CISI FIN: Guotai Haitong (0261) rated "buy" first, charging business market position further improved

CISI FIN released a research report stating that 2025 is a year of consolidation for Guotai Haitong (02611), which will require time to iron out the frictions brought by mergers and acquisitions. With the company's client assets and net asset size taking another step up, its overall strength will further enhance, realizing economies of scale. The bank expects the company's net profit attributable to shareholders to be 27.461 billion and 23.370 billion yuan in 2025-2026, with year-on-year changes of +110.8% and -14.9% respectively, and a "Buy" rating for the first time. Key points of CISI FIN are as follows: Event: Guotai Haitong released its mid-year report for 2025, achieving operating income and net profit attributable to shareholders of 23.872 billion and 15.737 billion yuan respectively, with year-on-year changes of +77.7% and +213.7%. The non-recurring net profit attributable to shareholders was 7.279 billion yuan, a year-on-year increase of 59.8%, mainly due to the negative goodwill brought by the acquisition of Haitong. The weighted average ROE increased by 3.14 percentage points to 6.25% year-on-year; the operating income and net profit attributable to shareholders for the second quarter were 12.099 billion and 3.495 billion yuan respectively, with changes of +2.8% and -71.4% compared to the previous quarter. After excluding client funds, the operating leverage decreased by 20.5% to 4.11 times from the beginning of the year. Mergers and acquisitions bring about dual growth in fee-based and fund-based businesses On the income side, the company achieved fee-based and fund-based business income of 10.04 billion and 12.623 billion yuan respectively in the first half of 2025, with year-on-year changes of +57.4% and +99.3%, among which the external expansion brought about by the acquisition of Haitong was the main driver of income growth. On the cost side, operating expenses increased by 75.4% to 1.145 billion yuan year-on-year, with an expense ratio of 48.7%, a decrease of 0.37 percentage points year-on-year, and credit impairment losses of 1.194 billion yuan. Under the external expansion, the market position of the company's fee-based business is further enhanced In terms of fee-based business, net revenue from brokerage, investment banking, and asset management were 5.733 billion, 1.392 billion, and 2.578 billion yuan respectively, with year-on-year changes of +86.3%, +19.4%, and +34.2%. The brokerage business saw a significant increase in client scale, with a 7.2% increase in domestic fund accounts to 38.45 million at the end of the year, and a benefit from the consolidation reaching 8.31% in the stock-based trading market share. The average scale of financial products held increased by 13.4% to 453 billion yuan compared to the previous year. With the completion of the integration, the company's traditional brokerage business volume is now industry-leading. The investment banking business benefited further from strong partnerships, with the underwriting scale of primary equity offerings increasing by 1,315.8% year-on-year to 125.316 billion yuan in the first half of the year, and the underwriting scale of bonds reaching 582.866 billion yuan, with a market share of 11.09% and ranking second in the industry. In terms of asset management business, the management scale of Huaxin Fund and Haifutong Fund increased by 6.5% and 10.0% respectively to 822.506 billion and 497.656 billion yuan at the end of the year. Guotai Junan Asset Management will absorb and merge with Haitong Asset Management. With the subsequent completion of the integration, the bank expects its competitiveness to be further enhanced. The scale effect brought by the expansion of the balance sheet will gradually show In terms of fund-based business, net interest income and investment income were 3.187 billion and 9.436 billion yuan respectively, with year-on-year changes of +205.4% and +78.4%. The increase in net interest income mainly came from the consolidation of the financial leasing company, as well as customer fund deposits and margin interest income brought by the increase in brokerage clients. With further expansion in scale, the bank's financial costs may further decrease in the future. As of the first half of 2025, the bank's financial assets increased by 54.3% to 802.908 billion yuan, with various financial asset categories showing relatively balanced growth. The bank enhanced its efforts in developing top-tier customers in off-exchange derivative business, leading to a significant increase in cross-border transaction volume. Risk Warning: Risks of significant market volatility, macroeconomic downturn, and lower-than-expected market share increase.