Brokers competed with commissions – Kommersant

Brokers in the first quarter as a whole showed an increase in commission income by only 5%. The change in the volume and structure of brokers’ revenues is associated with sanctions pressure and the transformation of the range of instruments available to investors.

Brokerage companies showed an increase in commission income by 5% in the first quarter, according to Kommersant’s calculations. At the same time, there is a rather impressive increase in revenue both from services in general and from brokerage services for some companies (Freedom Finance, Renaissance, Alor, April, etc.). After the rapid growth of income from services in the foreign exchange market last year, a number of companies showed a decrease (BCS, Finam, Renaissance), and a number of others showed significant growth (Freedom Finance, Uralsib).

The change in the volume and structure of brokers’ revenue in the first quarter of 2023 is the result of a radical transformation in the range of instruments available to investors against the backdrop of sanctions pressure, says independent analyst Andrei Barkhota. A number of brokers, according to him, managed to replace the shortfall in income from the narrowing of trading volumes by increasing volumes on foreign currency accounts or transferring part of client operations to subsidiaries with more opportunities. “Part of the foreign exchange liabilities really moved from the banking sector to brokerage accounts,” Anna Avakimyan, chief analyst at Regblok, agrees.

The described results are primarily related to US and European sanctions, which turned out to be the most severe for the financial sector, says Evgeny Shatov, partner at Capital Lab. The activities of many brokers associated with sanctioned banks were paralyzed. Mr. Shatov explains that the financial performance of brokers is affected by the terms of customer service, trading volume (in terms of commissions), the availability of investment instruments and the dynamics of the number of active accounts, market volatility, etc. “After being on the sanctions lists, brokers and trustees cannot buy and sell foreign securities. In addition, the sanctions do not allow the withdrawal of currency (dollars and euros) and its transfer,” he specified.

Foreign exchange earnings strongly depend on the specifics of the broker, said Dmitry Alexandrov, managing director of Ivolga Capital. According to him, commissions for individuals are still increased, therefore, for retail banks and brokers, including those with infrastructure for sending currency abroad, commissions from conversion operations may even show an increase.

The current situation has put brokers within the banking business model and beyond in competitive conditions, allowing them to master the niches of new instruments and foreign currency accounts on an equal footing, Ms. Avakimyan says. In April-June this year, the expert expects the growth of commissions received at a level of at least 7-10%.

At the same time, the growth in demand for market maker services is still unstable, since many issuers were involved in the process of reducing or restructuring corporate debt, and new operations in the capital market must be preliminarily prepared, Ms. Avakimyan points out. Nevertheless, the growth of activity in this segment is inevitable, she believes. “The competencies of brokers in organizing placements are accumulating, but so far only price competition with banks is possible, when issuers pay a lower commission for the same volume of services, including exchange marketing,” the analyst added.

In the second half of the year, we can expect an increase in the volume of market maker services, Mr. Barhota believes. It is not ruled out that there will be an increase in organizations for the issue of debt and equity instruments from issuers of the second or third echelons, he believes. This, according to him, will be facilitated by the growth in the need for financing against the backdrop of an increase in the volume of orders and the factor of vacant niches for import substitution.

Ksenia Kulikova