Vietnam securities brokerage sector – 2021 results and 2022 outlook

FY2021 Results

  • The VNINDEX has increased by 39.0% in 2021, driven by a strong influx of retail investors and low bank deposits. Despite a strict lockdown in Q3, the total number of new securities accounts reached 1.5mn thanks to eKYC technology introduced by many brokers, which pushed the total number of local trading accounts to 4.2mn by the end of 2021. Hence, the average daily trading volume increased by 247.4% y/y.
  • Thanks to robust market participation, the securities brokerage sector posted outstanding financial results in 2021. Gross profit increased by 85.8% y/y thanks to: (1) superior brokerage income; (2) the margin lending balance rising by 159.4% y/y; and (3) strong market performance, which boosted proprietary trading earnings.
  • On the expense side, SG&A expenses moderately rose by 36.1% y/y thanks to improved digitalization and less fixed cost due to the work from home trend. Overall, net profit of the sector increased by 101.7% y/y.

Outlook

  • We believe bank deposit rates will slightly increase in 2022 due to inflationary pressure. However, the magnitude won’t be significant enough to trigger strong outflow from the stock market. VNINDEX’s trading volume is at a long-term sustainable level and we expect it to improve given Vietnam’s still low securities account penetration of 4%. Another catalyst for the brokerage sector is the new trading system, which is expected to launch in H2/2022 and will bring Vietnam closer to emerging market status and improve trading volumes significantly.
  • Looking at 2022 earnings, we expect a higher margin lending balance and lower interest expenses will drive profit growth. We see demand for margin lending remains strong while brokers can reduce debt by new equity issuance.
  • Overall, we expect net profit of the sector to increase by 10.6% y/y, although sector EPS growth will be negative, -6.7%, due to dilution from equities capital raising.

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