Open source Securities: Non-GAAP net profit of the 2025 annual report of securities firms meets expectations, and wealth management and overseas business are highlights.

Open Source Securities released a research report stating that as of April 1st, the revenue and net profit attributable to the mother of 24 listed securities firms in 2025 increased by +32% and +46% year-on-year, respectively. The non-net profit attributable to the mother increased by +50% year-on-year, which met expectations; brokerage and investment saw a high year-on-year growth, with Q4 asset management and investment banking increasing compared to the previous quarter. The growth rate of overseas business income is a highlight for leading securities firms, and it is also the direction for expanding the balance sheet for various firms. The three major business drivers are leading the fundamentals of securities firms to stabilize and improve, and the industry's net profit growth in 2026 is expected to be sustainable. The bank predicts that the net profit (non-GAAP) of listed securities firms in Q1 2026 will increase by +26% year-on-year. The main points of Open Source Securities are as follows: Non-GAAP net profit increased by +50%, brokerage and investment saw high growth, Q4 asset management and investment banking increased compared to the previous quarter. (1) As of April 1st, the revenue and net profit attributable to the mother of 24 listed securities firms increased by +32% and +46% year-on-year in 2025, while the non-net profit attributable to the mother increased by +50%, meeting the bank's expectations. The equity multiplier was 4.34 times, an increase of +0.5 times year-on-year. The year-on-year growth rates for brokerage, investment banking, asset management, net interest income, and investment income (including fair value and exchange gains) in 2025 were +44%, +38%, +8%, +48%, and +27%, respectively. The revenue proportions were 27%, 7%, 9%, 8%, and 44%, respectively, benefiting from the improving market conditions, with brokerage, investment banking, margin trading, and investment businesses of securities firms all showing rapid growth. (2) In a quarterly comparison, brokerage, investment banking, asset management, net interest income, and investment income saw changes of -17%, +62%, +10%, +13%, and -48% respectively compared to the previous quarter. The decline in brokerage and investment was mainly due to the decrease in trading volume and stock market performance in Q4, while investment banking benefited from the listing of large IPO projects in Q4, and asset management benefited from a lagging effect due to the growth in AUM, while net interest income benefited from a lagging effect due to the growth in margin trading scale. The net commission rate declined, wealth management for high net-worth individuals saw high growth year-on-year, and overseas business is a highlight. (1) According to data from the China Securities Industry Association, the calculated industry net commission rate was 1.62 per thousand, a decrease of -16.8% year-on-year, with a net commission rate for seats of 3.7 per thousand, a decrease of -29% year-on-year, and a net commission rate after deducting public offering of 1.6 per thousand, a decrease of -14.8% year-on-year, expected to be due to the continuation of industry price wars and the increase in the proportion of quantitative trading in trading structures. The customer margin for the securities industry at the end of 2025 was 3.24 trillion RMB, an increase of +26% year-on-year, compared to a +15% increase in the mid-year report for 2025, with faster capital inflows in the second half of the year. (2) The revenue from delegated sales for the 24 listed securities firms was 11.1 billion RMB, an increase of +51% year-on-year, with expectations of increased demand from residents and institutions driven by market improvements, and a high increase in the scale of public offering and private equity products sold by securities firms. (3) The growth rate of overseas business income is a highlight for leading securities firms and is also the direction for expanding the balance sheets for various firms. In 2025, CITIC SEC, CICC, Huatai, Guotai Haitong, and GF SEC saw year-on-year increases of +42%, +58%, +57% (excluding the impact of AssetMark operations and disposals), +229% (due to acquisitions), and +100%, respectively. The revenue proportions were 21%, 29%, 17%, 15%, and 8% respectively. The growth rates of overseas assets for CITIC SEC, CICC, Huatai, Guotai Haitong, and GF SEC were +31%, +32%, +38%, +139% (due to acquisitions), and +78% respectively. Weighted ROE and dividend yield are at historically high levels, and the sustained growth performance of leading securities firms is promising. (1) Looking at weighted ROE, CITIC SEC had a ROE of 10.6%, China Securities Co., Ltd. had a ROE of 10.5%, GF SEC had a ROE of 10.2%, CMSC had a ROE of 9.9%, China Galaxy had a ROE of 9.8%, CICC had a ROE of 9.4%, Huatai had a ROE of 9.2%, and Guotai Haitong had a ROE (non-GAAP) of 7.5%. (2) Looking at the dividend yield for the leading securities firms in 2025 (as of April 1st closing price), Huatai had a yield of 3.0%, GF SEC had a yield of 3.3%, Guotai Haitong had a yield of 3.0%, CITIC SEC had a yield of 2.9%, and CMSC had a yield of 3.6%. (3) Overseas expansion will open up growth and profitability opportunities, with wealth management continuing to benefit from the transfer of resident wealth, and investment banking and investment services bringing incremental productivity. The three major business drivers are leading the fundamentals of securities firms to stabilize and improve, with sustained net profit growth expected in 2026. The bank predicts that the net profit (non-GAAP) of listed securities firms in Q1 2026 will increase by +26%, and recommends Huatai, GF SEC, Guotai Haitong, CITIC SEC, CICCH, Hithink RoyalFlush Information Network, and Guosen. Risk warnings: Uncertainty in regulatory policies; impact of stock market volatility; intensification of industry competition.