Securities companies rush to promote margin lending
The recent flourish of the stock market is pushing demand for margin loans, thus securities companies are preparing capital increases to meet the borrowing demand of investors.
Although the number of margin loans peaked in June, experts from MB Securities Joint Stock Company (MBS) forecast that securities companies will promote margin lending due to improved liquidity and an increased number of fresh investors.
Securities firms are seeking ways to extend credit in the form of corporate bonds and margin lending, with more flexible benefits than bank credit.
According to FiinGroup Joint Stock Company, margin loan value reached over VND126.3 trillion (US$5.6 billion) at the end of the second quarter of this year, but accounting for only a small part of the current market liquidity.
However, the gradual increase in margin since the second quarter of 2020 shows the expectation of securities companies towards the market.
According to FiinGroup's estimates, the total capital securities companies expect to increase is VND18.8 trillion in 2021. Since the beginning of this year, they have mobilised nearly VND12 trillion. This will allow securities companies to promote margin lending activities, thus increase profits.
Thanh Cong Securities Joint Stock Company (TCI) recently announced a plan to pay dividends in shares at the rate of 4 per cent, and at the same time offered shares to existing shareholders at the rate of 100 per cent, in order to raise charter capital to over VND1 trillion.
Margin lending is increasingly contributing to the revenue of securities businesses. TCI estimates that revenue and profit before tax in the first nine months of 2021 will be about VND240 billion and more than VND175 billion, respectively, exceeding the plan set at the beginning of the year by 129 per cent and 175 per cent, respectively.
As for SSI Securities Joint Stock Company, the margin loans as of September 30 reached VND18.1 trillion, an increase of VND2.6 trillion compared to the previous quarter, becoming the brokerage with the largest loan balance in the market.
As of June 30, SSI lent nearly VND16.2 trillion, of which VND15.5 trillion was for margin lending. Revenue from the 9-month margin lending segment in 2021 has increased more than 4 times.
According to MB Securities Co, in order to compete with rivals and attract customers, many securities companies have reduced lending interests and transaction fees.
In 2019, interest rates for margin lending usually fluctuated between 12-14 per cent per year, but fell to below 12 per cent in 2020 and fluctuated around 10-12 per cent in 2021. At present, most securities are applying low transaction fees, around 0.2 per cent, even some securities companies apply zero-fee such as Pinetree Securities Joint Stock Company, AIS Securities Joint Stock Company or VPS Securities Joint Stock Company.