Q3 2022 Futu Holdings Ltd Earnings Call
Speaker 1: Our enterprise business have 301 IPO and IR clients as well as 572 ESOP clients as of quarter end, of 40% and 76% year over year respectively. Over 50 companies adopted our ESOP services during the quarter, including Ganzong LIVIAM and Microport. In the first three quarters of this year, we underwrote 23 Hong Kong IPOs and ranked second among all brokers, according to WIND. Next, I'd like to invite our CFO author to discuss our financial performance. Next, I'd like to invite our CFO author to discuss our financial performance. Next, L our total revenue was 1.9 billion, from 1.7 billion in the third quarter of 2021. Brokerage commission handling charge income was 958 million, an increase of 3% year over year and a decrease of 7% Q over Q. The year over year increase was mainly driven by a higher bled commission rate of 8.8 basis points across 6.9 basis points in the year over quarter.
Speaker 1: The Q over Q decrease was due to close to 20% sequential decline in trading volume, partially offset by the higher planned commission rate. Interest income was 881 million, an increase of 39% D over N, 42% Q over Q. The year over year increase was mainly due to higher income from cash deposits, which more than offset lower margin financing income and ICO financing interest income. The Q over Q increase was mostly attributable to higher interest income.
Speaker 1: from cash deposits and higher margin financing income. Other income was 107 million, down 36% EOBN, up 16% Q over Q. The EOBN decrease was mainly due to low IT or financing service charge income, enterprise public relationship service charge income, and currency exchange service income. The Q over Q increase was mainly due to some well-off income items.
Speaker 1: Our total cost was 218 million, a decrease of 18% from 267 million in the third quarter of 2021. Brokerage commission and handling charge expenses were 83 million down 34% year-over-year and 5% year-over-year. The commission
Speaker 1: Expenses didn't move in line with brokerage commission income due to the cost savings from our US sales clearing migration and upgrades service package with our US clearinghouse. A Q over Q decrease was mainly due to lower trading volume.
Speaker 1: Interest expenses were 41 million, down 40% year over year and up 68% year over year. The year over year decrease was mostly due to lower expenses from interest, from margin financing and security lending. The sequential uptick was driven by higher daily average margin financing balance and higher lender funding costs and it raised highs.
Speaker 1: Processing and servicing costs were 91 million, 35% year-over-year and about 3% Q-over-Q. The year-over-year increase was primarily driven by higher product service fee to support overseas market expansion.
Speaker 1: As a result, total gross profit was $1.7 billion, an increase of 18% from $1.5 billion in the third quarter of 2021. The gross margin was 89%, expanded from 85% in the third quarter of 2021.
Speaker 1: Operating expenses were 761 million, down 0.3% yield per year, up 5% Q over Q.
Speaker 1: R&D expenses were $313 million at 40% EoE and 7% QoQ. The increase was mainly due to increase in R&D headcount as we continue to support new product offerings, invest in US self-clearing capabilities, and customize product experience for different new markets.
Speaker 1: Selling on the market expenses was $235 million, down 42% yield over year, up 7% Q over Q. The yield over year decrease was mainly due to slowly paying client growth. This increased the Q over Q of client acquisition cost hike due to weak market sentiment.
Speaker 1: GN expenses were 212 million of 55% year-to-year and 1% year-to-year. The increase was primarily due to increase in telecom for general and administrative personnel.
Speaker 1: As a result, our net income increased by 23% year-over-year and 18% Q-over-Q to $755 million. Net income margin expanded to 39% in the third quarter as compared to 36% in the same quarter last year.
Speaker 1: Our effect tax rate for the quarter increased to 12.2% of the tax credit from our U.S. clearing has been fully utilized.
Speaker 1: That concludes our prepared remarks. We now like to open the course to questions. Operator, please go ahead.
Speaker 2: Thank you. If you would like to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. Once again, that's star 11 to ask a question over the phone. Please stand by while we compile the Q&A roster.
Speaker 2: Thank you, we'll now take our first question.
Speaker 2: first question. Please stand by.
Speaker 2: This is from the line of Cindy Wang from China Relay Sons. Please go ahead.
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Speaker 3: Now with that, I finally show the one key. My first question is regarding to the interest income in third quarter. Since interest income show very strong growth in third quarter, could you give us a breakdown by margin financing income, bank deposit and IPO financing interest income in third quarter? Since that rate hike was another 75 cents in November and possibly to raise another 50 bucks a bit in December . How do you see the contribution?
Speaker 1: I think the contribution from the IPO margin financing is relatively small. So most of our interest income now comes from the client's idle cash and also our margin business, which I think you are right, we are one of the beneficiaries from the rate hike cycle, especially in the field of water we see the contribution from the client deposits becomes more meaningful. And down the line, I think on a like for like basis, it may contribute to more interest income.
Speaker 1: our clients become much higher, they lower down their stock positions. So I'm not sure whether such allocations versus client stocks and the client's cash will remain in the fourth quarter or not. But if we assume such ratio remain the same versus the third quarter, I think we will get more interest in the fourth quarter.
Speaker 1: For your second question about the blended commission rate, there comes from several factors. Number one, as Lee mentioned, in the third quarter our US trading contributions roughly account for close to 70%, which has a positive impact on our blended commission rate. It is very difficult to forecast whether search polynomials will continue or not.
Speaker 1: given it is more driven by the market conditions. And secondly, the trading volatility in the third quarter comes from more clients trading derivatives, such as options and futures, etc. In the third quarter, our trading commission, among our trading commission, roughly 30% came from clients' activities in the derivatives. So it will enhance our blended commission rate as well.
Speaker 4: Thank you.
Speaker 4: Thank you. Thank you. Very clear.
Speaker 2: Thank you.
Speaker 2: We'll now take our next question.
Speaker 2: Please stand by.
Speaker 2: This is from the line of Zoe Zong from Jefferies. Please go ahead.
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Speaker 5: Thank you for taking my question. This is Zoe from Jefferies. Congratulations on the solid results and I have two questions.
Speaker 5: So first, we have already achieved our annual target of acquiring 200,000 new pain clients. So I'm wondering, based on the current market conditions, could you please provide some color about our user acquisition in Q4 and next year? And my second question is regarding our Singapore business. As we have seen strong growth in the number of new pain clients and the client assets, I'm wondering how many total pain clients do we have in Singapore as of Q3, and what about the average assets per pain client? How do we think about the penetration rate and upside rule? Thank you.
Speaker 1: Thank you, Zoe. I will take your first question and I will leave your second question to my colleagues Robin regarding the situation in Singapore. For your first question, you are right. We are already approaching our full year guidance for 200K new paying clients acquired this year. Quarter to today, I think you can understand and everybody can imagine the market condition was quite challenging across the US.
Speaker 1: and also the Asian markets as well. So based on the current quarter to date run rate, we think the new price applied in the fourth quarter may be smaller or slower than the third quarter. But we are very confident we will continue to acquire the client across the different markets. And also quarter to date, we still record decent net asset inflows across the different markets.
Speaker 1: It is too early to give you some sense or the guidance for our next year's UPAIN clients guidance. We will keep your posted in our fourth quarter learning quote. Thank you.
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Speaker 6: We hope to see you in the next event. We hope to see you in Beijing, China, and China in the next event. We hope to see you in the next event.
Speaker 7: That's it.
Speaker 1: In Singapore, we have over 200,000 paying clients now, which we think is about 15% of market share, and we think there's a lot of room for further growth. In the third quarter, we recorded decent growth. It's mainly because we introduced a lower risk wealth management product, which has money market funds, to capture the conservative investment appetite of Singapore clients. In the rate hike environment, the yields of the money market funds kept rising and become rather attractive to Singapore clients, and that's driving the growth of local new paying clients.
Speaker 1: We also continue to optimize the account opening and outside deposit process, thereby driving conversion from users to clients and also to paying clients. Meanwhile, we also saw improving client quality. For the clients that we acquired in the third quarter, the average net asset inflow in the first month exceeded 9,000 Singapore dollars, while the average net asset employer clients acquired in January this year will take about three months to reach this level.
Speaker 1: As of the end of the 3Q, the average asset to our Singapore clients was over 10,000 Singapore dollars, recording a modest Q on Q growth. The increase in that asset inflow was able to more than offset the negative impact of the weak equity market. Thank you. You can now print out your promo code and make up for your payment on Uber for up.
Speaker 5: Thank you, that's very helpful.
Speaker 2: Thank you. We'll now take our next question.
Speaker 8: Please stand by.
Speaker 2: This is from the line of youth fan from CICC. Please go ahead.
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Speaker 5: Okay, I will translate my question. Thanks management for taking my question. This is Yo-Yo Fan from CICC. First, congratulations on the exciting results achieved this quarter is by the Voluntary Market Environment. I have two questions here. The first one is about the client region breakdown. Would you please introduce more on the region breakdown of the newly added and also the existing paying clients?
Speaker 5: And also by second question is about the client asset breakdown. We see that the total client asset decreased by 15% culture over culture. Would you please give us the breakdown of the asset flow and the market to market loss?
Speaker 1: Thank you. My colleague Robin will answer two of your questions. Thank you.
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