Soochow: In 2025, the net profit attributable to the parent of the securities industry increased by 45% year-on-year, and the advantages of large securities firms are still significant.

Soochow released a research report stating that the daily average stock trading volume in 2025 will be 2.05 trillion yuan, a year-on-year increase of 70%. IPOs and secondary financings have both hit bottom and are rebounding, with further concentration; the scale of bond issuances is stable and growing. The equity market continues to rise, while the bond market performs relatively weakly. Listed securities firms that have disclosed their 2025 performance show a year-on-year increase of 45% in net profit attributable to shareholders, with a 8% year-on-year increase in the fourth quarter, but a 30% decrease compared to the previous quarter. Currently, securities firms have very low valuations, and considering the positive industry development policies, the bank believes that the advantage of large securities firms is still significant. Soochow's main points are as follows: The performance of the equity market in 2025 is impressive, with significantly increased trading activity 1) The daily average stock trading volume in the market in 2025 will be 2.05 trillion yuan, a year-on-year increase of 70%. The average number of new accounts opened by investors in the Shanghai stock market each month in 2025 will be 2.5 million, an 8% increase from 2.31 million in 2024. 2) By the end of 2025, the balance of margin financing will be 2.5 trillion yuan, a 36% increase from the end of 2024. The average margin guarantee ratio in 2025 will be 272%, a 17% increase from 2024, maintaininga high level. 3) The scale of IPO financings is rebounding. In 2025, a total of 116 IPOs were issued, raising a total of 131.8 billion yuan, a 96% increase compared to the previous year. The average fundraising amount per IPO in 2025 was 11.4 billion yuan, a 69% increase from 6.7 billion yuan in 2024. 4) After several years of continuous decline in the scale of secondary financings, there was a turning point in 2025. A total of 95.09 billion yuan was raised through secondary financings in 2025, a 326% increase year-on-year, with additional issuances raising 88.77 billion yuan, a 413% increase, showing significant improvement. 5) The scale of bond issuances is stable and growing. In 2025, the total bond issuance volume involving securities firms was 16 trillion yuan, a 13% increase from the previous year. Among them, the issuance volume of corporate bonds decreased by 60%, while the volume of short-term bonds and medium-term notes decreased by 9%. However, corporate bonds, financial bonds, and ABSs increased by 13%, 24%, and 19%, respectively. 6) The performance of the equity market is impressive, while the bond market shows weaker performance. In 2025, the Shanghai and Shenzhen 300 Index rose by 17.66%, the ChiNext Index rose by 49.57%, the SSE Composite Index rose by 18.41%, the CSI All A Index rose by 27.65%, and the ChinaBond General Composite Price Index fell by 2.32% in 2025. 7) The issuance of equity mutual funds is picking up. In 2025, the issuance volume of equity and mixed mutual funds increased by 84% to 590.5 billion shares, mainly in index funds and index-enhanced funds; the issuance volume of bond funds decreased by 42% to 482.9 billion shares. The overall issuance volume of mutual funds decreased by 0.1% to 118.25 billion shares year-on-year. Listed securities firms saw a year-on-year increase of 45% in net profit attributable to shareholders in 2025, with a 8% year-on-year increase in the fourth quarter A total of 27 listed securities firms achieved operating income of 456.4 billion yuan, a year-on-year increase of 32%, and a total net profit attributable to shareholders of 185.6 billion yuan, a year-on-year increase of 45%. Excluding non-recurring gains and losses such as the sale of Assetmark by Huatai in the third quarter of 2024 and the negative goodwill generated by the acquisition of Haitong by Guotai in the first quarter of 2025, listed securities firms achieved a net profit of 177.1 billion yuan, a year-on-year increase of 45%. All securities firms saw year-on-year growth or turned losses into profits. In the fourth quarter, the total net profit attributable to shareholders of the 27 listed securities firms reached 39.2 billion yuan, a year-on-year increase of 8%, but a 30% decrease compared to the previous quarter. The average ROE of the 27 listed securities firms in 2025 was 7.47%, an increase of 1.88 percentage points year-on-year, with 10 firms having an ROE of over 9%; the average leverage ratio was 3.58 times, a slight increase from 3.57 times at the end of 2024. The bank believes that ROE is mainly driven by fee-based and proprietary businesses. Almost all fee-based businesses saw growth, with significant flexibility in proprietary trading 1) Brokerage commissions saw significant growth. In 2025, listed securities firms generated a total of 116.8 billion yuan in brokerage income, a 45% year-on-year increase, lower than the 70% increase in market daily stock trading volume, mainly due to a significant decline in segregated commissions after the implementation of fund fee reforms. All disclosed data from securities firms showed positive growth. 2) Investment banking income increased by 38% year-on-year in 2025, primarily benefiting from the significant rebound in secondary financings due to a low base and a substantial increase in Hong Kong IPOs. A total of 25 listed securities firms achieved investment banking income of 32.4 billion yuan in 2025, a 38% year-on-year increase. 3) Asset management income saw a slight increase, with stability in asset management scale. A total of 25 listed securities firms achieved asset management income of 40.7 billion yuan in 2025, an 8% year-on-year increase. Among the 18 listed securities firms that disclosed comparable data, the total asset management scale in 2025 was 6.1 trillion yuan, a 13% year-on-year increase. 4) A total of 44 fund companies achieved a combined net profit of 33.8 billion yuan in 2025, an 11% year-on-year increase. Despite the active stock market environment, the operating performance of fund companies still showed significant differentiation. 5) An increase in proprietary trading net income of 32%, with the equity market significantly up and bond market volatility increasing. In 2025, a total of 25 listed securities firms achieved investment net income (including fair value) of 186.2 billion yuan, a 32% year-on-year increase. In the fourth quarter, a total net investment income of 33.2 billion yuan was achieved, a 4% year-on-year increase, but a 46% decrease compared to the previous quarter. 6) Dividend payout ratios continued to increase. In 2025, listed securities firms paid a total cash dividend of 57.7 billion yuan, a 33% year-on-year increase, with an average dividend payout ratio of 31%, a 2 percentage point increase from the previous year. As of April 1, 2026, the average dividend yield of A-share listed securities firms was 1.90%, while H-share listed securities firms had an average dividend yield of 4.0%. The industry's activity remains at a high level, with an expected 15% year-on-year increase in industry net profit in 2026 Since the beginning of the year, market trading activity has been active, with the daily average stock trading volume in the first quarter approaching 3.1 trillion yuan, a 53% increase from the high base of 2.05 trillion yuan in 2025, with margin balances reaching 2.6 trillion yuan by the end of March, a 3% increase from the beginning of the year. Given the high base, the bank predicts a 15% year-on-year increase in industry net profit for 2026: brokerage business revenue is expected to increase by 23%, investment banking business by 10%, capital intermediary business revenue by 14%, asset management business by 10%, and proprietary trading to remain flat year-on-year. With extremely low valuations and the backdrop of an improving ROE, there is potential for a revaluation of value As of March 31, 2026, the CITIC SECII index's static valuation was 1.23 times PB, which is at the 6th percentile historically and the 13th percentile in the past decade, indicating extremely low valuations. The bank believes that under the backdrop of high-quality development of China's capital market and the continuous improvement in the ability and efficiency of securities firms in heavy-asset businesses, there is still room for growth in the ROE levels and valuations of securities firms. Additionally, with ongoing reform expectations in the capital market and policies encouraging high-quality securities firms to strengthen through mergers and acquisitions, the bank believes that the advantages of large securities firms are still significant, and industry concentration is expected to continue to rise, leading to large securities firms enjoying a valuation premium. Key recommendations: CITIC SEC, Huatai, Guotai Haitong, GF SEC, Industrial, Caitong, East Money Information, Beijing Compass Technology Development, Xiangcai Co., Ltd, among others. Risk warning: Significant fluctuations in the equity market, slower-than-expected macroeconomic recovery, stricter capital market regulation, and intensified industry competition.