Big Turn Of China Development Securities: "Package" Transfer Of 90% Of Business Department'S Brokerage Business

As far as the securities business department is concerned, it is also a rare one-time transfer business department.

On November 16, CDB securities listed on the Beijing financial assets exchange to transfer the assets and related rights and interests of its nine securities business departments at a parity of 72.9577 million yuan of the net assets appraisal value. However, according to public information, China Development securities has only 10 business departments in total, and only one business department will be retained after the transfer.

Such a one-time "big clearing" naturally caused the attention of the market. In response, CDB securities responded that the company adjusted its strategic positioning in 2019, and the transformation of retail business was one of the specific measures for its new positioning. After the completion of the transfer, CDB securities still retains the brokerage business license. In the future, it will focus on providing brokerage services for institutional clients based on its new strategic positioning.

Business department business of "chicken ribs"

Different from the traditional small and medium-sized securities companies in China, the development of CDB securities does not depend on brokerage business. Since its establishment 17 years ago, CDB securities has only 10 business departments nationwide. According to the data issued by the Securities Industry Association, the performance growth brought by brokerage business to CDB securities is not obvious.

In the first half of 2020 when the market is relatively hot, the net income of securities brokerage business of CDB is 34.58 million yuan, ranking 94, which is the bottom of the industry. In 2019, the net income of brokerage business is only 54.39 million yuan.

In contrast, the company's investment banking business and asset management business are still in the middle of the industry, with net income of 139 million yuan and 493.4 billion yuan respectively in the first half of 2020, ranking 45 and 46 in the industry. This kind of investment banking business to drive revenue is very rare in small and medium-sized securities companies.

"The formation of such income structure of CDB securities is mainly caused by the collaborative business brought by the parent company, China Development Bank." There are securities companies in Beijing said. The bond related business of CDB securities has been relatively prominent, "the parent company CDB introduces customer resources, and the company does related bond contracting and asset management business".

From the perspective of the shareholding structure of CDB, CDB holds 80% of the shares. According to the financial report, in 2019, CDB securities has underwritten 124.9 billion yuan of various bonds, ranking 14th in the industry, among which corporate bonds (including railway bonds) remain the first in the industry. In addition, according to wind data, since the beginning of 2020, CDB securities has underwritten 52 corporate bonds and raised 30.63 billion yuan, ranking second in the industry.

In terms of asset management business, CDB securities has also introduced a team from CDB, formulated business development ideas focusing on "institutional customers", expanded the active management business of financing projects, and helped the construction of national large-scale infrastructure, "make full use of the company's own bond advantages to vigorously develop bond active management business".

The relevant "shareholder background" is also reflected in the securities brokerage business of CDB. By the end of 2019, the company's securities brokerage and credit trading business had a balance of 5.161 billion yuan, including 4.578 billion yuan of stock pledge business and 583 million yuan of margin trading business. "The development of stock pledge business also has a big head in collaboration with the parent company's business." Said the securities dealers.

However, from the perspective of cost, the proportion of staff allocated by CDB securities in the securities business department is the highest. By the end of 2019, the total number of employees of the company was 693, including 175 employees in the sales department, accounting for 25.25%. The information disclosed by the exchange shows that 145 employees are involved in the transfer.

"With the most manpower allocation and the largest cost, the revenue is not outstanding, and it does not rely on the financing business linked with the business department. From the perspective of organizational structure adjustment, the business department of CDB securities is also very reasonable." There are medium-sized securities companies in Beijing, non bank analysts said.

CDB securities also disclosed that the specific transfer scope of the business department is the company's two financing business and related customers, while the related stock pledge business and the cooperative customers of China Development Bank Group are excluded from the transfer scope, and the intention to focus on the development of related fields is obvious.

It is worth mentioning that sun Xiaokun, director of the inspection office of the head office of China Development Bank, just took over the post of chairman and President of CDB securities in September this year. It is reasonable that the "new official" has launched internal reform two months after taking office.

It is reported that after the transfer is completed, China Development securities will still retain the brokerage business license, focusing on providing brokerage services for institutional clients. "Focus on serving the national strategy, focusing on development finance, focusing on collaborative groups, focusing on serving institutional customers, and steadily complete the strategic transformation."

Liangrong customers or "package" sales

Specifically, the subject matter to be transferred includes nine securities business departments of China Development securities in Beijing, Tianjin, Hebei, Shanghai, Shenzhen, Hunan and Zhejiang. The business scope of the relevant business departments includes: securities brokerage; securities investment consulting; financial consultant related to securities trading and securities investment activities; securities underwriting and recommendation; margin trading; securities investment fund sales; and sales of financial products.

According to the financial data audited by PricewaterhouseCoopers Zhongtian certified public accountants, the operating revenue of the above nine business departments in 2019 is 87.3299 million yuan, the net profit is 20.3143 million yuan, and the assets and liabilities are 1.719 billion yuan. As of December 31, 2019, the appraisal value of the asset groups of the nine securities business departments is 72.9577 million yuan, equivalent to the average price of each business department of 8 million yuan.

Some people close to CDB securities disclosed that in the future, once the transfer of the above business department is successful, the retail customers bound with the business department will also be transferred. "The company's intention should be to sell the two financial services and related customers together. The only Beijing business department in the future is more like a facade to handle some offline business."

It is worth mentioning that CDB securities also has 23 branches nationwide, even more than the total number of its business departments. Whether the relevant branches are facing the abolition or transfer is also the concern of the market.

"I predict that the branch will not move, and the main labor costs are all under the pressure of the sales department. The branch company also undertakes the function of doing collaborative business local station of CDB, which is helpful to expand business and deepen cooperation with local enterprises." Said the securities dealers.

It is worth noting that according to the provisions of CDB securities, the transfer of the business department needs "one-time payment" and "one-time purchase", which means that the potential transferee needs to "swallow" the nine business departments at one time.

As for the qualification of the transferee, CDB securities also listed detailed standards, including state-owned background, A-class rating, asset level, etc.

Among them, "the total assets of more than 40 billion yuan", "three-year class a rating" and "no less than 50 business departments" are the most critical conditions. After comprehensive screening, about 20 securities companies meet the requirements.

"At present, the transfer is still in the preliminary stage of solicitation, and there are buyers to communicate, but we can't confirm who will take over the sales department." Those close to CDB Securities said.