Insider Trading Loses Money; Everbright Securities' Revenue, Profits Fall

Recently, the term "China Everbright Investment Banking Employee Involved in Insider Trading with a Loss of 5.32 Million Yuan" has attracted attention online. Zhao Yuanjun, the former General Manager of the Investment Banking Headquarters of Everbright Securities, was fined 4.6 million yuan by the China Securities Regulatory Commission (CSRC) and banned from the securities market for 10 years. Concurrently with the internal control loopholes, in the first half of the year, Everbright Securities' operating income and net profit attributable to the parent company decreased by 32.29% and 41.87% year-on-year, respectively. In addition, several of its main business lines experienced不同程度的下滑, with the wealth management business, which serves as the "ballast stone" of operating income, declining by 24% in the first half of the year.

Former Investment Banking General Manager Involved in Insider Trading

Recently, Zhao Yuanjun, the former General Manager of the Investment Banking Headquarters of Everbright Securities, was fined 4.6 million yuan by the CSRC for participating in insider trading during the reorganization of Star Technology and was banned from the securities market for 10 years.

Public information shows that from September 17, 2018, to February 28, 2022, Zhao Yuanjun was employed at Everbright Securities as a securities professional. According to the detailed process of the formation of insider information described in the CSRC's administrative penalty decision, on February 17, 2020, Kang from Everbright Securities, based on the situation of Star Technology and financing rules, designed a major asset reorganization plan; on February 19, 2020, Kang reported to Zhao Yuanjun on the situation of this major asset reorganization project; Zhao Yuanjun reported to the relevant persons in charge of Everbright Securities and instructed Kang to conduct a feasibility analysis of the reorganization project. On February 20, 2020, Kang sent the relevant analysis report to Zhao Yuanjun; on February 22, 2020, Zhao Yuanjun participated in a video meeting with Star Technology regarding the project; on March 15, 2020, Star Technology issued a related major asset reorganization announcement.

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The CSRC stated that Zhao Yuanjun had the following illegal facts: from September 17, 2018, to February 28, 2022, during his tenure at Everbright Securities, Zhao Yuanjun actually controlled and used the "Zhao Moujiang" Huatai Securities general account and credit account to trade related securities. As of April 25, 2022, all illegal trading securities have been sold. After calculation, the account actually lost about 5.3258 million yuan.

Net Profit Attributable to the Parent Company Decreased by 41.87% Year-on-Year

While the former staff were punished for insider trading, Everbright Securities' operating "answer sheet" in the first half of the year showed a decline in both operating income and net profit attributable to the parent company. According to the semi-annual report for 2024, in the first half of the year, Everbright Securities achieved an operating income of 4.184 billion yuan, a year-on-year decrease of 32.29%; net profit attributable to the parent company was 1.391 billion yuan, a year-on-year decrease of 41.87%; basic earnings per share were 0.26 yuan, a year-on-year decrease of 45.83%. In the online performance explanation meeting, some investors said that Everbright Securities' equity investment revenue in the first half of the year decreased by 108% compared to the same period last year; the operating cost of investment trading increased by 48% compared to the same period last year, and they asked what the reasons for the changes in various data were. Liu Qiuming, the executive director and president of the company, replied that the change in equity investment revenue was mainly due to market fluctuations leading to changes in the valuation of invested projects, and the change in the operating cost of the investment trading cluster was mainly due to the increase in the scale of debt investments, and the change in the amount of impairment provisions according to the expected loss model.

In addition, in the first half of the year, Everbright Securities achieved a total income and other income of 6.36 billion yuan, a year-on-year decrease of 25%. Among them, the income from fees and commissions was 2.96 billion yuan, a year-on-year decrease of 12%, mainly due to the decrease in the income from fees and commissions of securities brokerage business and underwriting and sponsorship business. The interest income was 2.35 billion yuan, a year-on-year decrease of 8%, mainly due to the decrease in the interest income from financing and securities lending and the interest income from deposits with financial institutions. The net investment income was 990 million yuan, a year-on-year decrease of 54%, mainly affected by the fluctuations in the equity market. Other income and benefits were 50 million yuan, a year-on-year decrease of 88%, mainly due to the decrease in the income from commodity basis trade business and government subsidies in this period.

From the performance of various businesses, in the first half of the year, the performance of Everbright Securities' main businesses mostly experienced a certain degree of decline. The wealth management business accounts for 48% of Everbright Securities' operating income, ranking first in revenue contribution. However, this business achieved an operating income of 2.003 billion yuan in the first half of the year, a year-on-year decrease of 24%. The corporate financing business achieved an operating income of 458 million yuan, a year-on-year decrease of 32%. Among them, in the equity financing business, in the first half of the year, Everbright Securities completed 2 equity main underwritings (excluding exchangeable bonds), with an equity underwriting scale of 1.09 billion yuan, ranking 14th in the number of main underwritings and 16th in the main underwriting amount; in the debt financing business, in the first half of the year, the scale of debt financing services for the real economy was 37 billion yuan, a year-on-year increase of 40%, among which the underwriting scale of the technology industry and green industry increased by 254% and 36% year-on-year, respectively. The investment trading business achieved an operating income of 428 million yuan, a year-on-year decrease of 3%, and the operating cost increased by 48% compared to the previous year, mainly due to the increase in the scale of debt investments, and the change in the amount of impairment provisions according to the expected loss model, and the overall asset portfolio achieved a positive return.

In addition, the equity investment business experienced the largest decline, with a revenue of -55 million yuan in the first half of the year, a year-on-year decrease of 108%. At the semi-annual performance explanation meeting, Everbright Securities stated that the change in equity investment revenue was mainly due to market fluctuations leading to changes in the valuation of invested projects. Regarding the development strategy for the second half of the year, Everbright Securities stated that the fixed income proprietary investment business will further strengthen market research, continue to optimize investment strategies, prudently expand investment categories, and carry out business cautiously and steadily. It will increase support for key areas such as green finance and technology finance."Eliminate" 10 Business Departments Within the Year

Alongside setbacks in its main business, the number of Everbright Securities' business departments has been reduced this year. On August 2nd, Everbright Securities issued an announcement deciding to revoke the Beijing Xizhimen and Beijing Yong'anli securities business departments, citing the reason as "to further optimize the layout of business outlets."

As of now, Everbright Securities has revoked a total of 10 business departments. Starting from June, Everbright Securities has successively issued announcements to revoke securities business departments, including Guangzhou Tianhe North Road, Guangzhou Pazhou, Maoming Xiyue South Road, Taicang Taiping Road, Jinan Long'ao West Road, and Shenzhen Menghai Avenue securities business departments, among 8 of its subsidiaries. The reason for the revocation in all cases was "optimizing the layout of business outlets."

An investor asked Everbright Securities about the reason for eliminating some business departments in the first half of the year during a performance explanation meeting. In response, the management of Everbright Securities stated that the optimization of business outlets is an active change under the backdrop of significant transformation in the business model, team construction, and customer service needs of wealth management business. Valuable resources will be invested in improving the quality of customer service, reducing fees and benefits for investors, and building a professional team, in order to better fulfill the functional responsibilities of financial institutions and further consolidate the company's competitiveness and brand image in the market.