Thanachart Securities plans to emphasise portfolio advisory services and derivative warrants (DWs) to survive fierce competition and squeezed profit margins in stock trading.
Portfolio advisory services and DWs are expected to contribute a combined 30% of total net profit in the upcoming periods, said managing director Pimpaka Nichgaroon.
These two new businesses are anticipated to make up nearly half of total net profit over the next three years, with portions of traditional brokerage business expected to shrink to less than 50%, Ms Pimpaka said.
The company's brokerage business contributes about half of total revenue, driven by both local and foreign institutional investors. The retail securities segment accounts for 30% of revenue, with the rest made up by margin loans, derivatives and other business.
"We want to grow our portfolio advisory business and DWs to 20-25% each of total net profit over the next three years," Ms Pimpaka said. "The traditional securities business will still be maintained, but growth will be difficult."
She said that while Thailand ranked the highest for securities market volume in Asean for a seventh year, securities companies' profits have been falling almost every year, especially in the retail investor segment, where trading profit has been squeezed by high-frequency trading for many years.
Thanachart Securities' investment banking business has also been taken up by the brokerage arms of major banks, which have stronger connections with corporate lending services, she said.
Portfolio advisory services present an opportunity for survival. The Securities and Exchange Commission recently allowed brokers to give investment advice and trade on behalf of customers in the form of portfolio advisory services.
The move also permits brokers to provide other value-added services beyond previous restrictions, whereby brokers were allowed to make suggestions to purchase or offload equities but could not trade on behalf of customers.
Thanachart Securities began operating portfolio advisory services in December 2019, aiming to penetrate retail and high-net-worth investors with trading accounts of at least 1 million baht who are seeking investment returns higher than those of bank deposits.
Ms Pimpaka said both portfolio advisory services and DWs are offered as alternatives for retail investors who are struggling from squeezed profit margins amid volatile market sentiment.
In 2019, the securities industry reported an average brokerage commission fee of 0.09% per trade.