Securities Sector - 2024 Outlook

Following the securities firms’ improved profitability in 2023, we expect the sector return on average assets (ROAA) will continue to improve at the same pace in 2024. Stronger stock trading volume and improved market sentiment amid a low-interest rate environment will boost margin lending income and gains from fixed-income investments. As firms expand investment and margin lending, their leverage ratios and reliance on short-term bank loans will gradually increase, with risks offset by new capital raises. Sector asset risk will stabilize from the slower pace of new corporate bond defaults, but several bond distributors remain more at risk as they underwrite more corporate bond issuances and commit to buyback bonds from investors.