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Securities Times reporter Ma Jing
Interest rates are getting lower and lower, but securities companies are not fond of issuing bonds for financing. Data shows that since 2024, the average coupon rate of corporate bonds issued by securities companies has dropped to 2.5873%, but the issuance scale has dropped by 30% compared with the same period last year.
A number of interviewees said that at present, securities companies are adjusting the scale of heavy capital businesses such as self operation and financing, and the demand for supplementary capital is no longer strong. Moreover, in the low interest rate environment, borrowing money for self operation and other businesses does not necessarily cover the financing costs. In addition, the data also shows that the debt scale of securities companies is gradually rising after the intensive issuance of bonds before. This has affected the net interest income of securities companies to some extent.
In previous years, due to multiple reasons such as developing business and improving risk resistance, the demand for supplementary capital of securities companies was relatively strong. However, equity financing is limited, so securities companies turn their attention to debt financing channels. 2023 has also become a big year for securities companies to issue bonds for financing. In the whole year, 73 securities companies issued 787 domestic bonds, with a scale of more than 1.5 trillion yuan, an increase of 33.7%.
Among them, subordinated debt is more concerned because it can be included in net capital in a certain proportion. However, since 2024, the scale of bond issuance by securities firms has slowed down, whether in terms of overall bond issuance or subordinated bonds.
Wind shows that as of June 18, 63 brokers had issued 255 domestic bonds, with a total amount of 449.087 billion yuan. Compared with the same period last year, the number and scale of bonds issued domestically decreased by 29.36% and 34.71% respectively. Among them, subordinated bonds issued totaled 60.997 billion yuan, 30% less than the same period last year. The issue of overseas bonds will not be discussed for the time being due to its low proportion and no obvious change on a year-on-year basis.
The issuance scale of short-term financing bonds is also declining. As of June 18, the issuance scale of short-term financing bonds by securities companies was 140.120 billion yuan, down 33.43% year on year.
In fact, with the decline of interest rates, the cost of bond issuance and financing for securities companies is getting lower and lower. Since 2024, the average coupon rate of 328.467 billion yuan of securities corporate bonds has been 2.5873%, with a median of 2.595%. Some large securities companies with good credit have the lowest coupon rate of 1.9%. In the same period of last year, the average and median coupon rates were 3.2423% and 3.12% respectively. The bond coupon rate of the lowest securities company is also above 2%.
The interest rate of subordinated debt is slightly higher than that of ordinary debt, but the reduction is also obvious. The average coupon rate of subordinated bonds issued by securities firms this year was 2.84%, down 0.81 percentage points year on year.
The current equity financing dilemma has not been alleviated, so why does the issuance cost continue to decrease while the issuance of bonds by securities companies has slowed down?
In this regard, some non bank analysts of securities companies told the Securities Times that this was related to the adjustment of the business structure of securities companies. At present, the securities industry is facing the problems of declining efficiency of capital use and declining rate of return on capital. Simply understood, "It's useless to ask for money, let's not". The return on equity (ROE) of incremental funds may not cover costs, so reducing the scale of heavy capital business becomes the optimal solution at present. At present, the self operation, financing and derivatives businesses of securities companies that replenish capital to develop are in a shrinking state. The adjustment of business structure has made the demand for capital of securities companies no longer strong.
In addition, non bank analysts of securities companies also mentioned a similar point of view. Previously, the money from bond financing of securities companies was used for business development and could also be leveraged to improve ROE. However, due to the contraction of proprietary business and other businesses, the borrowed money used to obtain income may not cover the financing costs. In addition, the bond financing scale of securities companies was not small before, but under the current low interest rate environment, it is not meaningful to invest on leverage, and securities companies are also actively reducing leverage.
In addition, from the perspective of their own capital situation, securities companies are also facing certain debt repayment pressure. This can be seen from the continuous decline and expansion of net interest income of listed securities firms in 2023 and the first quarter of 2024. Zhongyuan Securities Zhang Yang, a non bank analyst, said that one of the reasons for the decline in net interest income was the continued growth of debt scale, which led to the continued increase in interest expenses.
However, the solvency of the securities industry is strong. When looking forward to 2024, rating agencies such as Dagong International said that the overall credit level of the securities industry will remain stable. It is worth mentioning that securities companies are also paying off debts by "borrowing new to repay old". This year's newly issued securities companies mentioned in the prospectus that the funds raised will be used to repay the matured debts.
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