Big Competition Of Investment Banking Business Of Securities Companies Under Registration System: Doubling Of IPO Projects And Aggravation Of Matthew Effect

Under the registration system, A-share IPO ushers in the new year, and the investment banking business income of major securities companies is rising.

Wind data shows that as of June 8, a total of 208 companies (including those that have completed the issuance, the same below) have been listed on a shares since 2021, which is 103.92% higher than that of 102 companies in the same period of last year (from January 1, 2020 to June 8, 2020). Among them, there are 46 main boards in Shanghai Stock Exchange, 71 in science and technology innovation board, 18 in Shenzhen stock market and 73 in gem.

According to the data, the intermediaries involved in the listing of the above-mentioned 208 companies include 47 recommendation securities companies, 24 accounting firms (audit institutions) and 42 law firms.

According to the statistics of the 21st century economic report, with the continuous promotion of the registration system, the responsibilities of intermediary organizations are becoming more and more heavy, and IPO projects are further concentrated to the top brokers. As a result, many securities companies ushered in a big explosion of sponsor income. The total underwriting and recommendation income of 47 securities companies from January to June this year (up to June 8) was as high as 10.165 billion yuan.

"The IPO increment caused by the registration system directly ignited the issuance and underwriting business of securities companies. The investment banking business of securities companies originally comes from IPO underwriting, merger and acquisition, and the increase of IPO is the increase of its total business volume. Because the competitors in China's securities industry are relatively fixed, the increase in demand means that the business volume allocated to each securities firm increases. " Pan Helin, executive director and professor of Digital Economy Research Institute of Central South University of Finance and law, pointed out in an interview.

Significant Matthew effect in IPO underwriting

Since the pilot registration system, the A-share market has given full play to the function of direct financing and served the development of the real economy. From the perspective of financing amount, the total amount of IPO Financing from January to June this year (up to June 8) was 161.225 billion yuan, an increase of 30.87% compared with 123.199 billion yuan in the same period of last year.

The IPO underwriting and recommendation income of major securities companies also ushered in a big harvest. Wind data shows that since this year, a total of 47 securities companies have obtained IPO underwriting and recommendation income, totaling 10.165 billion yuan, a significant increase of 86.38% year-on-year.

In terms of the performance of various securities companies, Haitong Securities ranked first with 1.135 billion yuan of IPO underwriting and recommendation income, becoming the first securities firm with IPO underwriting and recommendation income exceeding 1 billion yuan in 2021. CITIC Securities ranked second, with revenue of 916 million yuan from 20 projects independently sponsored by CITIC, and shared 68.1485 million yuan of underwriting and recommendation fees with CICC. Huatai United Securities ranked third, with revenue of 659 million yuan.

In addition, the IPO underwriting and recommendation income of securities companies such as CSCI securities, Minsheng securities, CICC, Guotai Junan and Anxin securities also exceeded 400 million yuan. The other 39 securities companies' initial underwriting and recommendation revenue were all less than 400 million yuan, of which 21 were less than 100 million yuan.

From the number of underwriters, from January to June this year (as of June 8), Haitong Securities and CITIC Securities have separately sponsored 20 IPO projects. At the same time, CITIC Securities Co sponsored huitai medical IPO with CICC. There are 14 projects sponsored by Huatai United Securities Co., Ltd., and 11 projects independently sponsored by China CITIC construction investment. However, it has also jointly sponsored 5 projects with Huaxi Securities, Guoxin Securities, Zhongyuan securities, Changjiang Securities and China Merchants Securities, namely, Chuanwang media, amo shares, ruihuatai, Youyan powder materials and Bank of Chongqing.

In addition, the investment banking business of some small and medium-sized securities companies has also risen rapidly under the tide of registration system. Minsheng securities and Changjiang Securities Co., Ltd., which underwrite 10 projects separately, are among the top five sponsors. In addition, Changjiang Securities Co sponsored a project with CSCI. In the view of industry insiders, some small and medium-sized securities companies are trying to overtake the curve through their own resource endowment.

However, although the odd number of IPOs of small and medium-sized securities companies such as Changjiang Securities and Minsheng securities have entered the top 10 in the industry, the first tier securities companies such as Haitong Securities and CITIC Securities still occupy an absolute advantage in the IPO underwriting field. In terms of underwriting amount ranking, the advantages of head brokers are still unshakeable, and the Matthew effect of the industry is significant.

Specifically, the initial underwriting amount of CITIC Securities, Haitong Securities, Orient Securities, Huatai United Securities and CITIC construction investment exceeded 10 billion yuan.

Among them, CITIC Securities participated in the underwriting of 21 IPO projects with a total financing of 18.307 billion yuan; Haitong Securities participated in 20 IPO projects with a total financing of 16.051 billion yuan; The total financing of seven projects underwritten by Dongfang securities was 11.491 billion yuan, of which Hehui optoelectronics-u raised 8.172 billion yuan; 14 projects jointly underwritten by Huatai Co., Ltd. have raised 10.94 billion yuan in total; A total of 14.401 billion yuan was raised from 17 projects in which CSCI participated.

On the whole, most of the top 10 projects with the highest IPO financing amount in 2021 were contracted by large securities companies. In addition to Hehui optoelectronics-u, the sponsor of Tianneng stock (financing 4.847 billion yuan) ranked second in IPO financing amount was CITIC Securities, and Bank of Chongqing, with a financing amount of 3.763 billion yuan, was jointly sponsored by China Merchants Securities and China CITIC construction investment.

"In any field, there will eventually be Matthew effect. For IPO enterprises, finding a securities company with a large scale and high success rate is the starting point for IPO enterprises to stabilize their own expectations. From the market point of view, to encourage small securities companies to maintain competitiveness, it may be necessary to promote mergers and acquisitions and alliances between securities companies. " Pan and Lin said.

Small and medium-sized securities companies take advantage of location advantages

Although the market structure is hard to shake, in this "incremental" competition, more and more small and medium-sized securities companies are also seizing the opportunity of registration system, and they are "full of Stamina" in the process of catching up. The 21st century economic reporter has noticed that "location advantage" is becoming one of the competitive secrets of more and more small and medium-sized securities companies.

Among them, Dongguan Securities Co., Ltd. has successfully sponsored two IPO projects in Guangdong Province, of which Shengyi technology is registered in Dongguan City, and Qide New Material Co., Ltd. is located in Jiangmen City, Guangdong Province. In 2020, Dongguan securities has also promoted five Dongguan local enterprises to successfully participate in the meeting and one refinancing project to be issued.

Wind data shows that up to now, there are still 20 IPO projects of Dongguan securities in the normal queuing process (including counseling, registration and filing enterprises), of which more than 12 are projects in Guangdong Province, and 7 are located in Dongguan City.

Earlier, Gao Zemin, vice president of Dongguan securities, disclosed that Dongguan securities is responsible for the continuous supervision of more than 130 new third board enterprises in Dawan District, and its new third board market service has basically covered all cities in Dawan District, and has become one of the securities companies with larger supervision scale in Guangdong Province.

"In the future, Dongguan securities will further promote the transfer of many listed companies in Dawan district or facilitate their M & A. taking advantage of Dongguan's geographical advantages, Dongguan securities will actively undertake the financial industry radiation of Guangzhou and Shenzhen, and assist the new third board enterprises to realize their integration, extension and transformation through capital operation such as IPO, reorganization and merger and acquisition." Gao Zemin said.

In addition, for example, Zhongyuan securities, which is registered in Zhengzhou, has successfully sponsored six IPO projects since this year. Two of them are located in Zhengzhou City, Henan Province. They are Zhengzhou Baichuan Huanneng, which was listed on the gem on May 25 this year, and blue sky gas, which was listed on the main board of Shanghai Stock Exchange on January 29 this year. The two enterprises raised 369 million yuan and 980 million yuan respectively.

Huaxi Securities, which is registered in Chengdu, Sichuan Province, has listed three projects this year. Among them, Chuanwang media and Haitian Co., Ltd. are enterprises in Sichuan Province, financing 227 million yuan and 874 million yuan respectively. Another project, Xiaoming shares, is registered in Ningxia Hui Autonomous Region, which is also located in the western region.

Soochow securities, headquartered and registered in Suzhou, has successfully sponsored four IPO projects in Suzhou, Jiangsu Province, including Mingzhi technology and shangsheng electronics listed on the science and technology innovation board, Jiahe food listed on the main board and Huaya intelligent listed on the Shenzhen Stock Exchange; In addition, Changjiang Securities, which has sponsored 11 projects mentioned above, also has 2 IPO projects from Hubei Province.

Compaction of the responsibility of intermediary agencies as the key point of supervision

At the same time, it has become a topic repeatedly emphasized in recent years to compact the responsibilities of intermediary agencies and improve the practice quality of intermediary agencies.

In April 2021, the China Securities Regulatory Commission (CSRC) released 29 pieces of information on punishment for violations of investment banking business, and took regulatory measures against issuers' insufficient verification and insufficient effectiveness of internal control, involving more than 10 securities companies, including China Securities construction investment securities, CITIC Securities, Haitong Securities, CICC Corporation, Guojin securities, Dongfang securities and Minmetals securities.

Among them, securities companies' violations mainly focus on insufficient verification of issuers, insufficient effectiveness of internal control, and failure to diligently and conscientiously supervise and urge issuers. The person in charge of the relevant business has also been given administrative penalties such as regulatory talks and issuing warning letters.

Then, in May 2021, Yi Huiman, chairman of China Securities Regulatory Commission, made it clear at the 7th general meeting of China Securities Association that the securities industry should play a good role in market and price orientation of investment banks, adhere to the path of professional development, and effectively improve the core capabilities of recommendation, pricing and underwriting.

Industry insiders pointed out that the CSRC has repeatedly stressed "zero tolerance", severely punished "breaking through the barrier with illness", and strengthened the "gatekeeper" responsibility of intermediary agencies, which means that the regulatory authorities will maintain a high pressure on violations of laws and regulations, increase law enforcement accountability, and force intermediary agencies to return to their positions and fulfill their responsibilities through strict supervision. In addition, with the increasingly strict supervision of intermediary agencies, the recommendation agencies, accounting firms and other intermediary agencies are bound to face the survival of the fittest.

"In terms of the proportion of the total amount, compared with the previous years, the probability of such (intermediary institutions being punished) incidents has not been significantly improved. On the one hand, the supervision is more strict on the market after the registration system; on the other hand, the supervision and application of scientific and technological means should be more agile in dealing with securities companies' violations. Therefore, I think it is a normal phenomenon, It does not mean that the quality of intermediary agencies is declining. For the chaos of IPO, these penalties have played a warning role and can regulate the behavior of future securities investment banking business Pan and Lin said.