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CITIC Securities vs. CICC: A brief comparison.

05-16

Many investors are unsure about the differences between CITIC Securities and CICC stocks, not knowing how to make the right choice.

From the logo of CITIC Securities, the circular faceplate logo is identical to CITICS, but in reality, CITIC Securities has little connection with CITIC Securities other than holding a 4.9% stake. The predecessor of CITIC Securities was Huaxia Securities.

In October 2005, CITIC Group and Industrial Bank Co. participated in the restructuring of Huaxia Securities, renaming it CITIC Securities, with CITIC Securities becoming the controlling shareholder of CITIC Securities.

Later, due to regulatory requirements limiting one controlling and one participating brokerage under the same ultimate controller, CITIC Securities transferred part of its equity in CITIC Securities to the Beijing State-owned Assets Supervision and Administration Commission, retaining less than 5% as a financial investment.

Currently, the main shareholders of CITIC Securities are Beijing Capital Group and Central Huijin Investment Ltd.

Business Structure of CITIC Securities:

According to CITIC Securities' 2022 annual report, the proportions of net income from brokerage, proprietary investment, investment banking, asset management, net interest income, and other income are 22%, 16%, 22%, 5%, 9%, and 26%, respectively.

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The business structure is relatively balanced. In terms of rankings within the industry for major businesses, the net income from brokerage business is 5.195 billion, ranking 7th in the industry. The net income from securities underwriting business is 5.135 billion, ranking 3rd.

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The asset management scale is 477.4 billion, ranking 5th. Operating income is 27.5 billion, ranking 5th, and the net profit attributable to shareholders is 7.507 billion, ranking 9th.

Comparison between CITIC Securities and CICC:

Interestingly, in 2022, CITIC Securities and China International Capital Corporation (CICC) are similar in terms of revenue, net profit, and secondary market capitalization. In terms of revenue, CITIC Securities is slightly larger than CICC, and there is not much difference in net profit. Both have their own characteristics in terms of business advantages.

CICC has been more aggressive in proprietary investment, with the proportion of revenue consistently between 40-50% in recent years, which is relatively high among all listed securities firms. In 2022, the proportion of self-operated equity and derivative positions to net capital was as high as 57.5%, ranking first among all listed securities firms.

The main reason for the relatively large proprietary positions is the strength in over-the-counter options business. On the other hand, CITIC Securities tends to be more conservative in proprietary investment.

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Asset Management Business:

Regarding asset management business, looking at the net income from asset management departments alone, CICC had a net income of 1.365 billion in 2022, slightly higher than CITIC Securities' 0.982 billion.

However, compared to other holding and participating mutual fund companies, both are far behind.

In 2022, CITIC Securities, including its consolidated subsidiary Huaxia Fund Management, had a net income of 10.94 billion from asset management, while Guangfa Securities, including its consolidated subsidiary Guangfa Fund Management, had an income of 8.9 billion.

Comparatively, the gap between CICC and CITIC Securities in asset management is not significant, considering both lack a large money-making machine like a majority-owned mutual fund.

Finally, from the perspective of financial leverage of the parent company, CITIC Securities has a capital leverage ratio of 14.9 times and an asset-liability ratio of 81.7%, while CICC has a capital leverage ratio of 11.2 times and a liability ratio of 84.7%.

CICC's financial leverage and style are more aggressive. There have been rumors in the market about the merger of CITIC Securities and CICC several times, but the difficulty of the two giants merging is much greater than that of a large company acquiring a smaller one.

Currently, the first shareholder of CITIC Securities, Beijing Capital Group, and the controlling person of the first venture are both capital operation platforms under the Beijing State-owned Assets Supervision and Administration Commission.

Risk Warning and Disclaimer

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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