees, accounting for as high as 85%.

Specifically, in the first half of 2024, a total of 21 listed securities firms had a total compensation package exceeding 1 billion yuan. Among them, CITIC Securities' total compensation in the first half of the year fell below 10 billion yuan, to 9.793 billion yuan, a year-on-year decline of 8.9%. CICC, Huatai Securities, and Guotai Junan followed with total compensation packages ranging between 4 billion and 4.4 billion yuan.

Looking at the year-on-year change in total compensation, CICC saw a significant reduction, from 5.799 billion yuan in the first half of 2023 to 4.369 billion yuan, a drop of nearly 25%. In addition, Zhongtai Securities, Everbright Securities, Caitong Securities, Zheshang Securities, Huaxi Securities, Tianfeng Securities, and Guohai Securities all saw a year-on-year decrease of more than 20% in their total compensation in the first half of the year.

A few securities firms saw an increase in their total compensation against the trend, with the exception of China Galaxy Securities, all of which were small and medium-sized securities firms. Among them, China Galaxy Securities' total compensation in the first half of the year increased slightly by 4% year-on-year, mainly due to an increase of 319 employees in the first half of this year compared to the end of last year. In addition, the total compensation of Guoyuan Securities, First Capital, Huaneng Securities, Capital Securities, and Nanjing Securities also increased.The compensation of securities industry professionals is strongly correlated with the performance of their companies, with the reduction in employee compensation packages echoing the decline in securities firms' performance in the first half of the year.

Data from Choice, a service of Eastmoney, shows that in the first half of 2024, 43 listed securities firms collectively achieved a total operating income of 235.023 billion yuan, a year-on-year decrease of 12.69%; and a total net profit attributable to shareholders of the parent company of 63.961 billion yuan, a year-on-year decrease of 21.92%. In its semi-annual report, CICC also stated that the securities industry as a whole faces challenges in business operations, and the group's operating performance has declined compared to the same period in 2023, with employee costs correspondingly reduced.

It should be noted that due to factors such as deferred bonus payments, timing of year-end bonus distribution, personnel turnover, adjustments in branches, campus recruitment, and welfare subsidies, the average compensation per employee and per month in securities companies can be influenced. Additionally, there are significant individual differences in compensation among employees of different positions, departments, and ranks. Therefore, the aforementioned data should be used for reference only.

However, it is important to point out that in recent years, regulatory authorities have been strengthening guidance on industry compensation management. In May 2022, the Securities Association of China (SAC) issued the "Guidelines for Securities Companies to Establish a Robust Compensation System," which sets basic requirements for securities firms and their subsidiaries to establish a robust compensation system and requires each securities firm to ensure the effective implementation of a robust compensation system.

The new "National Nine Articles" also emphasizes the active cultivation of a good industry culture and investment culture. It calls for the improvement of a compensation management system for the securities and fund industry that is adapted to operational performance, business nature, contribution level, compliance and risk control, and social culture. From the annual reports of listed securities firms, the compensation of securities industry professionals has declined for two consecutive years in 2022 and 2023.

More than 5,700 employees were reduced in the first half of the year.

In addition to the reduction in total compensation, the phenomenon of collective staff reduction in the securities industry is also evident from the semi-annual reports.

Data from Choice shows that a total of 21 listed securities firms disclosed the latest number of employees as of the first half of this year, with 17 of them having a reduced number of employees compared to the end of 2023. These 17 companies collectively reduced their staff by 5,721 people in the first half of the year.

Specifically, CITIC Securities and Guoxin Securities were the securities firms with the largest number of staff reductions in the first half of the year, with the number of employees reduced by 779 and 756 respectively compared to the end of last year; CITIC Construction Investment reduced its staff by more than 600 people, and GF Securities, Industrial Securities, and China Merchants Securities all reduced their staff by more than 500 people. Among medium and small securities firms, Guohai Securities had a significant reduction in staff, with 206 people reduced in the first half of the year, and the number of employees shrank by more than 5%.

Among large securities firms, China Galaxy Securities is the only one that increased its staff against the trend, with the number of employees reaching 14,300 by the end of June this year, an increase of 319 people compared to the end of last year. There are also three securities firms that slightly increased their total number of employees compared to the end of 2023, namely Shanxi Securities, Nanjing Securities, and Pacific Securities, which increased by 8, 14, and 3 people respectively.Travel expense expenditure has declined year-on-year

The reduction in employee costs is reflected in the financial statements as a decrease in business and management expense expenditures, a point mentioned by many securities firms such as Changjiang Securities and Orient Securities in their semi-annual reports. Business and management expenses are the various costs incurred by a company during its business operations and management processes, typically the largest portion of operating expenses. This includes, but is not limited to, employee compensation costs, office expenses, depreciation and amortization, business entertainment expenses, travel expenses, and marketing costs. Among these, employee compensation costs are the most significant.

Securities Times · Securities China reporters have noticed that in addition to reducing employee costs, securities firms have also become more cautious in office expenditures such as travel and reception expenses. Previously, several industry insiders have mentioned to the reporters that their companies have reduced costs and increased efficiency in various ways, including lowering travel standards, avoiding unnecessary trips, conserving water and electricity, and canceling lunch meetings.

According to data from Dongfang Fortune Choice, among the 30 listed securities firms with comparable travel expense data in their semi-annual reports, 23 firms have seen a decline in travel expenses compared to the same period last year, with more than half of the firms experiencing a decrease of over 10%.

CICC (China International Capital Corporation) has the largest decline in travel expenses, spending 136 million yuan in the first half of the year, which is 94 million yuan less than the same period last year. Following closely are Hualian Securities and Hongta Securities, with year-on-year decreases in travel expenses of over 30%. Everbright Securities and Zheshang Securities also have significant year-on-year decreases, with reductions of over 20%.

Only seven securities firms have increased their travel expense expenditures, among which the increases for First Capital Securities, China Galaxy Securities, GF Securities, and Huaneng Securities are relatively large. The highest increase is seen in First Capital Securities, with travel expenses of 9 million yuan in the first half of the year, a year-on-year increase of 79.61%.

It is worth mentioning that against the backdrop of about 50% of listed securities firms seeing a decline in net profit attributable to the parent company of over 30% in the first half of the year, the performance of the aforementioned four securities firms is relatively good. First Capital Securities and Huaneng Securities have seen year-on-year increases in net profit attributable to the parent company of 73.39% and 8.65%, respectively, while China Galaxy Securities and GF Securities have seen year-on-year decreases of 11.16% and 3.88%, respectively.

In terms of business entertainment expenses, all 11 listed securities firms with comparable data have reduced their expenditures. Hualian Securities has cut its business entertainment expenses from 2.1621 million yuan in the same period last year to 1.357 million yuan, Southwest Securities from 5.8576 million yuan to 3.676 million yuan, and Cinda Securities from 12.5625 million yuan to 8.1257 million yuan.

The financial reporting standards of securities firms are not entirely uniform, and in addition to the two aspects mentioned above, other office expenditures have also been compressed. For example, Everbright Securities' office, meeting, and telecommunications expenses in the first half of the year were 22.5648 million yuan, 3.8737 million yuan less than the same period last year. Caitong Securities' telecommunications and communication expenses in the first half of the year were 15.3909 million yuan, 9.5833 million yuan less than the same period last year.

Ten securities firms have seen a slight increase in their operating profit margins.A series of cost-reducing measures have brought what effects to securities firms? In this regard, some securities firms have introduced in their semi-annual reports. For example, Shenwan Hongyuan stated that it continues to optimize asset-liability management and refine cost control, continuously promotes the revitalization of inefficient assets, and further promotes income generation and cost saving to create benefits. In the first half of the year, business and management expenses decreased by 10.36% year-on-year, and interest expenses decreased by 6.64% year-on-year.

Southwest Securities also mentioned similar views and stated that the company's cost management level has significantly improved, and the results of cost reduction and efficiency enhancement continue to emerge. Orient Securities mentioned that the whole staff advocates "intensive cost reduction and quality improvement", comprehensively improves the internal management and governance capabilities, and steadily promotes the good results of various work, providing a solid guarantee for the completion of the annual tasks. Zheshang Securities stated that in the first half of the year, it concentrated various resources and strengths to promote business development and key projects, fully explored cost reduction and efficiency enhancement points, and the company's overall performance was better than the industry average.

From the data, the significant reduction in business and management expenses has driven down the operating expenses of securities firms. In the first half of the year, the total operating expenses of 43 listed securities firms were 158.923 billion yuan, a year-on-year decline of 4.27%. From an individual perspective, 26 securities firms had a decrease in operating expenses in the first half of the year, with more than half of the decline exceeding 10%.

Among them, the securities firms with a larger reduction in operating expenses in the first half of the year include Haitong Securities, Shanxi Securities, Tianfeng Securities, Everbright Securities, and CICC, all of which decreased by more than 20% compared to the same period last year. Looking at the report card in the first half of the year, except for Shanxi Securities, the decline in net profit attributable to the mother company of the other four securities firms was more than 30%.

However, from the perspective of operating profit margin, cost reduction has not shown obvious benefits. Among the 43 securities firms, only 10 securities firms have seen an increase in operating profit margin, and except for Hualian Securities, the increase is not more than 10%. Hualian Securities' operating profit margin in the first half of the year was 40.42%, an increase of 14.85 percentage points. The operating profit margin of Capital Securities increased by about 7 percentage points, and Hongta Securities and Caitong Securities both increased by nearly 4 percentage points, following behind.

In recent years, with the changes in policies and market environment, "quality improvement and efficiency enhancement" has become the main theme of the securities industry. The reporter noticed that since the beginning of this year, listed securities firms have successively issued the "quality improvement and efficiency enhancement and heavy return" action plan for 2024. Many securities firms will continue to optimize the assessment system of directors, supervisors, and senior executives, strictly implement the performance assessment system, and include the management mechanisms of deferred payment of remuneration and recovery and deduction in the action plan.

It is worth mentioning that when talking about the development ideas for the second half of the year, cost reduction and efficiency enhancement are still among the choices of some securities firms. For example, when looking forward to the development of investment banking business, Central Plains Securities mentioned that it will continue to optimize and improve the line structure and team configuration, resolutely implement the cost reduction and efficiency enhancement plan, and focus on reducing cost expenses. At the 2024 semi-annual performance explanation meeting, the management of CITIC Construction Investment also stated that it will continue to adhere to cost reduction and efficiency enhancement, and continuously improve the overall management efficiency of the company.