Taiwanese securities firms should maintain solid earnings until the end of 2026 despite increasing volatility in the past months, Fitch Ratings said in a Wednesday release.
The sector's total net profit jumped 325% year over year in the first half, with proprietary trading, brokerage income and underwriting revenue gaining from solid market activity, Fitch said.
However, Fitch sees greater structural challenges for smaller independent brokers amid a growing gap with larger securities firms.
The divide could widen if a shift in current favorable market conditions occurs, the rating agency said.
Larger brokers further boost their market shares through group synergies, digital platforms, and affiliated investment trust companies with expanding ETF products, the rating agency said.
Meanwhile, smaller firms face less diversification and dependence on proprietary trading income, leading to a smaller market share.
Net adjusted leverage for the 10 biggest brokers grew to 9.6x, still in line with Fitch's "bbb" category capitalization and leverage score and the Taiwanese securities sector's "bbb+" sector risk operating environment.
The rating agency sees most firms retaining sufficient capital buffers even with increased leverage, given their retained earnings and ongoing balance sheet management.