Why did profit fall while the firm still sees core businesses as on track?

  • CITIC Securities’ profit fell 20% year on year in the third quarter of 2026, with a 69% year-on-year drop in investment income the main drag. Morgan Stanley said the profit decline was to some extent in line with expectations and overall results were consistent with market consensus.
  • The bank believes the weakness in investment income may be related to the A-share market correction and a temporary tightening of regulations on derivatives, including southbound total return swaps. Meanwhile, other core revenue lines performed in line with expectations and could continue to gain market share.
  • Morgan Stanley expects consensus earnings-per-share estimates to be revised down slightly over the next 12 months, but says the results leave its investment thesis unchanged.

How strong was the quality of brokerage growth?

  • Third-quarter brokerage fee income rose 7% year on year but fell 22% quarter on quarter, in line with the trend in average daily market turnover. Revenue remained tied to trading conditions, with the market correction still reflected in the quarter-on-quarter result.
  • Morgan Stanley believes commission rates may be declining, and gains in market share helped CITIC Securities offset the effect of lower rates.

What supported investment banking and asset management revenue?

  • Third-quarter investment banking fee income rose 32% year on year and 16% quarter on quarter, benefiting from faster domestic IPO activity. Morgan Stanley identified the pace of the A-share IPO rebound as a factor affecting its assessment: a faster recovery in issuance would benefit results, while issuance volumes below expectations pose downside risk.
  • Asset management fee income rose 13% year on year and was flat quarter on quarter. Over the same period, assets under management in the public fund market were broadly flat quarter on quarter, but the stock market correction slightly worsened the asset mix. On that basis, the bank believes CITIC Securities’ asset management revenue performed slightly better than the market quarter on quarter.

Why did net interest income rise despite a contraction in financing business?

  • Third-quarter net interest income rose 169% year on year and 109% quarter on quarter, while the balance of margin financing and securities lending loans fell 15.7% quarter on quarter, a decline in line with the overall market.
  • Morgan Stanley believes growth in net interest income may have benefited from lower interest expenses on financing for equity and derivatives trading. The bank rates CITIC Securities’ Hong Kong-listed shares Overweight, with a target price of 33.10 Hong Kong dollars.