Revenue Reversal and Margin Loan Debt in 2023

In 2023, the margin lending debt of securities companies (SCs) has nearly doubled compared to the previous year. However, the revenue from this sector has not experienced a corresponding growth.


Specifically, as of December 31, 2023, the outstanding loans (mainly margin loans) of the expanded securities companies significantly increased – nearly one and a half times compared to the previous year, approximately 180,000 billion VND, an increase of about 8% compared to the end of the third quarter.

In 2023, this activity generated interest income of over 17,415 billion VND, a 4% decrease compared to the previous year. Throughout the year, interest income from loans and receivables followed an upward trend in the first three quarters and leveled off in the fourth quarter, in terms of value.

In the fourth quarter of 2023, securities companies earned over 4,903 billion VND from lending activities, an increase of 21% compared to the same period last year, but a slight decrease of 0.4% compared to the third quarter of 2023.

Some of the top 10 securities companies with the largest margin balances in the market, also the group with the largest market share of stock brokering on HOSE in 2023 (except for VPBank Securities – VPBankS), recorded a decline in interest income from lending activities in the fourth quarter.

For example, VNDIRECT Securities (VND), this securities company earned 273 billion VND from lending activities, a decrease of 24% compared to the previous quarter. KIS Securities (KIS) and VPS Securities (VPSS) saw a decline of 14-17% in interest income from lending and receivables, while Mirae Asset Vietnam Securities (MiraeAsset) had the lowest decrease, a 5% decline. On the other hand, other securities companies such as Kỹ Thương (TCBS), SSI, HSC, MBS, Vietcap, and VPBankS experienced growth rates ranging from 2-32%, with an average increase of 15%.

When cumulative figures from the beginning of the year are taken into account, the number of securities companies experiencing a decline in revenue from lending activities in the fourth quarter is greater than in previous quarters. Specifically, VND decreased the most (-28%), to 1,154 billion VND; VPS had the smallest decrease (-1%) to 1,226 billion VND; MiraeAsset (+0.2%) remained almost steady compared to the previous year, reporting 1,434 billion VND.

Interest income from lending and receivables of securities companies with the largest market share in 2023
Unit: Billion VND

In general, the interest income from lending of the top 10 securities companies differentiated in the fourth quarter, but when taking into account the whole year of 2023, the majority of these companies experienced a decline.

One notable point is that the market’s outstanding loans in the fourth quarter increased in the context of the stock market not experiencing significant growth. The VN-Index only fluctuated around the 1,100-point mark, accompanied by low liquidity (on HOSE, the average trading value per session in the fourth quarter was 15,762 billion VND, 26% lower than the previous consecutive quarter). Consequently, it is possible that some margin loans did not enter the market, or some securities companies did not lend to individual investors for securities trading. According to ABS Research, the significant increase in loan commitments at many securities companies does not correspond to the growth in trading volume and market share, indicating that a considerable portion of the loans is for financial and business purposes for corporations, not for individual investors to trade securities.

The group of analysts also noted that there is still a significant potential for securities companies to increase margin lending, as the new lending balance is only equivalent to 77% of the industry’s equity, considerably lower than the maximum allowed level of 200%. Therefore, although the margin lending ratio on market capitalization has remained high over the past three years (around 3%), the risk of forced liquidation has not increased proportionally to this ratio.

Racing to increase margin lending capital

With the loan-to-equity ratio currently at only 77% of the industry’s equity, there is still significant potential for expanding margin lending, especially in the context of the stock market in 2024 expected to be more positive.

A recent strategic report for 2024 by HSC pointed out that many major securities companies have plans to increase capital in the 2024 – 2025 fiscal years, showing their capital readiness to meet higher trading demand when the KRX system operates, as well as addressing the issue of pre-funding requirements. In addition, their capital sources are more flexible and less dependent on bank funding.

On the other hand, in addition to the aforementioned major securities companies, some securities companies with bank ownership such as ACB Securities (ACBS), LBank Securities (LBPS), and Tiên Phong Securities (ORS) have already or are planning to increase their equity.

Most notably, ACBS has increased its capital twice in just a few months (an additional 1,000 billion VND in November 2023 and 4,000 billion VND in January 2024), bringing the company’s equity to 7,000 billion VND.

The purpose of these capital increases partly serves the lending activities. In the first capital increase, Mr. Nguyen Duc Hoan – CEO of ACBS stated that the goal is to increase capacity for the margin trading business, through maximizing lending volume/customer (3% of equity) and the maximum lending limit/stock (10% of equity).

Tiên Phong Securities is also planning to increase its equity by an additional 1,000 billion VND to 4,000 billion VND through a private placement of 100 million shares. The registration period for purchasing shares is from February 5 to March 11, 2024.

In the near future, with the increase in charter capital to 3,888 billion VND from 250 billion VND, up to 16 times with a planned maximum equity dilution of 363.8 million shares for existing shareholders, LBank Securities is expected to make a comeback in various securities trading areas, including providing margin loans for securities trading.

In the past, LBPS terminated its membership on HOSE and HNX in 2013. Currently, the company only offers specific products such as shareholder services, financial advisory, investment advisory, and auction organization.

In addition, many securities companies have planned “monstrous” capital increases since previous years. For example, SSI approved the issuance of over 453 million additional shares to increase its capital to 19,645 billion VND at the end of December 2023, including two options for increasing the charter capital (issuance of bonus shares at a rate of 20% and public offering of additional shares to existing shareholders at a price of 15,000 VND/share, a rate of 10%) and private placement of 10 million shares.

Another notable company, HSC, plans to increase its equity to over 7,552 billion VND through the issuance of over 297 million new shares. The company will allocate 78.13% of the 2,286 billion VND raised from the offering for margin trading activities, and the remaining portion for proprietary trading.

Prior to that, in August 2023, the Board of Directors of VNDIRECT Securities also approved the issuance of 243.57 million shares to existing shareholders (20% dilution rate, expected offering price of 10,000 VND/share) and the issuance of over 60.89 million shares to pay dividends at a rate of 5%, increasing the company’s equity to the milestone of 15,223 billion VND, and planning to use 40% of the funds raised for margin trading activities.

As of January 26, 2024, there is no further updated information on the aforementioned capital increases. If these capital raising transactions take place in the year 2024, the margin lending potential of securities companies will be further expanded.

Duy Khanh

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