UBS: Mainland brokers' recurrent net profit last quarter was lower than expected to have a weak outlook for the fourth quarter

The Zhitong Finance App learned that UBS released a research report saying that the regular net profit of Chinese listed brokerage firms in the third quarter of this year fell 20% year on year and 43% from quarter to quarter, falling short of market expectations, drastically reversing the 63% year-on-year increase in the first half of the year. Profit prospects for the fourth quarter may be weak, and the bank lowered the industry profit forecast and target price for 2026 to 2028.

The bank pointed out that the leading brokerage firms assessed by UBS continued to outperform, with recurring net profit falling 19% year-on-year during the period, which was lower than 43% of the smaller peers, mainly due to lower directional investment exposure, more resilient core business, and continued market share capture. Net investment income dragged down performance during the period. The investment income of leading and small brokerage firms covered fell 59% and 78%, respectively, year on year. Net income from investment banks was divided, with leading companies rising 47% year over year and smaller peers falling 1%, mainly due to the recovery in equity financing activities concentrated on leading underwriters.

The bank expects that measures such as expanding swap facilities, repurchase and refinancing support, and optimizing financial and securities risk management and control will help boost short-term market sentiment. However, trading has been weak since the fourth quarter, average daily stock market turnover has fallen 25% year on year, and brokers' profit prospects may be weak, so the industry profit forecast and target price for 2026 to 2028 will be lowered.