Following two consecutive quarters of recovery, securities brokerage operations unexpectedly experienced a notable decline in the fourth quarter of 2023.

During the period, the total brokerage revenue of securities companies is estimated to reach VNĐ3.3 trillion (US$134.3 million), a decrease of about VNĐ900 billion, or over 21 per cent, from the third quarter. However, this figure remains slightly higher than the same period in 2022.

Most securities companies have recorded a significant decline in brokerage revenue compared to the previous quarter, despite many pillars such as VPS Securities JSC (VPS), SSI Securities Corporation (SSI), VNDirect Securities Corporation, MB Securities JSC (MBS), KIS Vietnam Securities Corporation (KIS), Baoviet Securities Company (BVSC), showing high growth from the same period last year.

Some others even witnessed a decrease in brokerage revenue compared to last year, such as Hồ Chí Minh Securities Corporation (HSC), Vietcap Securities JSC, and Techcom Securities JSC (TCBS).

In the fourth quarter, VPS continued to be a leader in brokerage revenue with VNĐ808 billion, accounting for a quarter of the entire market. The amount soared 47 per cent from the same period last year, but was still 15 per cent lower than the previous quarter.

VPS is the leading securities firm in market share for brokerage across all three exchanges of the market. It is also a winner in the derivatives market in the fourth quarter and throughout 2023.

The sluggish trading market in the final quarter of 2023 is one of the factors contributing to the decline in total brokerage revenue of securities companies. However, it is noteworthy that this situation occurs amid a significant increase in outstanding loan balances.

By the end of 2023, the outstanding loan balance in securities companies is expected to rise by VNĐ15 trillion from the end of the third quarter to approximately VNĐ180 trillion, the highest level in seven quarters. Of which, the estimated margin debt is around VNĐ172 trillion, up VNĐ13 trillion from the end of the third quarter.

It is very likely that the gain in margin loan during the fourth quarter of 2023 primarily from lending deals by securities companies with organisations. This is because retail investors tend to engage in more frequent trading when utilising margin leverage. In theory, this should stimulate a vibrant trading market and contribute to increased revenue for securities firms. However, the reality has proven to be different.

Additionally, the competitive landscape has become increasingly intense, with more securities companies joining the zero-fee race and lowering brokerage rates. This trend has also impacted the revenue stream, as the overall market share has been contracting.

Since the beginning of 2024, MBS has also participated in the zero-fee competition. Previously, TCBS, Pinetree, DNSE Securities JSC, and JB Securities Viet Nam Company Limited (JBSV) had already offered lifetime free trading for investors, at least for regular accounts.

Most other securities companies are currently offering fees ranging at 0.1-0.15 per cent, inclusive of fees paid to the stock exchanges.

Trend of waving, reducing fees remains

In reality, brokerage fees have a significant impact on the investment decision of small retail investors.

For active traders who frequently enter and exit positions and utilise high leverage, these fees can consume around 10-30 per cent of their capital annually. Therefore, it is a crucial factor for investors to consider when choosing to open an account.

Most countries in the region and developed markets have mostly upgraded their fee-saving models for investors, with some even adopting a zero-fee structure.

In general, fees are expected to fall to zero and securities companies will have to compete by offering better services, providing investors with training courses, and exploring alternative revenue sources beyond transaction fees.

As a result, brokerage professionals must enhance their knowledge and invest more intellectual resources in their advisory activities. It is crucial for them to have a comprehensive understanding of macro-economics, market fluctuations and various asset classes. Rather than solely focusing on sales targets, the brokerage team will prioritise improving the quality of their advice and providing strong support to investors, ultimately driving the development of the securities market.

For the securities industry, a recent report by DSC Securities suggests that the trend of sacrifising a portion of brokerage profits will persist in 2024. However, companies have the opportunity to attract new client portfolios and lay a foundation for the margin segment. Margin trading has consistently contributed 35-45 per cent to the gross profits of securities companies over the past five years.

Therefore, DSC anticipates that this segment will continue to be a key driver of profit growth for the brokerage sector. — VNS