Bank of America Securities: Expected Chinese securities firms' net profit to increase by 21% year-on-year in the third quarter, with CICC (03908), CITIC SEC (06030), and GF SEC (01776) as top picks.

Bank of America Securities released a research report stating that it is expected that the average net profit of Chinese securities firms in the third quarter of 2025 will increase by 9% quarter-on-quarter and 21% year-on-year, supported by strong growth in brokerage business fees. Stock trading income may exceed expectations, driving overall performance. CICC (03908) and China Securities Co., Ltd. (06066) are expected to outperform their peers, with net profits in the third quarter expected to increase by 258% and 116% year-on-year, respectively. Despite strong fundamentals, H-share securities of brokerage firms did not perform as well as expected in September, as concerns about growth from the fourth quarter of 2025 to the first half of 2026 and the reduction of holdings by state-owned enterprises affected performance. Currently, valuations are at 1 times forward PB ratios, with an average equity return rate of 9%. The bank expects valuation to have upside potential as earnings of CKH HOLDINGS exceed expectations along with strong trading volume. Citic Securities, CITIC SEC (06030), and GF SEC (01776) are Bank of America Securities' top picks, with expectations of strong earnings growth in the fiscal years 2025 to 2026 and continuous improvement in equity return rates. Bank of America Securities has raised its profit forecasts for Chinese brokerage firms for the years 2025 to 2026 by 0% to 13%, expecting the average profit growth for major listed Chinese brokerage firms in the years 2025 to 2026 to be 30%, with CICC expected to lead. Bank of America Securities has raised its forecast for the average daily turnover of A-shares for the years 2025 to 2026 by 14% to 18%, expected to be between 16 trillion and 17 trillion RMB. The target price for H-share brokerages has been increased on average by 4% (see details in the table) to reflect higher earnings forecasts. Ample market liquidity continues to support market growth, with the Fourth Plenary Session, the "Fifteenth Five-Year" Plan, and potential regulatory relaxation policies being key catalysts to watch.