Brokers rescued by instability – Kommersant

Despite the turbulence in the stock market last year, brokers (non-banking financial institutions) have significantly improved their performance. Number of brokers with annual revenue over RUB 100 mln. last year increased from 26 to 32, their revenue increased by 11%. Experts attribute the situation to high market volatility. In the future, according to their forecasts, the indicator will stabilize.

According to Kommersant’s calculations, at the end of 2022, the number of brokers with revenues of more than 100 million rubles. reached 32 against 26 a year earlier. The statistics do not take into account Sberbank CIB, which did not disclose financial statements for either 2022 or 2021. Previously, its revenue exceeded 1 billion rubles.

The total revenue of the companies reached 61.8 billion rubles, which is 11% higher than last year, their net profit grew almost 2.8 times, to 9.4 billion rubles. Excluding Arovana Capital (former VTB Capital, showing a loss over the past two years), profit would have increased 1.5 times, to 17 billion rubles.

At the same time, the share of income from brokerage activities of the largest companies amounted to only 67%, while a year ago it was approaching 74%. Part of the share was pulled over by consulting services, the volume of which more than doubled and reached 11 billion rubles. Dmitry Lesnov, Head of the Finam Client Service Development Department, explained that the services of advisory managers are now an integral part of any broker’s product line. “These specialists, many of whom have experience of successfully passing through financial crises, help inexperienced investors avoid mistakes. Services are charged differently: somewhere it’s a percentage of the value of the client’s portfolio (usually 2-3% per year), somewhere it’s a commission on income (15-20%), or both,” he added.

At the same time, income from the provision of agency and market maker services decreased by more than 30%. As Evgeny Shatov, partner of Capital Lab, explains, the dynamics is primarily associated with a four-fold decrease in trading volumes for shares. In addition, the reduction in agency services and market maker services is explained by the withdrawal of foreign investors from Russian exchanges, as well as the reduction in investment opportunities for Russian investors in terms of investing in foreign securities.

The structure of commission income of brokers has also noticeably changed. If the commissions from services on the stock market for half of the companies increased by 30–200%, and for the other half they decreased by 30–50%, then the commissions from services on the foreign exchange market for almost all companies increased two to ten times.

However, during 2022, new financial instruments have appeared that can be used to preserve and increase your capital, the ICB notes. At the same time, higher market volatility, as a rule, also means an increase in the number of operations such as “opening / closing” positions, which also indirectly increases the remuneration of brokers, Anna Avakimyan, chief analyst at RegBlock, believes.

The number of new brokerage accounts opened throughout 2022 was significant, and now the share of turnover of individuals is about 80%, Mr. Lesnov noted. Until 2022, according to him, these were large Western funds and algorithmic traders, which had near-zero profitability for most brokers and provided them with only high ratings in terms of trading volumes.

Also, many brokers and their clients were able to take advantage of the situation and were quite active in transactions with replacement Eurobonds, he adds. Transactions with them allowed both brokers to earn (the commission could be measured from a few tenths to several percent of the transaction amount), and a large number of investors, the expert emphasized.

This year, according to Mr. Lesnov, the operating margin of brokers should stabilize. At the same time, the expert does not see any significant growth drivers. MKB expects an increase in the number of active clients and assets. Mr. Shatov expects continued growth in the client base and demand for brokerage services, since traditional deposits do not provide the desired level of profitability to protect depositors’ savings from inflationary risks.

Dmitry Alexandrov, Managing Director of Ivolga Capital, believes that 2023 is unlikely to be better than 2022, as opportunities to buy assets at discounts have significantly decreased, and classic business has not recovered to 2021 levels amid a general decline in activity. But in the absence of significant force majeure, the expert clarifies, one should hardly expect a worse result than in 2022.

Ksenia Kulikova