Haitong Securities, the mainland's second-largest listed brokerage, announced yesterday that profit fell 40per cent last year but beat analysts' forecasts as the year-end rally helped it recover part of the losses in proprietary trade. The Shanghai firm said it earned 3.3 billion yuan (HK$3.75 billion) last year, compared with 5.45 billion yuan in 2007. The figures were not audited. Analysts had expected the profit to drop 50 per cent. Haitong's profit decline came as the Shanghai Composite Index lost 65.39 per cent last year, its biggest drop in its 18-year history. Revenue fell 38 per cent to 70 billion yuan. 'The firm made most of the rally before the year-end to post a better than expected performance,' said TX Investment Consulting analyst Zhang Chunlei. 'Overall, the bear market last year dealt a heavy blow to the securities firms amid shrinking brokerage fees.' Guoyuan Securities, Haitong's smaller rival to Haitong, said its net income last year fell 77 per cent to 52.39 million yuan. The sluggish sentiment has been making it difficult for mainland companies to raise funds from the stock market, significantly cutting off a major revenue for securities firms. The China Securities Regulatory Commission says mainland companies raised a combined 339.6 billion yuan from share offerings last year, down 56.4 per cent year on year. Brokerage fees also dropped as many investors shied away from the market after getting burned. 'Brokerage fees were relatively stable though the amount fell dramatically,' said Mr Zhang. 'The proprietary trading turned out an X factor because it made a big difference on the firms' bottom lines.' Analysts said Haitong reaped profits from a rally between early November and mid-December when the benchmark gained nearly 20 per cent after the government unveiled a 4 trillion yuan stimulus package. Last quarter, Haitong earned 649 million yuan, beating TX Investment's 130 million yuan target. Citic Securities, the largest mainland brokerage, has said it would write down more investment losses for the 2008 annual report, which is worth about 500 million yuan. Eight brokerages are trading on the Shanghai and Shenzhen stock exchanges. TX Investment forecast they would post an average of 56 per cent profit drop.