Huaxi Securities Co., Ltd. recently unveiled its semiannual financial report, revealing total operating revenue of RMB 2.712 billion for the first half of the year, a 30.82% year-on-year increase, alongside a net profit attributable to shareholders of RMB 972 million, surging 89.71% year-on-year. This near-doubling of net profit growth ranks among the top performers among listed brokers that have disclosed their interim results. However, these impressive figures mask a deeper structural issue: the company's revenue streams remain heavily skewed toward market conditions, with an unmistakable reliance on favorable market swings for profitability.
A closer look at the data underscores this imbalance. In the first half of 2026, revenue from brokerage and wealth management operations reached RMB 1.584 billion, up 39.11% year-on-year, accounting for 58.41% of total operating revenue. Combined with investment business income of RMB 513 million, representing an 18.92% share, these two segments contribute a dominant 77.33% of overall revenue. The robust growth in brokerage income is largely attributed to "active market trading activity," with average daily equity and fund turnover surging 98.6% year-on-year. Should a securities firm anchor over 58% of its income to commission-based trading, its earnings stability becomes inextricably tied to market sentiment, leaving results vulnerable to significant fluctuations if trading volumes cool off.
In stark contrast to the strength of its brokerage arm, Huaxi Securities appears nearly invisible in investment banking and asset management, two areas that typically highlight a broker's professional expertise and competitive differentiation. Investment banking revenue for the first half totaled just RMB 42.14 million, growing a mere 0.76% year-on-year and representing a slim 1.55% of total revenue. Asset management income came in at RMB 40.74 million, accounting for 1.50%. More concerning is the downward trajectory: between 2023, 2024, 2025, and the first half of 2026, the investment banking revenue share of total revenue has steadily declined, from 5.8% to 3.37%, then 1.69%, and now 1.55%.
The investment banking segment not only generates minimal revenue but also operates at a loss. In the first half of 2026, it posted an operating loss of RMB 30.93 million, with a gross margin of -73.39%. This implies the unit is draining profits from other business lines rather than contributing to the bottom line. The weakness in investment banking is hardly coincidental, as a string of regulatory penalties and poor quality assessments has laid bare the underlying causes.
In April 2024, Huaxi Securities was suspended from sponsoring business for six months by the Jiangsu Securities Regulatory Bureau due to inadequate due diligence in the Jin Tong Ling Technology Group's 2019 private placement project, including false statements in the sponsor report and irregularities in reports issued during the ongoing supervision phase. Two sponsor representatives were deemed unsuitable persons and barred from the industry for two years. In December 2025, the Nanjing Intermediate People's Court ruled that Jin Tong Ling must compensate 43,269 investors for investment losses totaling RMB 775 million, with Huaxi Securities, as one of 25 co-defendants, facing an undecided joint liability ratio in ongoing proceedings. According to the February 13, 2026 announcement from the China Securities Investor Services Center regarding compensation payments in the Jin Tong Ling special representative lawsuit, the company has transferred cash compensation to eligible investor securities accounts, with the vast majority of affected plaintiffs having now received full payments.
In March 2026, the Sichuan Securities Regulatory Bureau issued another penalty against Huaxi Securities, citing inadequate due diligence on material matters such as collateral information, insufficient verification of raised fund usage, and flawed internal protocols in certain bond underwriting and trustee management projects. Both the company and two project leaders, Zhao Zhejie and Chen Yufang, were subjected to corrective supervision measures. The China Securities Association's 2025 quality evaluation of securities firms' investment banking operations revealed that Huaxi Securities stands as the only brokerage to receive a C rating in this category for three consecutive years, underscoring persistent deficiencies in this segment.
Comments