GF SECURITIES CO., LTD. (“GF Securities” or the “Company”, stock code: 1776.HK; 000776.SZ， the Company and its subsidiaries, the “Group”) is pleased to announce its interim results for the six months ended June 30, 2018 (the “Reporting Period”).
Faced with dual-pressure on the market environment and the general decline in the performance of securities firms, GF Securities insisted on the principle of changing according to circumstances, thereby speeding up the pace of business transformation and manage reformation, as well as steadily building a competitive edge in the entire business chain. Various major operation indicators continued to rank among the top in the industry, which continued to create value for its shareholders. As of the end of June 2018, total assets of the Group amounted to RMB390,471 million, representing an increase of 9.40% as compared to the end of 2017; During the Reporting Period, total revenue and other income of the Group was RMB11,420 million, and net profit attributable to owners of the Company was RMB2,858 million.
The principal business of the Group can be divided into four segments, namely investment banking business, wealth management business, trading and institution business and investment management business. During the Reporting Period, the total revenue and other income from the investment banking business segment was RMB585 million; the total revenue and other income from the wealth management business segment was RMB5,663 million; the total revenue and other income from the trading and institution business segment was RMB2,484 million; and the total revenue and other income from the investment management business segment was RMB2,129 million.
Actively Faced Challenges Brought by the Sluggish Market and Achieved Remarkable Business Performance
In order to adapt to the changes in economic structure, market environment and regulatory policies, the Company increased its efforts in securing strategic customers and large and medium-sized customers on the basis of continuing to consolidate its advantages in the field of high-quality small and medium-sized enterprise customers. At the same time, the Company continued to promote cross-border investment bank business and strive to enhance the international competitiveness of investment banking business. During the Reporting Period, the Company completed 9 equity financing projects for which the Company acted as a lead underwriter, ranking 9th in the industry; among these projects, the Company acted as a lead underwriter for 4 IPOs, ranking 5th in the industry. In addition, in respect of the overseas investment banking business, the Company carried out such business primarily through its indirectly wholly-owned subsidiary, GF Capital (Hong Kong) Limited. During the Reporting Period, GF Holdings (Hong Kong) Corporation Limited (“GFHK”) completed 11 deals by acting as lead underwriter (including IPO, refinancing and bond offering), financial advisers and mergers and acquisitions.
During the Reporting Period, the Company acted as a financial advisor for 7 material asset restructurings (including the projects approved by the M&A and Restructuring Committee of the China Securities Regulatory Commission and non-administrative material asset restructuring projects), ranking 4th in the industry. M&A and restructuring financial advisory service of the Company was graded as “A” by the Securities Association of China for 3 consecutive years. Leveraging on its outstanding research capabilities, the Company strengthened business synergy and provided high-quality integrated entire industry chain services for NEEQ. As of the end of June 2018, the Company sponsored a total of 280 companies listed on the NEEQ as the lead brokerage, of which there were 35 innovative enterprises, ranking 6th in the industry.
In the first half of 2018, the A shares market continued to adjust. As of the end of June 2018, various indexes decline as compared to the end of last year, and investment opportunities were scarce. The Company adheres to the idea of value investment and focuses on blue chip stocks investments with stable growth in performance. At the same time, the Company was granted the honor of “Excellent Option Market Maker” of the Shanghai Stock Exchange in February 2018. During the Reporting Period, the Company has better controlled the duration, leverage and investment scale of the bond portfolio, seized the staged market opportunities, and achieved good investment performance. In the first half of 2018, the net investment gains from fixed income sales and trading business of the Company were RMB2,290 million, representing a year-on-year increase of 25.22%.
In 2018, the balance of margin financing and securities lending business slid down after an upsurge. As at the end of June 2018, the closing balance of the Company’s margin financing and securities lending business was RMB50.571 billion, and the market share was 5.5%. During the Reporting Period, the Company recorded the interest income from the margin financing and securities lending business of RMB2,092 million, representing a year-on-year increase of 4.58%. Since 2018, the stock pledged business of the Company maintained stable under the constant strengthening of risk control access of stock pledged business. As at the end of June 2018, the balance of the exchange traded stock pledged repo transaction business carried out by the Company through its owned funds was RMB26.328 billion, representing a decrease of 0.96% as compared to the end of 2017. Due to the alternative diversion effect of the stock pledged repo business, the size of securities trading business in the form of agreed repurchase is relatively small. During the Reporting Period, the Company recorded the interest income from the repurchase transaction business of RMB782 million, representing a year-on-year increase of 52.30%.
The investment research business of the Group mainly comprises investment research services provided in areas such as macro economy and strategy, industry and listed companies, and financial engineering for the institutional clients. The Company’s equity research covers over 770 listed companies in the PRC in 28 industries, and over 60 companies listed on the Hong Kong Stock Exchange. Currently, the Company is actively promoting the internationalization of research brands so far as permitted by and in compliance with laws and regulations. During the Reporting Period, the total revenue and other income from the investment research business of the Company was RMB191 million, representing a year-on-year increase of 42.18%.
Technological Finance Served as Powerful Driving Force and Organic Growth Showed Initial Success
During the Reporting Period, the Company continued reform of retail business. Taking technological finance, wealth management, institutional brokerage and integration as the four driving forces, the Company adhered to the principle of customer focus, continued to develop the traditional business, vigorously developed wealth management business, built customer service system, and continuously promoted business transformation. The Company continues to focus on investment in technology finance and has been actively expanding its financial technology research and development team. Besides, the Company increases its own R&D and technology innovation efforts in aspects such as big data, artificial intelligence, platform and client terminal. During the Reporting Period, the Company’s self-developed Beta Bull (貝塔牛) smart investment advisory system continued to carry out phase III functional optimization and iteration to meet the online customers’ wealth management needs, with a number of cumulative service customer of 650,000. In the first half of the year, 80% of the strategy portfolio outperformed the benchmark and better served the customers. At the same time, the sales amount of the financial products amounted to RMB7.2 billion. The Company’s Yitaojin (易淘金) APP was upgraded to a wealth management terminal with focusing on trading and wealth management, also strengthened the establishment of international market and services. As of the end of the Reporting Period, the number of the Company’s mobile-phone securities users exceeded 18.57 million, representing an increase of 18.05% as compared to the end of last year; the number of subscribers of the Company’s WeChat account was over 3 million; during the Reporting Period, the sales and transfer amount of products of the Yitaojin E-commerce platform amounted to RMB98.373 billion.
Under the direction of new policies in relation to asset management, GF Securities Asset Management (Guangdong) Co., Ltd. (“GF Asset Management”) steadily progressed with transformation to high-quality organic growth, such as active management in 2018. As at the end of June 2018, the size of compliance entrusted fund of GF Asset Management ranked eighth in the securities industry, and the net income of entrusted asset management business ranked fifth. In the first half of 2018, the management fee income realized by GF Asset Management was RMB632 million.
The Group carries out public fund management services mainly through its controlled subsidiary, GF Fund Management Co., Ltd. (“GF Fund”), and associate company, E Fund Management Co., Ltd. (“E Fund”). As at the end of June 2018, the publicly offered funds managed by GF Fund have reached RMB360.006 billion, representing an increase of 28.60% as compared to the end of 2017, and the total fund size excluding money market funds was RMB239.848 billion, ranking third in the industry. During the Reporting Period, GF Fund realized the total revenue and other income of RMB1,045 million; and the net profit was RMB195 million. As at June 30, 2018, the publicly offered funds managed by E Fund have reached RMB703.497 billion, representing an increase of 15.77% as compared to the end of 2017, and the total fund size excluding money market funds was RMB298.977 billion, ranking first in the industry. During the Reporting Period, E Fund realized the net profit of RMB675 million, representing a year-on-year increase of 7.64%.
The Group mainly engages in private fund management business through its wholly-owned subsidiary GF Xinde Investment Management Co., Ltd (“GF Xinde”). During the Reporting Period, GF Xinde and the funds under its management have completed a total of 23 equity investment projects, with the investment amount up to RMB575 million; as at June 30, 2018, GF Xinde and the funds under its management completed 225 equity investment projects. As at June 30, 2018, GF Xinde set up and managed 32 private funds. The total size of customers’ assets under management amounted to RMB9.138 billion.
Development of International Business Being Speeded Up under Collaboration among Subsidiaries
During the Reporting Period, business development was speeded up under the leverage among subsidiaries of the Group. The Company continued to vigorously expand the FICC business. The Company builds an overseas FICC investment transaction and product platform mainly through GF Global Capital Limited, its indirect wholly-owned subsidiary, covering cross-border and overseas investment services focus on fixed income and customer demand-oriented, with the assets allocated to 22 countries and regions including Asia, Europe and America, covering the diversified financial products fields including bonds and structured products. During the Reporting Period, the Company ranked No. 6 among securities firms in the trading volume of bonds in China.
In the area of overseas asset management business, the Group provides consulting services and management for various investment instruments mainly through GF Asset Management (Hong Kong) Limited (“GF Asset Management (Hong Kong)”), its indirectly wholly-owned subsidiary. GFHK is one of the first financial institutions with PRC background in Hong Kong granted with RQFII qualification. GF Asset Management (Hong Kong) conducts asset management and investment operation through public equity funds, private equity funds and entrusted management accounts. As at the end of June 2018, the scale of assets managed by GF Asset Management (Hong Kong) was HKD5.989 billion.
In regions outside of the PRC, the Group provides brokerage services for high-net-worth individuals and retail customers primarily through its indirectly wholly-owned subsidiary, GF Securities (Hong Kong) Brokerage Limited, covering financial products such as stocks and bonds listed on the Hong Kong Stock Exchange and other foreign exchanges, using self-developed Yitaojin (易淘金) international version of trading system to focus on development of overseas wealth management business for high-net-worth clients and provision of planning and inheritance of private wealth for ultra-high-net-worth clients. Moreover, the Group is engaged in investment and private equity management services mainly through its indirectly wholly-owned subsidiary GF Investments (Hong Kong) Company Limited and subsidiaries thereunder, and has completed investment mainly in fields of new energy, TMT and life science, some investment projects have been listed on the stock exchanges of Hong Kong, the United States and China.