Financial Review of the Securities Industry for 2019

On 16 March 2020, the Securities and Futures Commission (SFC) published its 2019 Financial Review of the Securities Industry. This is an annual review which contains statistical information about the financial situation of firms licensed for type 1 (dealing in securities) or type 8 (securities margin financing) regulated activities. The data is simply extracted from the monthly financial returns submitted to the SFC by those firms under the Securities and Futures (Financial Resources) Rules.

According to the review, the total net profits of these firms for 2019 was HK$25.2 billion, which is a decrease of 34.4% compared to 2018 (HK$38.3 billion). This was described in the review as being attributable to an increase in total overheads and interest expenses as well as a drop in net securities commission income and net profit on proprietary trading.

A closer look at these figures reveals that “other” income, comprising inter-company management fee income, advisory fees, asset management fees, underwriting fees and corporate finance income, actually went up by HK$4.2 billion (from HK$114.6 billion in 2018 to HK$118.8 billion in 2019), but that this increase was undermined by a HK$4.3 billion decrease (from HK$24.2 billion in 2018 to HK$19.9 billion in 2019) in net securities commission income.

This data suggests that firms engaging in traditional brokerage business struggled in 2019 as the city experienced its worst political crisis in decades, while firms that offer a wider range of services did a better job. Only time will tell how the 2020 figures will compare.