Futu Holdings Ltd Q4 FY2025 Earnings Call

Hello, ladies and gentlemen. Welcome to Futu Holdings Fourth Quarter and Full Year 2025 Earnings Conference Call. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your host for today's conference call, Daniel Yuan, Chief Staff to CEO, Head of Strategy and IR at Futu. Please go ahead, sir.

Thanks, operator, and thank you for joining us today to discuss our fourth quarter and full year 2025 earnings results. Joining me on the call today are Mr. Leaf Li, Chairman and Chief Executive Officer; Arthur Chen, Chief Financial Officer; and Robin Xu, Senior Vice President. As a reminder, today's call may include forward-looking statements, which represent the company's belief regarding future events, which, by their nature, are not certain and are outside of the company's control. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. For more information about the potential risks and uncertainties, please refer to the company's filings with the SEC, including its annual report. With that, I will now turn the call over to Li. Li will make his comments in Chinese, and I will translate.

Li will make his comments in Chinese, and I will translate.

Thank you all for joining our earnings call today. In 2025, we had another year of strong client acquisition, adding more than 950,000 new funded accounts and exceeding our full-year guidance by 19%. Total funded accounts reached around 3.4 million, a 40% increase year-over-year. We remain confident in our ability to acquire 800,000 net new funded accounts in 2026, supported by strong growth opportunities in both our established and newer markets.

Thank you all for joining our earnings call today. In 2025, we delivered another year of strong client acquisition, adding more than 950,000 new funded accounts and surpassing our full-year guidance by 19%. Total funded accounts reached around 3.4 million, up 40% year-over-year. We remain confident in our ability to acquire 800,000 net new funded accounts in 2026, supported by strong bottom-up growth opportunities across both our established markets and newer ones.

The robust growth in funded accounts in 2025 was broad-based, primarily driven by solid client additions from Hong Kong and Malaysia. In 2025, net new funded accounts in Hong Kong recorded a high double-digit year-over-year increase as we continued to extend our market leadership with a high market share. Significant share gains were also observed in Malaysia, and we expect this momentum to continue given our competitive product offering and growing brand trust. In Japan, cumulative app downloads as of November last year crossed 2 million, further solidifying our position as the number one foreign securities firm. Momo was also the most downloaded trading app in Australia in 2025.

We experienced a high double-digit year-over-year increase as we continued to extend our market leadership with a high market share. Significant share gains were also observed in Malaysia, and we expect this momentum to continue due to our competitive product offering and growing brand trust. In Japan, cumulative app downloads as of November last year crossed 2 million, further solidifying our position as the number one foreign securities firm. Momo was also the most downloaded trading app in Australia in 2025.

In the fourth quarter, we added about 230,000 net new funded accounts, which is an 8% decrease from the previous quarter but a 9% increase compared to the same quarter last year. Client growth in Hong Kong slowed down after a significant drop in the local stock market, but Japan and Malaysia saw double-digit sequential growth in net new funded accounts, driven by strong interest in U.S. stock trading and our exceptional U.S. stock offerings. In the U.S., we launched another offline marketing campaign that emphasized key features for active traders. During the quarter, the number of auction contracts traded, as well as stock and crypto trading volume in the U.S. market, experienced double-digit sequential growth.

A sharp downturn in the local stock market led to net new funded accounts in Japan and Malaysia experiencing double-digit sequential growth, supported by strong client interest in U.S. stock trading and our superior U.S. stock offerings. In the U.S., we launched another round of offline marketing campaigns that highlighted key features for active traders. During the quarter, we saw double-digit sequential growth in the number of auction contracts traded as well as in stock and crypto trading volume in the U.S. market.

In the fourth quarter, net asset inflow remained robust. Mark-to-market losses on clients' Hong Kong stock holdings affected overall client assets. Total client assets reached HKD 1.23 trillion at the end of the quarter, a 66% increase year-over-year and flat compared to the previous quarter, with Hong Kong and Singapore experiencing increasing contributions from high-net-worth clients. In the U.S., average client assets showed the fastest sequential growth among all regions. Driven by increased U.S. stock margin trading activity, margin financing and securities lending balances rose 7% sequentially to HKD 67.7 billion at the end of the quarter. A number of popular Hong Kong IPOs during the quarter also boosted leverage usage, resulting in a double-digit sequential increase in daily average margin balances.

Average client assets in the U.S. showed the fastest sequential growth compared to all regions, supported by increased margin trading activity in U.S. stocks. As of the end of the quarter, margin financing and securities lending balances rose by 7% sequentially to HKD 67.7 billion. Additionally, several popular IPOs in Hong Kong during the quarter contributed to the greater use of leverage, leading to a double-digit sequential increase in the daily average margin balance.

Total trading volume climbed to a record HKD 3.98 trillion, an increase of 38% year-over-year and 2% quarter-over-quarter. The U.S. equity markets are showcasing various investment themes in 2025, and we have noticed our clients diversifying beyond large technology names into a wider array of sectors and across the AI value chain. Consequently, U.S. stock trading turnover grew 17% sequentially to HKD 3 trillion in the fourth quarter. Meanwhile, Hong Kong stock trading volume decreased 31% quarter-over-quarter to HKD 821 billion, as the market correction in the second half impacted investor interest in China technology stocks. This decline was somewhat mitigated by increased trading interest in gold and other precious metals. Despite market challenges, crypto trading volume remained steady at around HKD 20 billion, with an increase in crypto penetration among trading clients in Hong Kong, Singapore, and the U.S. During the quarter, we enhanced our crypto offerings by adding more than 10 options in both Singapore and the U.S., as well as improving our market data and information related to crypto.

In the second half, this decline was partially offset by heightened trading interest in gold and other precious metals. Crypto trading volume held steady at around HKD 20 billion despite market challenges, and crypto penetration among trading clients increased in Hong Kong, Singapore, and the U.S. During the quarter, we enhanced our crypto offerings by adding over 10 points in both Singapore and the U.S. and improving our market data and information related to crypto.

Both management client assets reached HKD 179.6 billion, up 62% year-on-year and 2% sequentially. In response to growing client demand for portfolio diversification, we broadened our portfolio suite across key markets. In Hong Kong, we enhanced our lineup of high dividend funds and further lowered the minimum investment threshold for structured products, making them more accessible to retail investors. In Singapore, we introduced more Singapore equity funds as well as duration volume funds. In Malaysia, we launched Shariah-compliant bold tracker funds, which were met with strong demand from local investors.

Growing client demand for portfolio diversification prompted us to expand our portfolio suite in key markets. In Hong Kong, we improved our lineup of high dividend funds and reduced the minimum investment requirement for structured products, making them more accessible to retail investors. In Singapore, we introduced additional Singapore equity funds as well as duration volume funds. In Malaysia, we launched Shariah-compliant bold tracker funds, which received strong interest from local investors.

During the quarter, we streamlined Airstar Bank's account opening processes and launched mutual funds and insurance products in the banking app. A desktop version was also introduced to clients for a seamless cross-platform experience. We enhanced Airstar Bank's compliance and risk management capabilities by developing an anti-money laundering system and AI-powered fraud detection infrastructure. Looking ahead, we will continue to improve the technology infrastructure and user experience while exploring synergies between Airstar Bank and the group as we work toward a comprehensive one-stop financial services platform in Hong Kong.

We also introduced to clients a seamless cross-platform experience. On the internal fund, we strengthened Airstar Bank's compliance and risk management capabilities by developing an anti-money laundering system and AI-powered fraud detection infrastructure. Looking ahead, we will continue to enhance the technology infrastructure and user experience while exploring synergies between Airstar Bank and the group as we advance toward a comprehensive one-stop financial services platform in Hong Kong.

At the end of the quarter, we had 600 IPO distributions for our clients, marking a 24% increase compared to last year. In 2025, we solidified our position as the top online broker for Hong Kong IPO distribution and subscription. We provided investment banking services to over half of the newly listed companies on the Hong Kong Board, with our platform accounting for 49% of the total public offering subscription amount for the year. The number of Hong Kong IPO subscribers using our platform grew almost fivefold year-over-year. In the fourth quarter, we took on the role of overall coordinators for several prominent Hong Kong IPOs.

We are the leading online broker for Hong Kong IPO distribution and subscription. In 2025, we provided investment banking services to over half of the newly listed Hong Kong Board companies, with subscription amounts on our platform accounting for 49% of the total public offering subscription amount. The number of Hong Kong IPO subscribers on our platform increased nearly fivefold year-over-year. In the fourth quarter, we took on the role of overall coordinators for several high-profile Hong Kong IPOs.

Next, I'd like to invite our CFO, Arthur, to discuss our financial performance.

Thank you, Hua and Daniel. Please allow me to walk you through our financial performance in the fourth quarter. All the numbers are in Hong Kong dollars, unless otherwise noted. Total revenues were HKD 6.4 billion, an increase of 45% from HKD 4.4 billion in the fourth quarter of 2024. We concluded another strong year with full-year revenue growing to HKD 22.8 billion, a 68% increase year-over-year. Brokerage commission and handling charge income was HKD 2.8 billion, which is 35% higher year-over-year but down 5% quarter-over-quarter. Total trading volume increased both year-over-year and quarter-over-quarter, while blended commission rates softened as clients traded more higher-priced U.S. stocks and options during the quarter. Interest income was HKD 3 billion, rising 50% year-over-year and remaining flat quarter-over-quarter. The year-over-year growth was driven by higher interest income from security borrowing and lending, banking deposits, and margin financing. On a sequential basis, interest income was stable as increased income from banking deposits and margin financing was countered by decreased income from security borrowing and lending. Other income reached HKD 630 million, up 79% year-over-year and 42% quarter-over-quarter. The year-over-year increase was mainly due to higher fund distribution service income and IPO subscription service charge income. The quarter-over-quarter growth was largely attributed to higher enterprise public relationship service charge income and IPO subscription service charge income. Our total cost was HKD 729 million, a decrease of 6% from HKD 776 million in the fourth quarter of 2024. Brokerage commission and handling charge expenses were HKD 141 million, up 26% year-over-year and down 12% quarter-over-quarter. Both the year-over-year and quarter-over-quarter changes were roughly in line with the shifts in brokerage commission and handling charge income. Interest expenses were HKD 437 million, down 15% year-over-year and 8% quarter-over-quarter. The decreases were mainly due to lower interest expenses related to our security borrowing and lending business. Processing and servicing costs were HKD 150 million, unchanged year-over-year and down 6% quarter-over-quarter, with the quarter-over-quarter decrease largely attributed to a reduction in cloud service fees. Consequently, total gross profit reached HKD 5.7 billion, an increase of 56% from HKD 3.7 billion in the fourth quarter of 2024. Gross margin was 88.7%, compared to 82.5% in the fourth quarter of 2024. Operating expenses rose 9% year-over-year and fell 8% quarter-over-quarter to HKD 1.6 billion. R&D expenses were HKD 507 million, up 27% year-over-year and down 12% quarter-over-quarter. The year-over-year increase was largely due to a rise in R&D headcount to support crypto and AI-related initiatives, while the cumulative decrease was primarily driven by bonus accruals made in previous quarters. Selling and marketing expenses were HKD 507 million, up 9% year-over-year and down 13% quarter-over-quarter. The year-over-year increase was in line with the growth of our new net funded accounts, while the quarter-over-quarter decrease was largely due to lower new client additions and, to a lesser extent, a decrease in client acquisition costs. General and administrative expenses were HKD 549 million, down 5% year-over-year and flat quarter-over-quarter. The year-over-year decrease was primarily due to lower professional service expenses compared to the same quarter last year. As a result, income from operations increased 87% year-over-year and 6% quarter-over-quarter to HKD 4.1 billion. Operating margin increased to 64.4% from 50% in the fourth quarter of 2024, primarily due to strong top-line growth and operating leverage. Our net income rose by 80% year-over-year and 5% quarter-over-quarter to HKD 3.4 billion. The net income margin expanded to 52.3% in the fourth quarter compared to 42.2% in the same quarter last year. Our effective tax rate for the quarter was 16.3%. That concludes our prepared remarks. We would now like to open the call to questions. Operator, please go ahead.

We will now take the first question from the line of Peter Zhang from JPMorgan.

This is Peter Zhang from JPMorgan. Thank you for the opportunity to ask questions and congratulations on the results. I have two questions. My first is about the business trend in the first quarter. Could management provide insight into the growth of fee income, net asset inflow, and trading velocity year-to-date? Additionally, what is the outlook for the commission fee rate trend in 2026? My second question pertains to the breakdown of trading volume, specifically for U.S. trading. Some investors may perceive Futu primarily as a Chinese stock and think our clients predominantly trade Chinese ADR stocks. However, with our successful overseas expansion, I wonder if management can share insights on the breakdown of U.S. stock trading volume between Chinese ADRs and other stocks.

Let me address your second question about the contribution of Chinese ADRs to our U.S. stock trading volumes in the latest quarter. This contribution is less than 10%. In comparison to the third quarter last year, it has remained around 10%. Therefore, it seems that the influence of Chinese ADRs on our overall U.S. stock trading volumes is gradually declining. Now, I will pass it over to my colleague, Daniel, to respond to your first question.

Based on the trends we have seen year-to-date, we expect net new funded accounts and trading volume to remain relatively flat quarter-over-quarter. We have observed strong bottom-line activities from our clients, so we anticipate a double-digit sequential increase in net asset inflows, making the quarterly net asset inflow in the first quarter the highest on record. The mark-to-market impact has been significant and negative during the current quarter. Overall, we expect total client assets to see a modest increase by the end of the first quarter. Regarding commissions, we are also seeing a relatively flat blended commission rate quarter-over-quarter. Thank you.

We will now take the next question from the line of Emma Xu from Bank of America Securities.

The first question is about the crypto business. What are the latest developments in this area since Hong Kong relaxed its regulatory policies in February? What new products have been launched, and what is the current status and performance? The second question pertains to AI. What specific improvements is AI currently bringing to your business? Are there any challenges or pressures that AI might create, considering your business's SLI model?

In terms of crypto development in Hong Kong, we are still awaiting approval for our VAT license from the regulators. We are very optimistic that we will receive this license soon. After launching the VAT component, we aim to provide our traditional clients with crypto trading options that leverage their stock for margin. Additionally, we plan to offer crypto services to our high-net-worth clients, alongside services for our institutional clients, to create comprehensive solutions. Over the past quarter, we expanded our product offerings by trading various tokens in Singapore and the U.S. Furthermore, as mentioned earlier, the number of clients trading crypto in Hong Kong, Singapore, and the U.S. has significantly risen, with the penetration rate for these trading clients reaching high single-digit to low teen levels. We believe this penetration rate will continue to increase in the near future. Thank you.

In the past quarter, we further enriched our product offerings by trading different tokens in Singapore and the U.S. At the same time, as we've mentioned in the opening remarks, in Hong Kong, Singapore, and the U.S., the number of clients trading crypto has increased significantly, and the penetration rate for these trading clients has risen to high single-digit and low teen levels. We think this penetration rate will continue to grow in the foreseeable future. Thank you.

AI is a key strategic priority for Futu. We began our AI assessments in 2022 and have significantly increased our AI investment over the past few quarters by integrating AI capabilities into our product experience and internal operations. We use AI to improve how our clients discover investment opportunities and gather information. Our AI-generated daily and weekly reports automatically filter and highlight essential insights, covering over 20 types of market data, including technical indicators and patterns, thus providing better timeliness and broader content coverage than our competitors. Additionally, AI summarizes earnings reports and news, greatly enhancing client efficiency in obtaining information. In the fourth quarter, we introduced AI features that enable users to create quantitative trading strategies with simple natural language. This feature has been well received by advanced traders on our platform, making it easier to develop professional investment strategies. We've also broadened our AI chatbot's asset class coverage, which has gained popularity recently, and we now offer access through our open API. We have been developing our open API since 2014 and continuously optimizing the experience. We have supported skills that are accessible through our open platform as well. Due to years of development and the accumulation of market data, trading infrastructure, execution, and clearing capabilities, along with our commitment to adopting AI, we believe Futu will continue to be a leading player in the AI era. Thank you.

We will now take the next question from the line of Chiyao Huang from Morgan Stanley.

The first question is about the HKD 800,000 guidance for new funded accounts, which is a very strong number. Given the increasing market volatility this year, I'm curious about the key drivers and areas that management believes have the most potential to help meet this target, particularly any new markets we are looking at. The second question is about Airstar Bank. I'm interested in the long-term strategic plans for the bank's market position. How will it differentiate itself from other virtual and traditional banks? Also, do we have a timeline for the product pipeline? Over time, what is expected for Airstar Bank's revenue structure—will it lean more towards balance sheet business or fee income business in wealth management?

For the first question, regarding our guidance of 800,000 funded accounts, this figure includes potential from one new market that we intend to enter in 2026. Despite the market volatility this year due to geopolitical tensions and macroeconomic challenges, our client acquisition rate has remained strong, and we are confident in reaching this target by the end of the year. For Airstar Bank, we will continue to focus on generating significant synergies between Airstar Bank and Futu's existing business. As mentioned in the opening remarks, our efforts in Airstar Bank will focus on two areas: externally, enhancing user experience, and internally, improving infrastructure. Externally, we've introduced new wealth management products in the Airstar Bank app, including mutual funds and insurance products, with more wealth management offerings set to launch in the upcoming quarters. Internally, we will strengthen compliance and risk controls and develop proprietary products to boost business efficiency and reduce operating costs for the bank. Over the long term, we expect our revenue streams to shift more towards fee income from wealth management and related activities, alongside growth from balance sheet expansion. Nevertheless, this remains a long-term goal for revenue generation. In the near term, we will keep our focus on the two areas mentioned earlier. Thank you very much.

We will now take the next question from the line of You Fan from CICC.

This is You Fan from CICC, and I have two questions. The first is regarding the regional breakdown of our user base. We are still experiencing strong customer growth despite the market downturn, so I would like to know about the existing and new paying clients' regional distribution. My second question pertains to AUM. Can you provide the figures for net asset inflow from clients versus market depreciation, as well as the regional breakdown of client assets?

For the contribution of the fourth quarter net adds, Malaysia and Hong Kong together accounted for over 50% of new client additions in the fourth quarter. The other markets, like the U.S., Singapore, and Japan, contributed between 10% to 20%. As the year concludes, fund accounts within our overseas brand Moomoo have risen to 55% of total group fund accounts, with the largest contributions coming from Singapore and the U.S. Regarding the second question about new net asset inflows in the fourth quarter, there was some moderation quarter-over-quarter, but in absolute terms, it remained very high, and the momentum is still robust. During the fourth quarter, Hong Kong's market experienced a notable decline, with the Hang Seng Index decreasing by 5% quarter-over-quarter and the Hang Seng Tech Index down by 15% quarter-over-quarter. Consequently, we faced some negative impacts from market-to-market losses, which almost completely offset the net asset inflows in the fourth quarter. At the end of the year, Hong Kong remained the largest market in terms of client asset AUM breakdown, followed by Singapore and newer markets like Japan and the U.S., which also made significant contributions. Thank you.

We will now take the next question from the line of Leon Qi from CLSA.

I will briefly translate my questions into English. This is Leon Qi from CLSA, and congratulations once again on a very strong fourth-quarter performance. I have two questions today. First, I’d like to follow up on our new markets for this year. Can management provide some insights into the rationale for entering these new markets? Will it be similar to one of our existing markets? Is the significance mainly based on attracting new paying clients or is there a new strategy regarding products? If possible, I would appreciate insights on our market entry this year. The second question pertains to operations. We want to understand the reasons behind the resilient quarterly net asset inflow. Specifically, in Hong Kong, we know that high-net-worth clients from a few years ago are a focus. How do we assess the performance of our relationship managers for these clients? Is net client inflow a primary metric we track, or do we also consider other metrics like total assets, new funded accounts, or performance metrics related to clients' assets or the variety of products they hold? These operational metrics would be quite helpful for us.

Regarding the first question about this new market, it's still too early to provide specific market names since we are in the process of submitting license applications. However, we anticipate that this market will be located in the Asian region. In response to the second question about performance metrics for our internal teams handling high-net-worth clients, new asset inflow is indeed a significant component of our overall assessment, which is quite comprehensive. We also consider the preferences and values of our clients. Consequently, net asset inflow along with total asset retention rates play a vital role in these assessments. Thank you.

We will now take the next question from the line of Cindy Wang from China Renaissance.

Congratulations on the impressive fourth-quarter results. I have two questions. First, regarding your new target of HKD 800,000 for funded accounts in 2026, could you explain the expected contributions from Hong Kong and international markets? Also, what do you anticipate the average customer acquisition cost will be for the year? Second, we've noticed a strong market rally starting in January, but this has recently been impacted by volatility in the stock market due to geopolitical risks. Based on trading activity on your platform, can you provide insights on trends in trading volume, trading speed, and demand for margin financing and securities spending in the first quarter?

In terms of the breakdown of the new funded accounts target for 2026, we expect it to be similar to the contributions from various markets in 2025. Hong Kong will continue to be a significant contributor geographically. For the average customer acquisition cost, our initial target for this year's cost will be around HKD 2,500 to HKD 3,000, given the uncertainty of market volatility this year. We will also incur some fund loading costs due to this market expansion, so we want to keep some flexibility in our cost objectives. However, year-to-date, we believe the customer acquisition situation remains very strong, and the CAC for the first two months might be at the lower end or even below the range I previously mentioned.

So in the first quarter, the market has been quite volatile, and we've seen our clients engaging very actively with it. We expect the total trading volume for the first quarter to remain stable, staying at the historic high we saw in the fourth quarter of last year. During the market pullback, we noticed increased activity from our clients. We anticipate a sequential increase in our margin financing and securities lending balance. As we mentioned earlier, net asset inflow remains very strong, and we expect to achieve a historic high in quarterly net asset inflow in the first quarter. Thank you.

We will now take the next question from the line of Zoey Zong from Jefferies.

This is Zoey from Jefferies. I have two questions. First, could you elaborate on the competitive landscape in Hong Kong and the market share momentum in Q4 and recently in Q1? Second, in November last year, you announced a share repurchase program of up to HKD 800 million until December 2027. Can you provide an update on its progress and what pace we should expect in the next two years?

Regarding share buyback programs, in the fourth quarter, we have not conducted any buybacks under the HKD 800 million program, which will extend until the end of 2027. We will continue to monitor market conditions and look for opportunities to initiate the share buyback program more actively. Thank you.

We haven't noticed any significant changes in the competitive landscape in Hong Kong. Our performance remains influenced by overall market sentiment. In the fourth quarter, the substantial decline in Hong Kong stocks led retail investors to become quite pessimistic about the market. Consequently, our client acquisition has slowed from a previously active Hong Kong IPO market, reflecting investors' sentiment. Looking back at 2025, Hong Kong generated the highest number of net funded accounts within the Futu Group, showing a strong double-digit year-over-year increase. This allowed us to reinforce our leadership and solidify our position with a significant market share. We not only achieved remarkable client growth in 2025 but also saw substantial net asset inflows, with a larger contribution from high net worth clients, primarily due to an expanding array of wealth management products and our professional image as a financial platform, enhanced by various branding initiatives and numerous investment forums and lectures throughout the year. We believe that our strong performance in Hong Kong in 2025 underscores our earlier assessment of market potential, and we anticipate considerable growth opportunities in both client base and asset pools. As we move into 2026, we will continue to enhance our product capabilities and invest in brand development while remaining positive about long-term growth prospects in Hong Kong. Thank you.

We will now take — sorry, I would like to hand back over to the speakers for closing remarks.

That concludes our call today. On behalf of the Futu management team, I would like to thank you for joining us. If you have any further questions, please do not hesitate to contact me or any of our Investor Relations representatives. Thank you, and goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect.