Behind the brokerage market share race of securities companies

The market share of stock brokerages has not been accompanied by high profits. In some securities companies, they are too big for the expansion of the market share with a profit margin, affecting the interest income from other companies with lower market share.

market share
Despite being the leading company in terms of market share, VPS’s profit is modest compared to other securities companies. Source: Internet.

“Splashing money” to win market share

From the beginning of 2021, the market share of the stock brokerages has recorded great fluctuations when the position in the top 10 market share of stock brokerages, fund certificates and rights in the first quarter of HOSE belongs to VPS Securities after many years in the hands of SSI Securities Company.

Since then, VPS has continued to hold this position, even continuing to expand market share to 17.12% in the fourth quarter of 2021, increasing market share in 2021 to 16.14%, far ahead of second-place SSI with 11.05%.

According to VPS, market share growth in 2021 is down to the company investing strongly in the development of human resources, especially for private professionals issues, including the introduction of the most attractive remuneration in the market for this team.

Besides, based on continuous and intensive studies to understand customers, aiming to optimize diverse needs of customers, VPS continuously provides preferential fees, new service products and multi-function utilities on VPS Smartone platform.

Recognized in the Financial Report on the fourth quarter of VPS, the expenses for securities brokerage operations in 2021 have skyrocketed more than 330% compared to 2020, to VND2,485 billion.

In addition to internal training programs, SSI also implements industry analysis chains, in which brokers attend sharing sessions and meeting enterprises in order to deepen the business lines. For investors, SSI also regularly organizes basic and technical knowledge training chains, from theory to practicality with the content focusing on weak points and practical needs of investors. At the end of 2021, SSI’ securities brokerage expenses also soared to VND996 billion, up 135% compared to 2020.

In addition to consulting programs, knowledge training, reduced policies, even free brokers also apply popular securities companies to attract new investors.

Accordingly, brokerage costs at many securities companies also recorded a strong increase, as VNDirect increased by 193% to VND890 billion; HSC increased by 82% to VND767 billion; TCBS increased by 472%, to VND166 billion; Mirae Asset increased by 139%, to VND749 billion; MBS increased by 104%, to VND650 billion; VCSC increased by 113%, to VND570 billion; FPTS increased by 152%, to VND257 billion; KIS Vietnam increased by 166% to VND336 billion.

Market share does not go with profits

Brokerage activities are one of the main sources of revenue of securities companies, in addition to self-trading and margin lending activities. Therefore, securities companies always strive to expand their market share.

However, despite spending to increase market share, the profit of the stock companies did not increase. Accordingly, the securities company leading in the brokerage market did not see the largest profit. Specifically, at VPS – DN holds No. 1 position in brokerage market share in 2021, although brokerage revenue in 2021 reached VND3,135 billion, up 391% compared to 2020, the cost for this operation also increased by 334%, so profit from brokerage activities was only VND651 billion.

Accordingly, the profit margin of VPS brokerage is only 21%, that is, out of 10 dong of revenue, the company has to spend up to 7.9 dong in costs and only gets 2.1 dong in profit.

For the whole year 2021, VPS pre-tax profit reached VND995 billion, an increase of 59% compared to 2020. Compared to the Top 10 brokerage market shares for stocks, fund certificates and warrants, VPS’s profit is only 6th.

Meanwhile, despite being the leader, Song SSI remained the highest profitable securities company from brokerage activities with VND1,028 billion in 2021. Brokerage profit margin SSI reached 41%, nearly double compared to VPS. SSI’s total pre-tax profit in 2021 also recorded VND3,237 billion, up 112% compared to 2020 and ranking second in the whole industry.

The more impressive is TCBS when the profit margin of this segment reaches 82%, the highest among securities companies. Thus, even if only the 5th place in the brokerage market share, the profit from TCBS’s profit reached VND758 billion, only after SSI.

TCBS is also a securities company that achieved a total pre-tax profit for 2021 highest in the industry with VND3,810 billion, up 42% compared to 2020.