SSI released consolidated results for H1 2021 with net profit totaling VND1.0tn (USD44mn; +90.9% YoY), which completed 65.5% our FY2021 forecast. H1 2021 operating income (defined to include gains but not losses on the principal book) was VND3.3tn (USD142mn; +44% YoY). In addition, H1 2021 operating income achieved 62.1% of our full-year forecast due to the strong performance of (1) financial assets at fair value through profit and loss (FVTPL) as well as (2) margin lending and brokerage revenue. We see potential upside risk to our earnings forecasts for SSI, pending a more extensive review.

- The VN-Index increased 27.6% in H1 2021 (from December 31 to June 30), which favored SSI’s investment gains. SSI derived 24% of its consolidated PBT from its principal investment segment in H1 2021.   

- H1 2021 HTM investments (which include deposits and certificates of deposit with terms of less than one year) delivered decreasing gains (-35.4% YoY) due to a series of deposit cuts by the State Bank of Vietnam (SBV) for terms less than six months from November 2019 to October 2020. 

- Brokerage revenue soared 238% YoY in H1 2021, which was mainly supported by a surge in market turnover. H1 2021 average daily trading value (ADTV) on the three combined trading venues was USD1bn — up 295% vs H1 2020. 

- SSI’s margin lending book surged 306% YoY to VND16.2tn as of Q2 2021 following strong market turnover and the uptrend of the VN-Index since Q2 2020. However, H1 2021 margin lending revenue increased at a lower rate than the margin lending book (+130% YoY), which could be due to compressing loan yields amid intensifying competition, in our view. 

Operating income grew 44.0% YoY, led by significant increases in brokerage and margin lending revenue. Brokerage plus margin lending revenue (50% contribution to operating income) soared 190% YoY, which was supported by strong average daily trading turnover in H1 2021 of USD1bn (vs USD254mn in H1 2020). We observe that the average commission rate for the brokerage segment remained unchanged at 0.19% in H1 2021 as in H1 2020 amid intense competition in the segment. Gains from FVTPL also experienced solid growth of 28.4% YoY in H1 2021, contributing 37% to operating income. These gains were partly offset by (1) a 35.4% YoY decrease in gains from HTM investments, (2) no gains from AFS vs a gain of VND164bn in H1 2020 and (3) a 53% YoY decrease in IB revenue.

SSI overtook Mirae Asset Securities to rank first in terms of margin lending book size in Q2 2021. Mirae Asset was very aggressive in the margin lending segment and overtook SSI to rank first in terms of margin lending book size from Q3 2019 to Q1 2021. However, Mirae Asset’s margin lending over equity was a constraint for this company to push its margin lending book further. As of Q2 2021, Mirae Asset’s margin loans over equity reached 190% vs the regulatory threshold of 200%. Meanwhile, margin lending over equity at SSI was only 142%, which partly helped SSI to deliver the second highest QoQ growth and third highest 6M growth in margin lending among the top five largest margin lending books in Q2 2021, in our view (TCBS had the highest QoQ growth and 6M growth at 44% and 102%, respectively). The third largest margin lending book belonged to HCM; however, as of Q2 2021, HCM’s margin loans over equity reached 190%. As of Q2 2021, SSI’s margin lending book reached VND16tn vs our current 2021F forecast of VND12tn.