Securities firms in Vietnam, despite not being banks, have expanded their lending operations, achieving a record profit of 112 trillion dong (approximately $6.44 billion) in the first quarter. As proprietary trading and brokerage activities slowed, lending accounted for 36% of total revenue, driving overall performance. However, with a margin balance reaching 415 trillion dong (23.86 trillion won), concerns have been raised about potential burdens during market corrections.
On May 31, local media outlet VnExpress reported that the revenue generated from lending activities exceeded 112 trillion dong, marking an all-time high. The proportion of revenue from lending, which typically ranged from 28% to 30%, increased to 36% this quarter.
Securities firms have various revenue sources, including brokerage, margin lending, proprietary trading, investment banking, and underwriting. However, they have actively expanded their lending divisions in recent years.
The VN-Index surpassed 1,900 points this year but experienced significant volatility, dropping more than 200 points in March alone. Consequently, the reliance on proprietary trading revenue, which is highly dependent on market conditions, has decreased for two consecutive quarters, lowering its overall contribution to total revenue. The brokerage sector has also been affected by intense competition leading to reduced fees.
◆ Loan Balance Reaches 420 Trillion Dong... Margin Stands at 415 Trillion Dong
As of March 31, the total loan balance for clients exceeded 420 trillion dong, with 415 trillion dong allocated for margin trading, an increase of approximately 9 trillion dong compared to the end of last year, marking a record high.
Looking at individual firms, TCBS, SSI, VPBankS, VPS, and HSC each provided over $1 billion to investors. The loan balances of these firms are comparable to those of some banks, such as PGBank and Saigonbank.
Nguyen Te Minh An, head of investment banking at VNDirect Securities, cited the issue of excess capital as a reason for the expansion of lending. He explained, "In the past two years, companies have issued stocks in amounts exceeding the market's absorption capacity." He added, "Many securities firms are opting to expand their loan balances instead of competing in the brokerage sector, which has become fiercely competitive, or relying on proprietary trading that is heavily influenced by market volatility."
In the past year, the total capital of securities firms has increased by 70 trillion dong. Major companies such as TCBS, SSI, VPBank, VPS, and Vietcap have secured additional funds ranging from hundreds of billions to trillions of dong. This is due to the State Securities Commission limiting the debt ratio to a maximum of 200% of equity.
Min also predicted that lending expansion will continue in the upcoming quarters. He stated, "Once the market upgrade decision is implemented in September, we will also expand funding for foreign investors."
Tran Quoc Tuan, head of the second branch of Mirae Asset Securities, noted, "The margin balances of major securities firms have not yet reached the regulatory cap," adding that the overall loan ratio in the market remains below 200%, indicating it is not at a level to cause extreme shocks to the index. He cautioned that the current margin balance exceeding 415 trillion dong could lead to widespread forced selling if the market undergoes significant corrections, suggesting that sharp downturns may occur more frequently.
However, Nguyen Ha Hai, CEO of VPBank Securities, remarked, "The current demand for margin from investors is very high," indicating sustained interest in the stock market.
* This article has been translated by AI.
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