March 27, 2014 / 1:20 PM / 3 years ago

China's CITIC Securities profit rises on lending business

SHANGHAI, March 27 (Reuters) - CITIC Securities Co Ltd , China's biggest brokerage, reported its fastest profit growth in three years in 2013, as revenue from newer lines of business more than offset a fall in traditional investment banking income.

CITIC reported a 25 percent rise in net profit on Thursday, a sharp turnaround from the previous year when profit fell by two thirds.

The broker's return to profit reflects its strength in new lending businesses, such as margin and stock-repo financing, a sign that China's initiatives to encourage this area are succeeding.

Net profit rose to 5.24 billion yuan ($843.9 million) in line with its preliminary results released in January.

The profit rise in 2013 marks the highest growth since 2010, when net profit rose nearly 26 percent.

China resumed initial public offerings (IPOs), earlier this year after freezing them in late-2012, which should boost earnings for CITIC, a heavyweight in organising stock market listings.

Revenue from its lending business increased almost fourfold in 2013 to 33.42 billion yuan, helped by regulatory changes.

CITIC's results mirror other Chinese brokerages, which dipped in 2012 and recovered the following year as they diversified their businesses.

"Traditional brokerage business is not very profitable, margins are declining, because the business is very fragmented and all the players want to compete on price," Leon Qi, an analyst at Daiwa Capital Markets, said before the earnings were published.

"Interest rates in China are much higher than the rest of the world, so brokerages are able to charge a very high interest on margin and collateralized lending... so they are moving to that area," he said.

CITIC's revenue from its traditional brokerage business, which mainly consists of trading commissions, rose 80.2 percent to 6.50 billion yuan in 2013, while investment banking revenue fell 19.5 percent to 2.22 billion yuan. The CSI300 index of top Chinese companies fell 7.6 percent last year.

Profits for Chinese brokerages rose 33.3 percent to 44 billion yuan in 2013 from 33 billion yuan in 2012, according to figures from the Securities Association of China. ($1 = 6.2094 Chinese Yuan) (Reporting by Shanghai Newsroom; Editing by Erica Billingham)

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