Brokerage Industry 2014 Semi-Annual Review published

In the first half of 2014, BIST-100 index increased by 16% in US$ terms which was mainly driven by the results of local elections in favour of the ruling party.

• In 1H2014, equity trading volume went down by 20% y-o-y to US$ 189 billion.

• Domestic individuals continued to drive the liquidity of the equity market with a 60% share in trading volume. Yet, as of June 2014, these investors held around only 18% of the free float.

• 25% of equity trading was done online.

• Brokerage firms dominate the futures market with a 99% share. Banks are not permitted to trade in equity-based contracts since August 2013.

• Domestic individuals’ share in futures transactions by brokerage firms decreased by 2 percentage points y-o-y to 62% in 1H2014. Still, as in the equity market, futures trading volume is driven by domestic individuals.

• Internet continues to be the most preferred channel of futures trading with a share of 33%.

• In 1H2014, 8 IPOs took place with a size of only US$ 68 million. 7 of them were listed in the SME markets of Borsa Istanbul.

• The assets managed by brokerage firms and asset management companies reached US$ 2.4 billion and US$ 36 billion respectively.

• At the end of June 2014, brokerage firms employed 5,460 professionals. The average number of employees per brokerage firm is 62.

The brokerage firms’ aggregate net profits decreased by 30% to US$ 76 million in 1H2014, from US$ 101 million in 1H2013.

• At the end of June 2014, brokerage firms’ total assets increased by 6% y-o-y to US$ 6.7 billion. The increase in TL terms stands at 16%. Brokerage firms borrowed short term funds from the money market and invested mainly in bank deposits.

• In the first half of 2014, brokerage firms’ total revenues declined by 14% to US$ 328 million.

• The brokerage revenues declined by 17% y-o-y in 1H2014 as a result of the decrease in equity trading volume and the commission rates.

• Brokerage commissions are followed by proprietary trading profits which jumped 3 times to US$ 62 million in the first half of the year, on the back of profits from derivatives trading.

• In 1H2014, operating expenses decreased by 7% to US$ 292 million. Half of the expenses were related to employee compensation and benefits.

• The brokerage firms’ aggregate net profits decreased by 30% y-o-y in 1H2014 along with contraction in total revenues.

• 53 brokerage firms recorded a total profit of US$ 93 million, while 35 brokerage firms posted aggregate losses of US$ 16 million.

• Return on equity (ROE) of the industry improved to 15% in 1H2014 versus 9% in 1H2013. The sale of subsidiaries of one brokerage firm in the 2H2013, supported the last 12 months’ profits which improved the trailing ROE, despite falling profits in 2014.

Foreign investors hold 64% of the free-float equities 

• The number of investors with equity holdings is around 1.1 million as of end June 2014.

• Total equity holdings increased by 15% to US$ 106 billion compared to end-2013. Foreign investors hold 64% of the overall equity portfolio.

• The number of corporate bond investors decreased by 16% to 140,000, while their portfolio rose by 5% to US$ 18 billion at the end of June 2014.

• In 1H2014, while the number of pension fund investors rose by 12%, total portfolio increased by 20% to reach US$ 14 billion.