Huachuang Securities has released a research report indicating that the trend toward industry consolidation is persisting. Mid-sized and smaller brokerages continue to rely primarily on capital increases and share placements to support business expansion, making the conversion of capital replenishment into stable asset returns and improved return on equity a critical factor. These firms can still unleash substantial profit flexibility during market upswings, but they also experience more pronounced earnings volatility during periods of market pressure. Additionally, they should leverage regional branch networks and local client bases to enhance conversion rates across businesses such as product retention, investment advisory, and margin lending. Attention should be directed toward mid-sized brokerages that possess regional resources, distinctive business lines, and the potential for improved capital efficiency.
Industry consolidation persists as capital and asset share pressures mount for mid-small brokers
Against the backdrop of building first-class investment banks, category-based regulation that favors the strong and limits the weak, and the continued push for mergers and acquisitions, resources within the securities industry are increasingly concentrating among leading institutions. From 2016 to 2025, the CR10 ratio for attributable net assets of listed brokerages rose from 59.0% to 62.1%, while the CR10 for total assets (excluding client funds) climbed from 60.6% to 69.7%. Within this environment, mid-sized and smaller brokerages still depend largely on capital increases and share placements to drive business expansion, and whether that capital replenishment can translate into stable asset returns and improved ROE has become a pivotal issue.
Earnings gaps stem primarily from leverage and capital deployment efficiency, leaving room for cyclical flexibility
In 2025, the financial leverage multiples for top-tier, mid-sized, and smaller brokerages stood at 4.74 times, 3.51 times, and 2.82 times, respectively. Their ROE levels were 9.2%, 6.7%, and 5.8%, while return on assets came in at 2.02%, 1.96%, and 2.03% — showing relatively limited divergence. Leading brokerages convert higher leverage into superior ROE by leveraging advantages in funding costs, institutional client bases, risk hedging, and asset turnover. Mid-sized and smaller brokerages can still generate strong profit elasticity during bull markets, yet their earnings fluctuations become notably more pronounced when markets face downward pressure.
Brokerage and wealth management landscapes remain broadly stable, with a shift from new client acquisition to deeper cultivation of existing relationships
In 2025, the average daily equity and fund trading volume reached 2.05 trillion yuan, up 69.7% year-on-year. In the first half of 2026, that figure further advanced to 3.24 trillion yuan, representing an increase of roughly 101.0% year-on-year. The CR10 for branch-level equity and fund trading volume rose to 50.9% in 2025, while the CR10 for client funds has consistently hovered around 60%, underscoring the entrenched client and channel barriers of leading institutions. Mid-sized and smaller brokerages should capitalize on their regional branch footprints and local client relationships to improve conversion rates across product retention, investment advisory, and margin lending services.
Equity financing concentrates among leaders, leaving bond underwriting as a key avenue for mid-small brokers
From 2016 to 2025, the CR10 for IPO and refinancing underwriting scale advanced from 67.2% and 60.4% to 85.0% and 88.8%, respectively. Meanwhile, the CR10 for corporate bond and enterprise bond underwriting rose from 45.8% to 58.6%, a concentration level that remains comparatively low. Mid-sized and smaller brokerages can draw on their relationships with local shareholders, regional governments, and area industrial resources to focus on expanding regional state-owned enterprise bond offerings, serving specialized industry clients, and delivering comprehensive financial services to small and medium-sized enterprises.
Asset management moves beyond channel expansion, with product expertise defining future growth
In 2025, the scale of entrusted asset management by brokerages recovered to 8.39 trillion yuan, with the AUM CR10 climbing to 69.2%. Following the reduction of channel-based businesses, mid-sized and smaller brokerages must pivot toward active management, institutional customization, and sourcing distinctive assets. During the same period, the CR10 for equity funds, money market funds, and bond funds declined to 32.6%, 41.1%, and 26.9%, respectively. This relatively fragmented public fund landscape offers a window of opportunity for smaller institutions equipped with fixed-income research capabilities, asset sourcing strengths, and risk pricing expertise.
Proprietary trading provides earnings elasticity, while high-quality balance sheet expansion ensures sustainability
In the first half of 2026, 42 listed brokerages collectively generated proprietary trading income of 133.19 billion yuan, up 14.6% year-on-year. However, performance diverged noticeably across firms. Mid-sized and smaller brokerages should reduce reliance on any single market direction by allocating to high-dividend equities and perpetual bonds, while also developing market-making and client-driven trading operations. This approach can help control profit volatility while enhancing capital efficiency and income quality.
The Beijing Stock Exchange and the New Third Board serve as vital entry points for differentiated development
These platforms primarily serve innovative small and medium-sized enterprises, aligning closely with the regional client bases of mid-sized and smaller brokerages. Some firms have already established first-mover advantages in continuous supervision and market-making activities. Mid-sized and smaller brokerages should connect industry research, listing incubation, ongoing supervision, market-making, financing, M&A, and wealth management into a cohesive chain, shifting from pursuing individual deals to offering full-lifecycle services that elevate overall client value.
Investment recommendations
Focus should be placed on mid-sized brokerages with regional resources, distinctive business lines, and the potential for improved capital efficiency. Three categories of institutions warrant particular attention: first, regional leaders with solid local client foundations and substantial headroom for wealth management conversion; second, specialized brokerages that have carved out advantages in niche tracks such as bond underwriting, fixed-income asset management, Beijing Stock Exchange listings, and New Third Board market-making; and third, firms that have secured shareholder capital injections or completed refinancing while demonstrating clear capital deployment plans and expectations for operational mechanism improvements.
Risk warnings
Market trading volumes may decline; capital market reforms and business innovation could fall short of expectations; the real economy recovery may underperform; proprietary investment returns remain subject to fluctuation; and merger, acquisition, and shareholder change processes could face delays.