Since July 2025, the A-share market has continued to rally, fueling strong financing demand among securities firms as financial intermediaries. By November 27, domestic bond issuance by 74 securities firms exceeded RMB 1.7 trillion, marking a nearly 50% year-on-year increase.
Analysts attribute this balance sheet expansion to two factors: increased operational settlement funds amid favorable market conditions and industry-wide efforts to boost capital-intensive businesses (see report *Securities Firms’ Debt & Capital-Intensive Business Trends: 2025 Bond Issuance Up 60% YoY, Driving Balance Sheet Growth*).
Notably, while China Galaxy, Guotai Haitong, and Huatai Securities topped bond issuance volumes this year at RMB 138.9 billion, RMB 127.3 billion, and RMB 125.6 billion respectively, their leverage ratios remain moderate. As of Q3 2025, their equity multipliers (excluding client margins) stood at 4.23, 4.69, and 3.86, ranking 9th, 6th, and 13th among 43 listed brokers.
In contrast, China International Capital Corporation (CICC), Shenwan Hongyuan, and CITIC Securities led with equity multipliers of 5.42, 5.26, and 4.83. Research suggests CITIC and CICC rely more on interbank financing (e.g., payables), reducing bond issuance needs (see report *Behind CITIC’s Lagging Bond Issuance: High Payables Meet Funding Needs, Favorable Rates Reduce Refinancing Pressure*).
Shenwan Hongyuan, however, primarily leverages sell-buyback financing (repurchase agreements). This short-term collateralized borrowing involves pledging bonds or notes to counterparties (e.g., banks, funds) for liquidity, with repurchase commitments.
Sell-buyback financing is a key active funding tool beyond bond issuance. As of Q3 2025, such liabilities accounted for 24.40% of total debts (RMB 120.66 trillion) at listed brokers, second only to client margins (17.53% for payable bonds). Shenwan Hongyuan’s sell-buyback liabilities reached 32.72% of total debts—third-highest industry-wide, trailing only Dongwu and Southwest Securities.
Collateralization typically lowers sell-buyback interest rates. For example, CITIC Securities’ 2024 bond interest averaged 3.18% (RMB 4.55 billion on RMB 143.18 billion), while sell-buyback costs were 2.68% (RMB 9.03 billion on RMB 336.76 billion).
To assess debt structures and costs, we analyzed interest-bearing liabilities (short/long-term borrowings, repurchase agreements, bonds) and annualized financing costs (4×Q3 interest expenses/interest-bearing liabilities) for 43 brokers (see Chart 1). Key observations:
1. *Interest expenses* include non-debt items (e.g., client margin payouts), so calculated costs reflect relative, not absolute, rates. 2. Rates depend on terms (e.g., collateral quality, bond maturity). CITIC’s higher-cost sell-buyback reflects non-bond collateral (stocks, metals), while top brokers benefit from longer-term bond issuance. 3. Payables-heavy firms like CITIC and CICC may achieve lower overall costs via interbank credit.
Under this framework, Guosheng, Dongwu, Guohai, and Huilin Securities posted the lowest financing costs—all ranking top-10 in sell-buyback reliance but bottom-10 in bond shares. Conversely, Tianfeng Securities (highest-cost) leaned most on bonds (lowest sell-buyback share). Shenwan Hongyuan’s 2.17% cost ranked 17th, with 30.81% bonds (28th).
**Advantages**: Sell-buyback offers flexibility and lower costs, enabling tactical liability management. **Risks**: Short maturities create duration mismatches with long-term assets, while market turbulence heightens rollover risks. Historically, sell-buyback balances fluctuate sharply with liquidity (see Chart 2).
The 2014 peak (RMB 788.6 billion, 28.32% of liabilities) was followed by post-2015 tightening (M2 growth fell from 13.3% to 10.2%). Brokers then cut sell-buyback shares below 20% until 2018, while bond shares rose to 27.44%. Post-2022 rate cuts (LPR declines, DR007 ~1.5% vs. 2.0%) revived sell-buyback growth (+25% to RMB 2.46 trillion by 2024 vs. +2% for bonds).
Bonds provide stability but require high eligibility; sell-buyback acts as a market barometer. While current low-cost achievers enjoy earnings flexibility, their resilience to liquidity shifts—and ability to diversify funding—warrants scrutiny.
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