Haitong expects 4b yuan net profit
Mainland broker forecasts 15-fold earnings jump amid booming market
Haitong Securities, which completed a back-door listing earlier this year, said net profit for the first nine months could jump 15-fold, driven by strong revenue and a booming stock market.
Net profit by the end of last month was estimated to be four billion yuan, compared with 259.7 million yuan a year earlier, the Shanghai-based brokerage said in a statement to the Shanghai Stock Exchange yesterday, citing unaudited financial results.
Given Haitong's first-half net profit of two billion yuan, the brokerage has earned as much money in the third quarter as in the first two.
'We have been expecting dramatic earnings growth for the third quarter but the actual growth is still higher than our previous expectations,' Guotai Junan Securities analyst Liang Jing said in a research note yesterday.
Driven by income from proprietary trading, the creation of put warrants and gains from Haitong's mutual fund subsidiary, the growth in investment earnings could reach 50 per cent in the third quarter, the major reason for the better-than-expected results, the research note said.
Shares of Haitong Securities hit the daily 10 per cent limit in Shanghai and closed at 54.92 yuan in morning trading yesterday.
The company's market value now stands at 186 billion yuan or US$25 billion, making it larger than Bear Stearns, the fifth-largest United States securities firm which was worth US$17.9 billion yesterday before the US market opened.
Haitong Securities, the second-largest listed brokerage in the mainland, has handled 3.8 trillion yuan of securities trading in the first three quarters of the year. It has a 4.29 per cent market share compared with 4.27 per cent in June and is ranked the eighth-biggest brokerage business in the country, according to data from Guotai Junan Securities.
Haitong has 124 branches in the country, the fourth-largest among peers. In investment banking, it has a 3 per cent market share and also is ranked eighth among its peers in terms of the total proceeds it helped raise in share offerings.
The brokerage, whose target clients are small and medium-sized companies, helped raise 10.6 billion yuan in initial and secondary share offerings for five companies in the period.
The initial public offering market in the mainland, which is dominated by domestic firms, including China International Capital Corp and Citic Securities, with each taking more than 20 per cent market share, has proved difficult for smaller players to break into.
Haitong, while trying to find a niche serving smaller companies, also faces fierce competition from Guosen Securities, GF Securities and Ping An Securities.
To maintain its strong earnings growth, Haitong is raising as much as 26 billion yuan to meet capital-level requirements set by the China Securities Regulatory Commission.
The company wants to expand into securities underwriting, asset management and the creation of warrants.