Bulletin: Haitong Securities' Key Risks Lie Offshore

HONG KONG (S&P Global Ratings) April 2, 2024--Haitong Securities Co. Ltd.'s offshore operations will likely continue to pull down group earnings. While the entity performs well in its home market, it is incurring reversals in its offshore operations, stemming from mark-to-market losses and higher funding costs. The underperformance may continue, and this view forms a large part of our negative outlook on the Haitong rating (BBB/Negative/A-2). Our base case is that Haitong will likely soon resolve some of its riskier exposure in Hong Kong, along with a tightening of the group's risk controls, resulting in a rebound in earnings. The China-based brokerage's 2023 annual results (year ending Dec. 31) showed the riskiness of its offshore operations. Haitong made a loss

...April 2, 2024 HONG KONG (S&P Global Ratings) April 2, 2024--Haitong Securities Co. Ltd.'s offshore operations will likely continue to pull down group earnings. While the entity performs well in its home market, it is incurring reversals in its offshore operations, stemming from mark-to-market losses and higher funding costs. The underperformance may continue, and this view forms a large part of our negative outlook on the Haitong rating (###/Negative/A-2). Our base case is that Haitong will likely soon resolve some of its riskier exposure in Hong Kong, along with a tightening of the group's risk controls, resulting in a rebound in earnings. The China-based brokerage's 2023 annual results (year ending Dec. 31) showed the riskiness of its offshore operations. Haitong made a loss of Chinese renminbi (RMB) 311 million on a consolidated basis, driven by a HK$8 billion loss by its Hong Kong subsidiary. In comparison, Haitong earned about RMB7.3 billion in its home market of mainland China. While...

Bulletin