Futu revenue climbs 25% to $746.9M as CSRC penalty hits net income

Futu Holdings reported Q1 revenue of $746.9 million, up 25% year-over-year, as a RMB1.85 billion regulatory penalty from the China Securities Regulatory Commission reduced reported net income to $106 million.

"We continue to track toward our full-year guidance of 800 thousand net new funded accounts with confidence," Chairman and Chief Executive Officer Leaf Hua Li said. "Net asset inflow accelerated meaningfully primarily driven by our high-quality client base in Hong Kong and Singapore."

Brokerage commission income rose 14.3% to $336.9 million, while interest income climbed 28% to $338 million. Total trading volume reached a record $529.4 billion, up 29.1% year-over-year, driven by a 22.5% sequential increase in Hong Kong stock trading. Gross margin expanded to 87.2% from 84% a year ago, and operating margin improved to 60.3% from 57.2%.

The CSRC penalty, which the company said does not affect its business fundamentals or financial stability, stems from unlicensed regulated business activities in mainland China and Hong Kong. Excluding the charge, adjusted net income would have been $384 million, up 73% from $282.7 million in the prior-year quarter. Futu has repurchased $418 million of its shares under an $800 million buyback program through May 27.

The company added 225,000 net new funded accounts in the quarter, bringing the total to 3.59 million, up 34.3% year-over-year. Registered users reached 30.17 million, and brokerage accounts totaled 6.28 million. Total client assets surged 47.2% to $155.8 billion, with Malaysia, Australia, Canada and Japan markets recording double-digit quarter-over-quarter growth in client assets.

Wealth management assets under management grew 28.2% year-over-year to $22.8 billion, with Japan, Canada, Australia, the US and Malaysia all posting triple-digit annual growth. Futu's wholly owned virtual asset exchange, PantherTrade, received its VATP license from the Hong Kong Securities and Futures Commission in March, adding regulated cryptocurrency trading to its platform.

Chief Financial Officer Arthur Yu Chen said the proposed CSRC penalties comprise confiscation of about RMB470 million in illegal gains and fines of approximately RMB1.38 billion. The company is entitled to submit statements, present defenses and request a hearing, and will fully cooperate with regulators.

The results show Futu's core brokerage and wealth management business continues to generate strong operating leverage, with operating income up 31.5% and margins expanding, even as the regulatory overhang creates near-term uncertainty. Investors will watch the outcome of the CSRC proceedings and the company's ability to sustain its 800,000 full-year funded account target.

This article is for informational purposes only and does not constitute investment advice.