Brokers’ revenue growth rate increased, but net profit decreased

According to the results of the third quarter, the growth rate of revenue of the largest brokerage companies increased compared to the first half of the year – from 51% to 58%. A number of companies continue to maintain multiple revenue growth rates. But total net profit decreased compared to the first half of the year. Experts believe that revenue from brokerage services is growing, in particular due to the influx of new clients, but costs for business expansion have also increased.

Kommersant analyzed the reports of 34 largest brokerage companies for the nine months of 2023. In the third quarter, revenue growth rates increased slightly compared to the first half of the year – from 51% to 58%. At the same time, a number of companies continue to maintain multiple revenue growth rates – 27 times. The leader in this indicator is BCS (13.2 billion rubles), followed by IT Invest (3.5 billion rubles), followed by Finam (2.9 billion rubles).

However, the net profit of brokers even decreased slightly compared to the first half of the year – from 23 billion to 20 billion rubles. At the same time, it more than doubled year on year. The number of unprofitable companies increased from five to six. However, profit is also generated from interest income, so it cannot be directly linked to customer service results.

From brokerage services, revenue from operations on the stock market grew steadily. However, its share in total income fell below 70%. Its place was taken by revenue from operations on the derivatives market (the share increased from 9% to 14%). Revenue from securities placements increased significantly. However, its share is only 1.4%. It is possible that this is due to the lack of data on a number of large brokers (Sberbank CIB, Otkritie, Region, Solid). In general, brokerage services maintain a share of around 75% in the total revenue of investment companies.

Revenue from brokerage services is growing due to the influx of new clients who are trying to preserve their savings in dividend stories, says Alexey Bogdanov, Deputy General Director for Business Development at Finam Financial Group.

In addition, according to him, OFZs and corporate bonds now provide good returns. “Many companies do not have enough products and services to meet current customer demands as sanctions continue to take their toll. So there will be a flow of clients from such companies,” he added.

In the second half of the year, brokerage income could increase due to rising interest rates. Brokers place free balances of clients’ funds on the money market and carry out margin lending; the increase in the key rate has led to an increase in their income, says Arikapital investment strategist Sergei Suverov. Significant jumps in annual revenue growth rates for individual brokers are mainly due to the low base effect of 2022, noted independent financial analyst Andrey Barkhota. By a low base in terms of brokers’ revenue, the expert does not mean that brokers are startups, but a drawdown in the list of investment areas and client transaction activity that we had in 2022.

The expansion of the companies’ business and staff could increase operating costs, and marketing and infrastructure costs could also increase, which became more expensive due to the exchange rate, Mr. Suverov believes. “The operating costs of brokers required an increase due to increased competition in the brokerage market,” notes Mr. Barhota. “In addition, when trying to adapt digital products for their clients, brokerage companies tend to overestimate the current dynamics of the market, as well as spend money on infrastructure development in a proactive mode “

This year for companies with a sustainable model and a wide product line will end with good profits, Mr. Bogdanov believes. The next year, according to his forecasts, will be very turbulent (elections in many countries, a difficult economic situation and political upheavals), but those who make the right choice will be able not only to preserve their savings from inflation, but also to increase them many times over. “Risks that have already been realized will be intensified by new ones, but apparently on a smaller scale,” the expert concluded.

Ksenia Kulikova