Founder Securities has released a research report suggesting that leading brokerages are widening their ROE gap with smaller peers, presenting investment opportunities as fundamentals improve while market performance diverges.
The key areas to watch are: 1) top-tier brokerages with high ROE and low price-to-book (P/B) ratios; 2) regional state-owned brokerages with low P/B ratios and ambitions for growth; and 3) firms with high earnings sensitivity to trading volume.
Performance Review: Strong Q1 Earnings, Weak Market Performance
Capital markets remained active, with the brokerage sector posting high earnings growth in the first quarter of 2026, led by superior ROE from leading firms.
The sector's net profit grew 17% year-on-year, with adjusted net profit rising 39% year-on-year. The sector's total net profit for Q1 2026 was 609 billion yuan, a 17% year-on-year and 40% quarter-on-quarter increase, representing a high single-quarter level. Adjusted net profit was 595 billion yuan, up 39% year-on-year and 37% quarter-on-quarter.
China Securities (16.1%), Changjiang Securities (15.8%), CITIC Securities (13.8%), China International Capital Corporation (13.4%), and GF Securities (13.3%) recorded the top five annualized ROE figures for Q1 2026.
Since the start of the year, the brokerage index has been under pressure. As of May 28, 2026, the Shenwan Securities II Index had fallen 15.8% year-to-date, underperforming major market indices.
Market Outlook: Ample Room for Household Savings Inflow, Continued Policy Support
The ratio of household deposits to total A-share market capitalization indicates significant potential for further investment in equities.
With the expansion of the A-share market and rising average trading volumes, the "household deposits/A-share total market cap" ratio fell to 1.48 in April 2026. Historically, this ratio has typically been below 1 at market peaks, suggesting ample room for further inflows and a continuation of the "deposit shift" trend.
Policies have repeatedly emphasized stabilizing the capital markets. Looking ahead to the 15th Five-Year Plan period, "accelerating the building of a financial powerhouse" has been included in a five-year plan for the first time, highlighting the growing importance of a robust capital market. A recent Politburo meeting also reaffirmed the goal to "stabilize and boost confidence in the capital markets," indicating significantly increased national-level attention and support.
Fundamental Drivers: Higher Trading Volumes and Rising International Contribution
The upward shift in average market trading volumes is expected to continue supporting high profit growth for the brokerage sector.
Key metrics show the average daily stock and fund trading volume in Q1 2026 was 3.15 trillion yuan, a 77.3% year-on-year increase, while the average daily margin financing balance was 2.66 trillion yuan, up 42.0% year-on-year. Both growth rates accelerated compared to 2025.
International operations are highly profitable, with their contribution to overall earnings poised to increase. The ROE of brokerage firms' international subsidiaries is impressive and significantly higher than the company-wide average. In terms of profit scale, the net profit of these subsidiaries generally saw high year-on-year growth. As brokerages continue to inject capital into their international units to strengthen their financial foundations, a further rise in the contribution from international business is anticipated.
Key risks include adjustments in the stock and bond markets, a decline in trading activity, and a slowdown in incremental capital entering the market.
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