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Chinese mainland clients represented roughly 13% of Futu Holdings’ total customer base at the end of last quarter, with their assets accounting for 17% of the total assets managed by the company, and generating about 20% of its revenue, according to its CEO in light of recent penalties and new regulations.
“During the two-year supervision adjustment period for mainland clients, there’s no obligation to close accounts but rather to restrict deposit and purchase activities within the region,” the CEO stated at the first-quarter earnings call yesterday.
On May 22, regulators announced that Futu, Longbridge Securities, and Tiger Brokers were operating unlicensed cross-border securities, fund, and futures ventures within the mainland. Authorities pledged to confiscate all illicit gains and impose hefty fines. A grace period of two years was granted, during which existing mainland clients can only sell existing holdings and withdraw funds.
The company holds more than half of the Hong Kong market share, the CEO pointed out. Its overseas independent brand, Moomoo, experienced a significant jump in income across all international markets in the first quarter from the previous year, with earnings in five countries more than doubling.
Moomoo counts over two million clients with assets abroad, averaging about $18,000 under management per customer—higher than many other local online investment platforms—he added. The company also plans to utilize its 140 overseas licenses to expand further into new markets.
On May 22, several Chinese government agencies announced that foreign brokerage firms are prohibited from promoting their securities, futures, and fund services within the country. They are also barred from offering services like account opening, executing trading orders, or fund transfers.
“Operations in Hong Kong and other international markets continue smoothly, with various new initiatives progressing in an orderly fashion,” the CEO noted. “We expect that new regulatory changes will not significantly affect our projection of reaching 800,000 customers this year.”
Futu received a notice of investigation and an advance warning of administrative penalties from the China Securities Regulatory Commission and its Shenzhen Regulatory Bureau concerning its operations in the mainland, resulting in a fine of approximately CNY 1.9 billion (around USD 280 million).
In the first quarter, Futu’s net profit dropped 61% year-over-year to HKD 831 million (USD 100 million), primarily due to penalties, which prompted an impairment charge of HKD 2.1 billion (USD 268 million), according to its unaudited financial statements released yesterday. Revenue grew 25%, reaching HKD 5.9 billion.
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