Brokerages fail to use cash efficiently
Brokerages fail to use cash efficiently
Securities firms currently have significant amounts of cash, but they are not using it efficiently.
The total amount of cash and cash equivalents in 95 securities companies reached nearly VND20.26 trillion (US$964.7 million) in the first quarter, increasing VND135 billion ($6.4 million) compared to the beginning of this year, according to ttvn.vn. This figure does not include deposits categorised as short-term financial investments.
VP Bank Securities, Saigon Securities (SSI) and Kim Long Securities (KLS) saw the highest growth in cash, while ACB Securities, HCM City Securities (HCM) and Thien Viet saw cash supplies decline.
Looking at their financial reports, some brokerages would seem to have an abundance of cash. However, most of the total consisted of investors' deposits. Half of the cash at HCM was investors' deposits, while at VNDirect the ratio was slightly less and at PetroVietnam Securities these deposits accounted for 82 per cent of the total.
Excluding these deposits, SSI was the richest with more than VND2.76 trillion ($131.4 million), 45 per cent of which was deposited for short-term financial investment.
During the company's annual meeting last month, shareholders questioned whether high amounts of cash would affect profits as interest rates declined. SSI chairman and CEO Nguyen Duy Hung said the cash was used as a reserve to increase the number of associated companies.
The runner-up in cash was KLS with around VND1.85 trillion ($88 million), of which VND300 billion ($14.2 million) was deposited in banks and labelled as "short-term financial investment" in the company's financial report.
As interest rates have declined to only 9 per cent per year, the firm's profit was strongly affected. Net profit in the first quarter dropped 17 per cent from the same period last year to nearly VND51 billion ($2.4 million) after the "other revenue" category decreased 63 per cent.
Despite possessing a large amount of money, KLS failed to do anything outstanding. It was not in the top 10 brokers, its margin lending was not as much as HCM or VNDirect and it did not invest in other companies like SSI. Previously when KLS wanted to invest in the real estate sector, the idea was hammered by its shareholders. Therefore, the company's cash simply rested in banks.
Other brokerages with large bank deposits also had smaller profits, including Sai Gon–Ha Noi Bank Securities (SHS) – plunging 78 per cent to VND8.7 billion ($414,200) – and Hoa Binh Securities, falling 15 per cent to just VND57.5 million ($2.7 million).
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