Guotai Junan International sees flat profit for 2016

Revenue at brokerage’s Hong Kong arm tumbles 45.4 per cent in 2016 but decline offset by other business segments

PUBLISHED : Friday, 17 February, 2017, 7:41pm
UPDATED : Friday, 17 February, 2017, 10:34pm

Guotai Junan International, the Hong Kong-based arm of China’s state-owned brokerage giant Guotai Junan Securities, reported annual profit increased 1 per cent year on year to HK$1.01 billion, citing frustrating market conditions and an exceptionally high base in the previous year as key reasons for the lacklustre performance.

Revenue increased 10.7 per cent to HK$2.52 billion for the year ended December 31, the company said in a report filed to the Hong Kong stock exchange on Friday afternoon.

A payment of a final dividend of 4.5 HK cents for the year is proposed.

During 2016, the performance of the group’s business “was diverse”, the filing said.

The company’s core brokerage revenue decreased 45.4 per cent to HK$393 million, the filing said, citing “furious” market competition from mainland rivals.

“There was an increasing number of mainland Chinese players entering the Hong Kong securities industry. Most of them were looking for cross-border business opportunities,” the filing said.

“In addition, the tightening of currency outflows in mainland China created barriers for mainland investors in doing offshore investments,” it said.

Guotai Junan Securities is poised for a public offering in Hong Kong, and this would strongly support the firm’s corporate financing business and earnings in 2017
Lv Yuyi, analyst, Galaxy Securities

While brokerage and asset management businesses were affected by the market conditions and the high comparative figures of last year, financial products, market making and investments business became major growth drivers with their income as a whole surging 135.3 per cent.

Corporate financing income also rose 62.3 per cent and loans and financing business income grew 20.6 per cent from 2015, which both helped offset the core business decline, the filing said.

“Looking forward, the group will target the development of high-net-worth individuals and institutional investor markets,” the filing said.

“Guotai Junan International has seen its brokerage business and margin-finance business weighed under by fierce competition, but its financing business is turning positive,” said Lv Yuyi, an analyst with Galaxy Securities, in a note last week.

“In particular, its parent company, Shanghai-based Guotai Junan Securities is poised for a public offering in Hong Kong, and this would strongly support the firm’s corporate financing business and earnings in 2017,” he wrote.

As at the end of 2016, Hong Kong’s benchmark Hang Seng Index closed at 22,000.56, representing a year-on-year increase of 0.4 per cent. Meanwhile, the market’s average daily turnover dropped to HK$66.9 billion, a decrease of 36.6 per cent when compared with the HK$105.6 billion average in 2015.

A total of 126 companies went public on the Hong Kong market in 2016, a decrease of 8.7 per cent when compared with 138 flotations in 2015.

business-article-page