Futu Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 13, 2025

Key Takeaways

  • Paying client growth: Added 215,000 in Q4, up 41% YoY to 2.4 million total clients, and guiding for 800,000 new paying clients in 2025 across existing markets.
  • Product velocity: Delivered 209 app iterations and 7,762 new features in 2024, including U.S. margin trading and an options strategy builder to enhance client experience.
  • Record trading volume: Q4 trading volume jumped 202% YoY and 52% QoQ to HKD 2.89 trillion, with U.S. options traders doubling and contracts traded tripling YoY.
  • Net asset inflows: Total client assets reached HKD 343 billion (+43% YoY, +7% QoQ), as overseas markets’ Q4 inflow nearly matched full-year 2023 levels.
  • Strong financials: Q4 revenue of RMB 4.4 billion (+87% YoY) and net income of RMB 1.9 billion (+113% YoY) drove operating margin to 50% and net margin to 42.2%.
AI Generated. May Contain Errors.
Earnings Conference Call
Futu Q4 2024
00:00 / 00:00

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Operator

Hello, ladies and gentlemen. Welcome to Futu Holdings Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. At this time, all participants are in a listen only mode. After management's prepared remarks, there will be a Q and A session. Today's conference call is being recorded.

Operator

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 of Staff to CEO, Head of Strategy and IR at Futu. Please go ahead, sir.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

Thanks, operator, and thank you for joining us today to discuss our fourth quarter and full year twenty twenty four earnings results. Joining me on the call today are Mr. Lee Fei, 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.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

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 Lee. Lee will make his comments in Chinese and I will translate. Thank you all for joining our earnings call today.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

Client acquisitions accelerated across all markets amid an eventful quarter. We exceeded our full year guidance by a wide margin, adding 215,000 paying clients in the fourth quarter alone. As of year end, total paying clients was over $2,400,000 a 41% year over year. Year to date, we've observed robust paying client growth across markets and are guiding for 800,000 new paying clients in 2025. In the fourth quarter, Hong Kong market was the top growth driver for new paying clients as we implemented targeted marketing initiatives to capitalize on the momentum of different asset classes.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

In Singapore, we maintained quality growth with more paying clients added, there are also higher average assets. We further solidified our position as a leading one stop investment platform in Malaysia and recorded another quarter of strong paying client growth with our increasingly localized product experience and strengthening brand equity. In Japan, new paying clients grew double digit quarter over quarter as our superior U. S. Stock trading experience gained traction amid a bullish U.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

S. Market backdrop. In 2024, we delivered two zero nine iterations of our mobile app and desktop clients and added 7,762 new features, up 3732% year over year respectively. Product velocity remained high in the fourth quarter. In Japan, we launched U.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

S. Margin trading with an increasing adoption rate and improving throughout the quarter. In The U. S, we unveiled option strategy builder on our desktop version to better help traders navigate various options trading strategies. As we continue to refine our options trading products, in the fourth quarter, the number of options traders in The U.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

S. More than doubled year over year, while the number of options contracts traded more than tripled compared to the year ago quarter. In Hong Kong and Singapore, we established a bond trading thus to help our clients execute large and complex bond orders. For our clients in Australia and Canada, we launched recurring investment plans for local stocks. Although the pullback of China equity for the second half of the quarter weighed on the valuation of our clients' assets, it was more than offset by stellar net asset inflow across markets.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

Total client assets were HKD343 billion dollars up 43% year over year and 7% quarter over quarter. Overseas markets recorded the highest quarterly net asset inflow, almost equivalent to the full year 2023 inflow. Total line assets in Singapore grew by 19% quarter over quarter, marking the tenth consecutive quarter of sequential growth. Thanks to robust net asset inflow into U. S.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

Equities and money market funds. U. S, Canada and Australia markets also witnessed sequential growth in average client assets for four consecutive quarters. As our clients took on more leverage positions, margin financing and securities lending balance increased by 25% sequentially to a record HKD51 billion. Total trading volume jumped by 202% year over year and 52% quarter over quarter to HKD2.89 trillion dollars In the fourth quarter, our clients diversified their investing to include more crypto and AI names.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

As a result, U. S. Stock trading volume grew by 36% sequentially to a historic high of HK2.08 trillion dollars Notably, several AI focused companies previously less familiar to our clients emerged as top traded U. S. Stocks in 2024, driven by the remarkable outperformance and the rising narrative around AI's transformative potential.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

Hong Kong stock trading volume grew exponentially by 117% sequentially to HKD75 billion dollars The renewed enthusiasm in Hong Kong equity starting from September led to a substantial rebound in trading velocity. Clients showed a meaningful pickup of interest in many technology names as well as leverage and inverse ETFs as well as other things. Total client assets and wealth management increased 93% year over year and 14% quarter over quarter to HKD111 billion dollars Money market funds continue to hold strong appeal for our clients even with moderately lower yields in the fourth quarter and drove the bulk of the sequential growth in wealth management AUM. In Hong Kong and Singapore, we expanded our structured product offerings to better address the investment needs of our high net worth clients. Total client assets and wealth management accounted for 15% of total client assets, up from 12% in the same quarter last year.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

We had four eighty two IPO distribution in IR clients, up 16% year over year. In 2024, we underwrote 40 Hong Kong IPOs, ranking first among all brokers for the third consecutive year according to Wind. The new digital IPO settlement platform, Phoenix, introduced by the Hong Kong Stock Exchange, eliminates multi account subscriptions, shortens the settlement period, reduces the amount of lockup capital needed and lowers funding costs through the new pre funding model. We believe that this new system improves the retail IPO subscription experience, pro form our retail participation and favors market consolidation. We've swiftly adapted our subscription process based on a new framework and achieved notable gains in market share.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

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

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

Thanks, Lee and Daniel. Please allow me to walk you through our financial performance in the fourth quarter. All the numbers are in Hong Kong dollar unless otherwise noted. Total revenue was RMB4.4 billion, up 87% from RMB2.4 billion in the fourth quarter of twenty twenty three. We conclude a strong year with full year revenue growing to RMB13.6 billion, up 36 year over year.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

Brokerage commission and handling charge income was RMB2.1 billion, an increase of 128% year over year and 35% Q over Q. The year over year Q over Q increase was both driven by higher trading volume, partially offset by the decline in blended commission rate. We adopt per contract and per share pricing model for U. S. Options and The U.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

S. Stock trading, respectively. As a result, brokerage income will grow at a slower rate than trading volume where our clients trade high priced stocks and options. Interest income was RMB2 billion, up 52% year over year and a 19% Q over Q. Both were driven by higher interest income from our security borrowing and lending business and higher interest from banking deposits.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

Other income was RMB353 million up 157% year over year and 69% Q over Q. The year over year and Q over Q increase was both primarily attributed to higher funded distribution income and the currency exchange income. Our total cost was $776,000,000 an increase of 79% from four thirty four million dollars in the fourth quarter of twenty twenty three. Brokerage, commission and handling charge expenses was $112,000,000 up 90% year over year and 38% Q over Q. The Q over Q increase was roughly in line with the movement of our brokerage commission and handling charge income.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

Interest expenses were $513,000,000, up 90% year over year and 24% Q over Q. The year over year increase was driven by higher interest expenses associated with our security borrowing and the lending business. The Q over Q increase was mainly due to higher margin financing interest expenses as a result of higher funding costs for HKDollars. Processing and servicing costs were RMB151 million, up 45% year over year and 16% Q over Q. The increase was largely due to higher margin information and the data fee for new products with higher system usage fees.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

As a result, total gross profit was RMB3.7 billion, an increase of 89% from RMB1.9 billion in the fourth quarter of twenty twenty three. Gross margin was 82.5% as compared to 81.7 in the fourth quarter of twenty twenty three. Operating expenses was 57% year over year and 33% Q over Q to RMB1.4 billion. R and D expenses were RMB399 million, up 10% year over year and 4% Q over Q. This increase was partially due to costs related to organizational restructuring in the fourth quarter of twenty twenty four.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

Selling and marketing expenses were RMB464 million, up 154% year over year and 48% Q over Q. The year over year increase was due to a triple digit year over year increase in net new paying clients, partially offset by lower client acquisition costs. A Q over Q increase was in line with the growth of our new paying clients. General and administrative expenses was $576,000,000 up 55% year over year and 51% Q over Q. The year over year increase was primarily due to increase in the general administrative telecom and the Q over Q increase was mainly due to higher bonus accrued for general administrative personnel and to a less extent costs related to organizational restructuring.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

As a result, income from operation increased 117% year over year and 28% Q over Q to RMB2.2 billion. Operating margin increased to 50% from 43.1% in the fourth quarter of twenty twenty three, mostly due to strong top line growth and operating leverage. Our net income increased by 113% year over year and 42% Q over Q to RMB1.9 billion. Net income margin expanded to 42.2% in the fourth quarter as compared to thirty six point nine percent in the same quarter last year. Our effective tax rate for the quarter was 16.1%.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

That concludes our prepared remarks. We'd now like to open the call to questions. Operator, please go ahead.

Operator

Thank We will now take the first question from the line of Emma Xu from Bank of America Securities. Please go ahead.

Emma Xu
Emma Xu
Analyst at Bank of America

So congratulations on the very strong results. I have two questions. The first question is about the new paying clients. You guided 800,000 new paying clients for this year around 100,000 more than last year. But last year you have two new markets Malaysia and Japan.

Emma Xu
Emma Xu
Analyst at Bank of America

But this year previously you guided that you don't have new market plans. So just wondering why you are able to guide such a strong new paying client target? And the second question is about the CAC client acquisition cost. It increased moderately in the fourth quarter last year despite the very active market in an active market in general CAC should be lower, thanks to the natural flows. So just wondering, is it due to the change of the market, the mix of the new paying client market or due to the change of the channels that lead to the increase of the CAC?

Emma Xu
Emma Xu
Analyst at Bank of America

And what's your target of our CAC for this year? Thanks.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

Thanks, Emma. I will take these two questions. Now, in terms of your first questions regarding our new guidance for 2025, this 14464 new paying clients does not include any new markets we will enter in or not in 2025. So this is all for these existing seven markets. The reason for this very strong guidance is number one is we think these two new markets such as Malaysia and Japan which we're adding to last year still provide a very meaningful robust growth outlook in 2025.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

Not to mention these relatively mature markets such as Singapore and Hong Kong, we still see very good upside in client acquisitions, thanks to partially due to the Chinese asset rerating what we witnessed from early days of this year. And in terms of the second question regarding the client acquisition costs, we roughly target HK2500 dollars to HK3000 dollars CAC for this year. From the end of last year and going forward, we will spend more money in some brand equities in order to enhance our long term user loyalty in our platform. Thank you.

Emma Xu
Emma Xu
Analyst at Bank of America

Thank you. Very clear.

Operator

Thank you. We will now take the next question from the line of Cindy Wang from China Renaissance. Please go ahead.

Cindy Wang
Director at China Renaissance

Thanks for taking my question and congrats for a very strong result in Q4. And I have two questions here. First question, recently we noticed that U. S. And the Hong Kong market overall market trading volume has very strong quarter over quarter performance in first quarter to date.

Cindy Wang
Director at China Renaissance

So can management give us a little bit color based on current run rate? What's the trading volume, trading velocity, net asset inflow and the margin financing, securities and lending guidance? And the second question is related to the new product pipeline. So we know like Futur has a lot of like product pipeline every year. So can you give us roughly pipeline on the equity derivatives and crypto products? Thank you.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

So first of all, giving some color on the quarter to date operating matrices. We've seen this year, there was a lot of trading opportunities for both the Hong Kong and U. S. Stock market. Our retail investors continue to be very highly engaged.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

And year to date, based on the current run rate, we forecast higher net new paying clients as compared to the fourth quarter last year. We've also seen higher net asset inflow, which coupled with the appreciation of China equities led to a very meaningful sequential increase in total client assets. And based on this current run rate, we also forecast our total trading volume to further increase on top of the high base last quarter. We've seen that the clients remain highly engaged and very high risk tolerance year to date. And regarding our product plan, so this year for all of our overseas markets, we have a very rich product pipeline in order to satisfy the client demand for different risk rewards.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

In Japan, for example, we'll continue to catch up with our product trading capabilities around Japanese equities and at the same time continue to optimize and extend our leadership in U. S. Trading. In Malaysia, we also will have a number of product innovations and iterations based on local clients' needs. In The U.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

S, we plan to roll out crypto trading in the next couple of months. And in terms of wealth management, we plan to continue to expand our wealth management offerings, including offering more structured notes for our retail and high network clients. Thank you.

Operator

Thank you. We will now take the next question from the line of Chiyou Huang from Morgan Stanley. Please go ahead.

Chiyao Huang
Chiyao Huang
Analyst at Morgan Stanley

So basically two questions. One is on the on what basically what areas of the business that management think have the most potential to integrate AI models like DeepSeek and what kind of efficiency gains and how should that strengthen the product offerings and services? And the second question is on crypto offerings. And I just wonder, is there any update on the licensing process? Or what can be done to accelerate the client penetration or investor education and the marketing side on the crypto business in Hong Kong and Singapore?

Chiyao Huang
Chiyao Huang
Analyst at Morgan Stanley

And then what will be most differentiated offerings from FUTO's crypto office compared to peers? Thank you.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

Thank you, Cheung. Li will answer your first question and my colleagues Robin will answer your second question regarding crypto. Thank you.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

So in the past couple of years, we've made a number of explorations in AI based on different usage scenarios and we've incorporated AI capabilities both for internal operations and for client facing capabilities and we are also doing vocal deployment of DeepSeek. So internally, we've found that AI helps us to meaningfully lift our efficiency in terms of the market use and data generation, filtering of content in our social community and the designing and the graphics, etcetera. And in terms of client facing user experiences, so in Hong Kong, we've launched a new synthesis function for individual stocks twice a day in the morning and at night. We also have an automatic interpretation of the corporate announcements and analysis of the financial results. These are all based on the AI model, which we believe help our clients to quickly understand market dynamics and reduce the time needed for them to make investment decisions.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

And we are also doing a lot of studying and research in terms of how better to incorporate AI to empower more applications for retail investors. And we believe that if we use AI to help with decision making, that puts a much higher requirement in terms of the timeliness and the accuracy of the information generated. So the unpredictable quality of the responses will actually increase the investment thresholds for the retail investors and prolong the time needed for them to make effective investment decisions, thereby lowering their investment experiences. And we hope to make a lot of thorough preparations and to make sure that the information we generate through AI in different usage scenarios are highly accurate. And at the same time, we need to do very prudent assessment and very comprehensive testing to make sure that we strike the right balance between user experience, compliance and technological innovation, so as to maximize our investors' benefits and also to protect their needs. Thank you.

Operator

Thank you. We will now take the next question from the line of Charles Zhu from UBS. Please go ahead.

Charles Zhou
Charles Zhou
Stock Analyst at UBS Group

So I've got two questions. The first one, we understand the company plans to develop wealth management business in both Hong Kong and also Singapore. So what is your expectation for the total addressable market size? And also how does the Futur differentiate from its competitors in other I mean, say, for example, private banks or insurance companies? And can you maybe talk about your competitive advantage from product distribution, etcetera?

Charles Zhou
Charles Zhou
Stock Analyst at UBS Group

And do you think the business will be scalable? My second question is following the strong trading volume in Q4 last year, U. S. Stocks corrected sharply over the past months. How did it impact your trading volume in Q1?

Charles Zhou
Charles Zhou
Stock Analyst at UBS Group

And if the sales momentum continue in The U. S. Stock persist, the client AUM will decline, will this also affect overall trading volume in the rest of this year in 2025? Thank you.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

In terms of the trading volumes, despite we saw some setback in The U. S. Stock markets in the first quarter so far, But actually the market setbacks create more volatilities, which inspire more clients trading to bottom fish the markets in The U. S. Stock market.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

Then in the meantime, the trading volumes in Hong Kong made a huge spike due to China assets rerating and a lot of DeepSeq related theme. So on a collective basis, we, as Daniel mentioned before, in the first quarter so far, we see the overall trading volumes remain very robust. Now I hand over to Robin.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

So I'll first translate about the crypto updates and then Robin also touched on wealth management. So in the fourth quarter, the crypto market had a huge boom, which lifted our clients' trading interests and sentiments. We've seen that in November and December, the crypto trading volume on our platform grew exponentially, which is almost five times of what we saw in October. And our daily trading volume surpassed US35 million dollars And we've also seen a similar growth rate in terms of number of crypto traders on our platform. So in the first quarter, we've seen that the crypto prices experienced some pullback.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

And at the same time, there's a lot of trading opportunities in the Hong Kong and U. S. Stock markets. So we've seen a subsiding interest in crypto trading on our platform, but the trading volume and the crypto traders are still at a relatively high level. Right now in Hong Kong, we offer four trading pairs to our retail investors and we offer six trading pairs in Singapore.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

And in the future, we plan to allow more kind of mainstream trading pairs. And at the same time, I think we'll enhance our management of the capital efficiency and also the liquidity and the security and also kind of lower the cost of our clients moving funds in and out, which we believe will help with client conversion and with further penetration of crypto trading. We believe in Hong Kong and Singapore, most of their retail investors are still in the very early stage of building up awareness of those asset class. And we think there's a lot of further room for penetration. And we hope to leverage more investor education materials, a seamless fund deposit experience to assuage our client's concerns towards this relatively new asset class.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

And as the regulatory framework gets more clear in these two markets, FUTU as one of the earliest retail players and the space will enjoy the early mover advantage and building up our user mindshare, especially in terms of compliant operations, which will help us gain advantage as the crypto asset class becomes more mainstream in these two markets. And as we mentioned earlier, we're also planning to roll out crypto trading in UBS this year and we are expecting a higher penetration of crypto among our U. S. Client base compared to what we have seen in Hong Kong and Singapore so far. And as regards to our VACP license, so we got a conditional approval from SFC and we are working on our product development.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

We don't have a very specific timeline for our official launch yet and we look forward to giving more color down the road. And then about the wealth management. So this year, we've entered into a rate cut cycle, but we still believe money market funds yield will continue to be attractive to our clients in the foreseeable future. And at the same time, we have provided very seamless automatic subscription and redemption functions for our money market funds, which really maximize our clients' capital efficiency, so as to help them to seize the trading opportunities in the market and at the same time earn yields on their IO cash. And we typically, we expect to now perform in this fixed income related assets during a rate cut cycle.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

And we have built a comprehensive set of products in this space in Hong Kong and Singapore, which we believe will help our clients navigate these different investment cycles to achieve long term capital appreciation. And at the same time, as mentioned earlier, we intend to further enrich our wealth management product offerings, including more structured notes for both our retail and high net worth clients. And we are optimistic about the AUM growth for our wealth management. And to add some additional color to what Robin just said about wealth management, I think there are some of our key competitive advantages in this space is number one, we really offer our clients a seamless experience to navigate across different asset classes on our platform, whether it's equities or wealth management or crypto, etcetera. So I think that is one of our key competitive advantage.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

We don't just lead our competitors in just one specific asset class, but it is a very seamless one time experience for clients to very easily switch between asset classes and to cross navigate different cycles. And number two, I think we adopt a platform model, which is a key advantage for our high network clients wealth management business. For example, like in terms of structured products, we onboard structured offerings from a number of different private banks and our clients can compare these returns and the performances and pick the best asset class on our platform as opposed to maybe some other institutions will prefer to sell to their clients their own proprietary products. So this platform model really gives our clients access to a variety of different assets and us as an intermediary is very neutral and just make sure that we will be able to provide our clients with the most attractive investment opportunity. Thank you.

Operator

Thank you. We will now take the next question from the line of Yu Phan from CICC. Please go ahead.

Hua Fan
Managing Director at China International Capital Corporation (CICC)

This is Youyou Fan from CICC and the two questions. The first one is regarding the AUM breakdown in 4Q. So how much is from the client net asset inflow and how much from market to market impact? And what's the regional breakdown of the client assets? And the second question, we see the active Hong Kong IPO subscription recently.

Hua Fan
Managing Director at China International Capital Corporation (CICC)

So what's the impact on our income statement and what's the contribution to our new paying clients and the net asset inflow?

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

In terms of the net asset inflow breakdowns in the fourth quarter, as we mentioned before, the market to market implications

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

in

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

the fourth quarter actually was a negative number. So the client asset inflow, the number is much larger than the movement of the balance between two quarters. And among them, 24% of the asset inflow actually come from non Great China areas. This number one year ago was just a 20%. We see it is a very good indicator for our overseas markets' continuous engagement for clients.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

Then the second question, the director revenues from Hong Kong IPO just contributes low single digits of our total revenue given that we are further diversifying our revenue stream in the past four to five years. And also due to the new mechanisms in Hong Kong such as Feeny, the settlement duration, the leverage financing duration were both shortened. So, on one side, it is a negative to all the brokers' direct commission and the interest income. But on the other hand, it further engaged the clients to the markets to enhance the market liquidity and there's more interest in terms of the retail clients participate in this market. So on a net net basis, it is still very positive to our business. Thank you.

Operator

Thank you. We will now take the next question from the line of JPMorgan. Please Peter Tsang, please go ahead from JPMorgan.

Chiyao Huang
Chiyao Huang
Analyst at Morgan Stanley

Many thanks for giving me the opportunity to ask questions. This is Peter Zhang from JPMorgan and I have two questions. First is about the operating expense and we noticed that from sequential perspective, the G and A expense increased by over 50% Q on Q in fourth quarter while R and D expense only moderately picked up by 4%. So we wish to understand what's the drivers behind this divergent change for the two different operating expense in fourth quarter And what will be your outlook for 2025 in terms of your headcount growth and your R and D and G and A expense growth into 2025? And my second question is about other income.

Chiyao Huang
Chiyao Huang
Analyst at Morgan Stanley

We noticed that other income grew by 69% Q on Q to a record quarterly high in fourth quarter. We wish to understand what's the drivers behind this increase and what's the outlook into 2025? Thank you.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

For two questions, number one is regarding the G and A Q on Q expenses increase mainly due to three reasons. Number one is our year end bonus equipment, especially for the overseas markets management. Secondly is due to some one off professional expenses relating to some new license applications and the new market feasibility studies. And the thirdly is due to some one off organizational restructuring. Looking forward to 2025, we expect the number of our headcount will continue to increase in mid in low to middle single digit versus the situations in 2024.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

Then for second question regarding the breakdown of the key drivers of the other income mainly comes from two facts. Number one is revenues derived from the wealth management, including the funds distribution and also more fees from the structured products like structured nodes and the T bills, etcetera. The other is relating to FX exchange fees. This is partially due to very divergent market performance between The U. S.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

Market and the Hong Kong market in fourth quarter. So we saw more clients is trying to switch their assets between these two markets. Thank you.

Operator

Thank you. We will now take the next question from the line of Zoe Zhong from Jefferies. Please go ahead.

Zoey Zong
Zoey Zong
Analyst at Jefferies Financial Group

Thank you management for taking my questions and congratulations on your strong results. And I have two questions. First, we have seen the blended trading commission rate decline both year over year and sequentially in Q4. However, the trading volume contribution from HK stocks actually increased in Q4. So excluding the structural impact, what's the reason for the commission rate decline?

Zoey Zong
Zoey Zong
Analyst at Jefferies Financial Group

And then my second question is about capital return. We ever had USD 500,000,000 share buyback program, which is effective during December year. May I ask how much is the remaining quarter and what's your capital return this year? Also do we have any consideration of regular dividend? Thank you.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

In terms of the blended commission rate, the Q over Q decrease was mainly due to the product mix change. In the fourth quarter, more clients trading these high value, nominal values U. S. Stocks and also high nominal values U. S.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

Options, which made the blended take rates have some Q on Q decrease. And in the first quarter so far, we saw our take rates remain very stable. Then the second question regarding the shareholder returns, so far we have not utilized our share repurchase program, which will be expired at the end of twenty twenty five. We still think this new market, new business lines will still be in a fast growth stage. There will be a huge room for us to deploy the capital for these new business and the new markets, which we think in the long run will enhance our competitive edge in the markets and also our profitability.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

Having said that, as we mentioned in our third quarters, we do concur part of our shareholders is very focusing or care about cash dividends. And we will revisit and evaluate our dividend payout policies when twenty twenty five year full year complete and we'll consider the relative measures to provide a reward to thanks our long term shareholders. Thank you.

Zoey Zong
Zoey Zong
Analyst at Jefferies Financial Group

That's very clear. Thank you.

Operator

Thank you. We will now take the next question from the line of Han Yang Wang from 86Research. Please go ahead.

Hanyang Wang
Equity Research Analyst at 86Research

This is Hanyang from eighty six Research. I have one simple question regarding the derivatives trading. So what is the approximately the percentage of the derivatives in the total trading volume in the fourth quarter? And considering the increase in market volatility recently, do you see an increase in the proportion of derivatives trading on your platform in Q1? Thank you.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

In terms of the derivative of commissions, it roughly accounts for one third of our total trading commissions in the fourth quarter, slightly down to our historical high in the past. And in the first quarter, so far, we do not witness any material change for this ratio. Thank you.

Operator

Thank you. We will now take the next question from the line of Alan Chen from Citi. Please go ahead.

Alan Chen
Alan Chen
VP - Equity Research at Citi

Thanks management for giving me the chance to ask the question. This is Alan from Citibank. Can management give us some breakdown of the interest income in terms of either cash interest income versus margin financing, the credit lending income? And if management interest share, what's the prevailing interest rate on Fotune's clients' idle cash, what was the idle cash yield in 4Q24? And since September, we have already seen the Fed cutting the Fed rate of 100 basis points.

Alan Chen
Alan Chen
VP - Equity Research at Citi

I'm wondering how much of that 100 basis points Fed rate has already been reflected into the decline in the cash interest rate? Thanks.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

In terms of the breakdown of the interest income, roughly 40% to 45% interest income was derived from the idle cash deposits and the remaining belongs to the margin financing and the security lending, etcetera. And the impact for the rate cut if we use the fourth quarter end client assets numbers to make our projections every 25 basis cut by the federal rate. Our pre tax profit monthly pre tax profit will be negatively impacted by HKD8 million dollars to HKD10 million dollars Thank you.

Operator

Thank you. We will now take the last question from the line of Sihan Wang from Goldman Sachs. Please go ahead.

Zihan Wang
Zihan Wang
Research Analyst at Goldman Sachs

My first question is, do we have a regional breakdown of the new paying client growth in 4Q? And for 2025, what proportion of 800,000 new paying client is expected to be from new market and what proportion from mature markets? And my second question is, do we have a guidance for AUM per client growth in 2025? Will it be diluted as paying client growth is very fast and majority of them may be from new markets? And in the long run, what levels do we expect AUM per client to reach in each region? Thank you.

Arthur Yu Chen
Arthur Yu Chen
Chief Financial Officer at Futu

In terms of the breakdown of the new client acquisition, geographic locations for these mature markets like Hong Kong and Singapore, which on a collective basis contributed roughly 40% to 45% of our total new paying clients acquired in the fourth quarter and the remaining countries in Asia alongside Australia contribute roughly 40% as well, then the remaining 20% belongs to the North America. Thank you.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

Let me briefly translate. So first of all, I just want to comment on net asset inflow. In 2024, we saw very meaningful setup in net asset inflow in comparison to 2023. And we foresee a similar very robust net asset inflow in 2025 as well. And as you understand, like average client assets are first of all impacted by our new client mix between different markets and also impacted by mark to market trends.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

And both of these factors are less within our control than net asset inflows. It's very hard to predict how average client assets is going to trend for 02/1945. And in terms of average client assets in different markets, well, some markets will structurally have high average client assets. For example, Hong Kong and Singapore, like these clients will have higher investable income and therefore will have more capital that they can deploy on FUTU's platform. But at the same time, what we found super encouraging is that in the fourth quarter, all of our markets experienced very meaningful Q1Q growth in average client assets.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

And we expect this trend to continue because as we onboard more products, I think there's a lot of cross selling opportunity and we think there's ample opportunity for our existing clients to put more assets onto our platform. At the same time, as our product capabilities get enhanced and as our brand equity gets enhanced, we're able to attract more high quality clients, including high net worth clients in many of these markets. Thank you.

Operator

Thank you. I would now like to turn the conference back to Daniel Yuan for closing remarks.

Daniel Yuan
Daniel Yuan
Chief of Staff & Head of Investor Relations at Futu

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

Operator

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

Executives
    • Daniel Yuan
      Daniel Yuan
      Chief of Staff & Head of Investor Relations
    • Arthur Yu Chen
      Arthur Yu Chen
      Chief Financial Officer
Analysts
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