Guotai Junan International Announced 2020 Interim Results

Second Highest Revenue in History with Prominently Reduced Cost and Steadily Increased Payout Ratio

HONG KONG–(BUSINESS WIRE)–Guotai Junan International Holdings Limited (“Guotai Junan International”, the “Group” or the “Company”, stock code:1788.HK) announced its unaudited 2020 interim results for the 6 months ended 30 June, 2020 (the “Period”). During the Period, COVID-19 pandemic (the “Pandemic”) caused tough challenges to the global economy and inevitably hit Hong Kong’s business environment. Nonetheless, the Company still maintained stable and resilient results. During the Period:

• With the Groups’s enhanced anti-risk capability, its revenue achieved second highest history amount of HK$1,798 million;
• Profit attributable to shareholders dropped by 5% Year-on-Year(“YoY”) to HK$606 million while it increased by 136% half-on-half compared to the second half of 2019；
• Total costs reduced by 31% YoY to HK$1,096 million, among which impairment provision decreased by 93% YoY to HK$38.37 million;
• The Board of Directors declared an interim dividend of HK$0.034 per share, with the payout ratio increasing 4 percentage points to 54%;
• Annualised return on equity (ROE) was 9.4%, increasing by 1.3 p.p. compared to 2019;
• As of the end of June, cash and cash equivalents rose by 49% YoY to HK$6,990 million;
• As of the end of June, total assets under management of clients reached HK$151 billion, which was comparable to that at the end of 2019. During the Period, HSI dropped by 13%;
• Wealth management business completed its strategic integration, while market share of the brokerage business expanded steadily;
• Loans and financing balance surged by 28% to HK$14,987 million during the Period. 

Diverse Businesses Boosted Interim Results to the Second Highest Since Listing, with Resilient Profitability

During the Period, Hong Kong’s businsess environment was hit by the Pandemic, hindering corporate clients’ financing plans in Hong Kong, including IPOs and issuing equity and bonds. Stagnant economic activities also caused the global financial market to fluctuate. Leveraging the diverse income composition, the Group still demonstrated a favourable business development trend. Interim revenue of 2020 amounted to HK$1,798 million, which reached the second highest record in history. Meanwhile, the Group maintained a balanced revenue structure, in which fee and commission income (brokerage, corporate finance, asset management and financial products handling fee), interest income (loans, financing and interest income from financial products) and investment income (market making and investments) respectively constituted 34%, 37% and 29%. Furthermore, beneffiting from effective cost control and continuously optimization of asset quality, the Company achieved a stable performance in the first half of the year. Profit attributable to shareholders slightly declined by 5% YoY to HK$606 million but climbed by 136% compared to the second half of 2019. The profitability showed a relatively high stability and resilience.

Wealth Management Continuously Attracted New Clients, Driving the Steady Growths in Market Share, Loans Balance and AUM

This year, as China concept stocks seeking listings in HKEX, our wealth management business simultaneously launched warrant products linked to stocks such as Net Ease, etc. Since May, the market sentiment has been gradually recovered. Trading volume of the Group’s clients rose remarkably in the first half of the year. Balance of loans and financing surged by 28% to HK$14,987 million during the Period, and as of the end of June, the Group’s market share in the brokerage segment grew steadily compared to that of the end of 2019. Though HSI slumped drastically by 13% in the first half of 2020, the scale of asset under management of the Company’s wealth management platform steadily climbed by 15% to HK$22.2 billion. Total assets under management also remained at HK$151.0 billion.

During the Period, the Company’s wealth management division completed a series of strategic integrations, aiming to provide high-net-worth clients with tailor-made premium products and integrated platform. In terms of asset class, other than regular investment portfolios such as equity and fixed income, the platform also offers warrants derivative products, customized financial products, insurance, foreign exchange, futures and private equity.

Created Values for Clients, with Timely Adjustment to Balance Sheet Strategy

Early in the second half of 2019, the Group reassessed the strategy and management of the balance sheet, lowering the risk exposures of businesses in the balance sheet, such as market making, and enlarging the cash reserve. Furthermore, the Group took the initiative to raise the impairment provision for risky assets in 2019, consolidating the balance sheet’s anti-risk capability.

Since the Group’s rights issues in March, its net asset and the foundation of business development has been enhanced. Although the fear in global financial markets due to the Pandemic caused various assets’ prices to deteriorate abundantly in the first half year, relying on the experience and in-depth knowledge of the capital market for years, the Group always stood by to grasp market opportunities for clients during the Period. In the first half of 2020, the Group appealed to high-net-worth wealth management clients with differentiated investment and financing products, helping them invest assets of high quality in the fluctuated market. As of the end of June, the balance of loans and financing greatly increased, and the number of wealth management clients and AUM also steadily increased. As of the end of June, 2020, the Group’s total assets expanded by 30% during the Period to approximately HK$125.412 billion, while cash and cash equivalents grew by 49% YoY to HK$6,990 million, maintaining a satisfying liquidity.

Steady Profitability Supported by Effective Cost Control, with a Significant Decrease in Impairment Provision YoY

In the first half of 2020, the Group’s total costs droped by 31% YoY to HK$1,096 million, mainly benefiting from effective cost control during the Period and the steady improvement in balance sheet quality in recent years. Although the financial market has seen violent fluctuations during the Period, the Group’s impairment provision, staff costs and finance costs recorded a YoY decrease, indicating the stability and resilience of performance.

Remained a Leading Credit Rating among Peers while Risk Management Embeded into Corporate Culture

In July, the global credit rating agency Standard & Poor’s updated its credit rating report on the parent company Guotai Junan Securities and its subsidiary Guotai Junan International, in which, S&P reaffirmed Guotai Junan International’s BBB+ long term and A-2 short-term issuer ratings with a stable outlook. At the beginning of the year, Moody’s Investor Service also reaffirmed the Company’s Baa2 long term issuer rating. Currently the Company remains a leading credit rating level among the Chinese securities companies in Hong Kong.

Outlook：

Entering the second half of 2020, the impact of geopolitical frictions and the COVID-19 pandemic on the financial market may still remain. But in the medium to long term, with the continuous opening of the capital market, the gradually strengthened manufacturing industry and in-depth breakthroughs in technology, China’s economic growth still sees a strong certainty. The scale of investment and financing activities of Chinese companies and the wealth management needs of high-net-worth clients will also continue to increase. The Group will continue to make great efforts in developing financial institutions and corporate clients, while continuously optimizing and upgrading the wealth management platform, improving product service lines, strengthening the synergies between wealth management and other businesses such as coporate finance and asset management, and expanding the high-net-worth client base and AUM. At the same time, the Group will continue to leverage our core competency to provide clients with differentiated and customized financial products, actively deepen the cooperation with the parent company Guotai Junan Securities to explore new opportunities in the cross-border financial products market.

Practicability and stability has always been the operation philosophy of the Group. The Company will continue to improve the risk management measures and strengthen the execution. On the basis of timely identifying, measuring, hedging and reducing risks, the Company will improve the risk control capability to lay a solid foundation for further business development. The Group will strive to enhance risk-adjusted return on capital and reward our clients and investors for their long-term support with a steady and desirable growth.

About Guotai Junan International Holdings Limited (1788.HK)

Guotai Junan International is the market leader and first mover for internationalization of Chinese Securities Company. The Company is the first Chinese securities broker to list on the Main Board of The Hong Kong Stock Exchange by way of initial public offering. Based in Hong Kong, the Company provides diversified integrated financial services. The core services include: wealth management, corporate finance, loans and financing, asset management and financial products.

The Company is one of the constituents of HSCI, Hang Seng Composite LargeCap & MidCap Index, FTSE HK index, FTSE HK ex H share index and FTSE4Good index. Guotai Junan International has been assigned “Baa2 / Prime-2” and “BBB+ / A-2” long-term issuer rating from Moody and Standard & Poor respectively.

The controlling shareholder, Guotai Junan Securities Company Limited (Stock Code: 601211.SS; 2611.HK), is the comprehensive financial provider with a long-term, sustainable and overall leading position in the Chinese securities industry. Backed by strong operational support, the Company will be able to further explore the HK and the Asia-Pacific market, aiming to become an important financial institution with market influence in the region.

For more information about Guotai Junan International:

• Official website: http://www.gtjai.com
• 2020 corporate video: https://www.youtube.com/watch?v=VEL2YHKwRQA

Porda Havas International Finance Communications Group on behalf of Guotai Junan International Holdings Limited issues the press release.

Contacts

Porda Havas International Finance Communications Group

Mr. Bunny Lee +852 3150 6707 bunny.lee@pordahavas.com
Ms. Angela Shi +852 3150 6778 angela.shi@pordahavas.com
Ms.Mandy Chen +852 3150 6721 mandy.chen@pordahavas.com
Mr. Addison Chu +852 3150 6750 addison.chu@pordahavas.com
Fax +852 3150 6728