Financial Summary Consolidated Income Statement and Statement of Comprehensive Income The company turned from profit to loss in FY2022, reporting an annual loss of HKD 2.98 billion, primarily due to negative proprietary trading income and increased impairment provisions FY2022 vs. FY2021 Performance Comparison | Indicator | 2022 (HKD thousands) | 2021 (HKD thousands) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Total Revenue and Other Income | (585,690) | 1,642,634 | -135.7% | | Total Expenses | (2,433,665) | (1,294,786) | +88.0% | | (Loss)/Profit Before Tax | (2,984,585) | 351,552 | Turned from Profit to Loss | | (Loss)/Profit for the Year | (2,983,800) | 312,355 | Turned from Profit to Loss | | (Loss)/Profit Attributable to Owners of the Company | (2,983,800) | 262,420 | Turned from Profit to Loss | | (Loss)/Earnings Per Share (HKD) | (1.09) | 0.10 | Turned from Profit to Loss | - Other comprehensive income recorded a loss of HKD 1.01 billion in 2022, primarily due to fair value changes in debt investments measured at fair value through other comprehensive income and exchange differences, expanding the total comprehensive loss to approximately HKD 4.0 billion4 Consolidated Statement of Financial Position As of end-2022, total assets decreased by 24.5% to HKD 24.66 billion, total liabilities decreased to HKD 21.99 billion, and total equity significantly shrank by 63.9% to HKD 2.68 billion, mainly due to reduced retained earnings and revaluation reserve changes End-2022 vs. End-2021 Balance Sheet Comparison | Indicator | December 31, 2022 (HKD thousands) | December 31, 2021 (HKD thousands) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Total Assets | 24,661,853 | 32,661,878 | -24.5% | | Total Liabilities | 21,985,260 | 25,237,413 | -12.9% | | Total Equity | 2,676,593 | 7,424,465 | -63.9% | | Net Current Assets | 600,146 | 10,802,969 | -94.4% | Management Discussion and Analysis Business Review In 2022, the company's operating performance significantly deteriorated, turning from profit to loss due to Federal Reserve tightening and capital market volatility, with all major business segments experiencing revenue declines, particularly investment and lending and asset management - Due to factors like the Federal Reserve's monetary tightening and capital market volatility, the Group recorded a loss of HKD 2.98 billion in 2022, compared to a profit of HKD 310 million in 202164 Securities Brokerage and Margin Financing Securities brokerage commission income decreased by 38.9% to HKD 108 million, and margin financing interest income fell by 41.9% to HKD 102 million, while the company actively adjusted client structure and grew effective client numbers and assets Securities Brokerage Commission Income (by Product) | Product | 2022 (HKD millions) | Proportion | 2021 (HKD millions) | Proportion | | :--- | :--- | :--- | :--- | :--- | | Hong Kong Stocks | 76.4 | 70.6% | 130.1 | 73.4% | | Non-Hong Kong Stocks | 17.2 | 15.9% | 22.6 | 12.8% | | Bonds | 8.6 | 7.9% | 13.0 | 7.3% | | Others | 6.1 | 5.6% | 11.6 | 6.5% | | Total | 108.3 | 100.0% | 177.3 | 100.0% | - In margin financing, despite a slight increase in margin accounts to 9,661, average monthly loan balances decreased, leading to a 41.9% reduction in interest income to HKD 102 million9091 Corporate Finance and Underwriting Corporate finance and underwriting commission and fee income decreased by 53.3% to HKD 59.4 million, impacted by a 68.4% contraction in Hong Kong IPO market fundraising, though the company completed 3 IPO sponsorship and 24 bookrunner projects - Corporate finance and underwriting commission income was HKD 59.4 million, a 53.3% decrease from HKD 127 million in 202194 - During the year, the company completed 2 exclusive IPO sponsor projects, 1 joint IPO sponsor project, 24 IPO bookrunner projects, and 54 bond issuance projects, assisting enterprises in raising USD 13.46 billion94 Asset Management and Advisory Assets Under Management (AUM) decreased by 26.3% to HKD 24.18 billion, and asset management and advisory service fee income fell by 11.1% to HKD 44.4 million, with the segment recording a HKD 466 million proprietary trading loss due to guaranteed payments and debt security price declines - As of December 31, 2022, total Assets Under Management (AUM) was approximately HKD 24.18 billion, a 26.3% decrease from HKD 32.82 billion at end-202183 - This segment recorded a proprietary trading loss of HKD 466 million due to guaranteed payments to clients and a decline in related debt security prices83 Investment and Lending This segment's performance severely declined, with proprietary trading turning from a HKD 539 million profit in 2021 to a HKD 1.275 billion loss, while interest income remained stable at HKD 583 million, and credit business clients concentrated in real estate, SOEs, and technology - Proprietary trading recorded a loss of HKD 1.275 billion, compared to a gain of HKD 539 million in 2021, a year-on-year decrease of HKD 1.814 billion86 - For credit business, total loans extended to the top five clients amounted to HKD 1.617 billion, representing 66.9% of total loans97 Financial Review In FY2022, total revenue turned to a HKD 590 million loss from a HKD 1.64 billion gain, while operating expenses surged 88.0% to HKD 2.43 billion, driven by a 365.6% increase in impairment provisions, leading to significantly tightened liquidity and a soaring gearing ratio Financial Performance Group total revenue and other income turned from a HKD 1.64 billion gain in 2021 to a HKD 590 million loss in 2022, primarily due to revenue declines across business segments, especially significant losses in investment and lending and asset management Total Revenue and Other Income by Segment | Segment | 2022 (HKD millions) | 2021 (HKD millions) | | :--- | :--- | :--- | | Brokerage | 122.4 | 196.6 | | Corporate Finance and Underwriting | 59.4 | 127.2 | | Asset Management and Advisory | (420.3) | (88.4) | | Margin Financing | 102.4 | 176.3 | | Investment and Lending | (676.4) | 1,165.1 | | Others | 226.8 | 65.8 | | Total | (585.7) | 1,642.6 | Operating Expenses Operating expenses increased by 88.0% to HKD 2.43 billion in 2022, primarily driven by a surge in impairment provisions from HKD 260 million to HKD 1.2 billion, including HKD 430 million for loans and advances and HKD 680 million for debt investments, while finance costs also doubled Composition of Operating Expenses | Item | 2022 (HKD millions) | Proportion | 2021 (HKD millions) | Proportion | | :--- | :--- | :--- | :--- | :--- | | Commission and Brokerage Expenses | 31.6 | 1.3% | 55.8 | 4.3% | | Finance Costs | 478.3 | 19.7% | 228.5 | 17.6% | | Staff Costs | 370.7 | 15.2% | 399.5 | 30.9% | | Depreciation | 116.6 | 4.8% | 99.5 | 7.7% | | Other Operating Expenses | 241.2 | 9.9% | 254.7 | 19.7% | | Changes in Impairment Provisions | 1,195.2 | 49.1% | 256.7 | 19.8% | | Total | 2,433.6 | 100.0% | 1,294.7 | 100.0% | - Impairment losses primarily included HKD 431 million for loans and advances and HKD 677 million for debt investments measured at fair value through other comprehensive income103 Liquidity and Capital Resources As of end-2022, the Group's liquidity significantly tightened, with net current assets plummeting 94.4% to HKD 600 million and the current ratio dropping from 2.1x to 1.0x, while the gearing ratio surged from 297.8% to 684.3%, indicating increased financial risk - Net current assets significantly decreased from HKD 10.8 billion to HKD 600 million, and the current ratio dropped from 2.1x to 1.0x125 - The gearing ratio (total borrowings/total equity) significantly increased from 297.8% at end-2021 to 684.3% at end-2022115 - Total borrowings were HKD 18.32 billion, a decrease from HKD 22.11 billion at end-2021107 Principal Risks The Group faces principal risks including market (currency, interest rate, and other price), credit, liquidity, and operational risks, which are managed through policies like asset diversification, regular monitoring, credit policies, and internal controls - Market risk includes currency risk (primarily from RMB and USD), interest rate risk (related to margin loans, loans, and bond investments), and other price risks122128119 - Credit risk arises from potential default by clients or counterparties, mitigated through a series of credit policies and continuous monitoring120129 - Liquidity risk stems from the business's reliance on sufficient funds to repay maturing debts, managed by internal measures to monitor liquidity and funding needs121 - Operational risk originates from internal procedures, human error, system failures, or external events, mitigated through internal control measures130 Outlook and Strategy For 2023, the company anticipates global monetary policy tightening nearing its end, maintaining a cautious global economic outlook but optimistic about China's recovery, with future strategies focusing on core business, professional capabilities, resource allocation, stable income, healthy asset business development, digitalization, and enhanced risk management for high-quality growth - The outlook for the 2023 global economy is relatively cautious, but the company remains optimistic about China's economy, expecting a clear recovery trend179 - Future strategies will focus on core business, strengthening professional capabilities, optimizing resource allocation, increasing stable income, accelerating digital empowerment, and enhancing risk management capabilities135 Notes to Consolidated Financial Information Accounting Policies and Segment Information This financial information is extracted from audited annual consolidated financial statements, with consistent accounting policies, and the Group's business is managed across six segments: Brokerage, Corporate Finance and Underwriting, Asset Management and Advisory, Margin Financing, Investment and Lending, and Others, with only Brokerage and Others reporting positive pre-tax income in 2022 - The Group's business is divided into six operating segments: Brokerage, Corporate Finance and Underwriting, Asset Management and Advisory, Margin Financing, Investment and Lending, and Others212228 2022 Pre-tax (Loss)/Profit by Segment | Segment | Pre-tax (Loss)/Profit (HKD thousands) | | :--- | :--- | | Brokerage | (49,943) | | Corporate Finance and Underwriting | (33,037) | | Asset Management and Advisory | (530,780) | | Margin Financing | (25,737) | | Investment and Lending | (2,407,595) | | Others | 62,507 | | Total | (2,984,585) | Notes to Key Financial Items This section details the composition and changes in revenue, costs, impairment, tax, EPS, dividends, and key balance sheet items, highlighting significant declines in commission and fee income, a shift from proprietary trading profit to loss, doubled finance costs, increased impairment provisions, and no dividend payout for 2022 Revenue and Other Income In 2022, commission and fee income decreased by 40.2% to HKD 212 million, interest income slightly fell by 10.0% to HKD 685 million, proprietary trading income turned from a HKD 399 million gain to a HKD 1.741 billion loss, and other income grew by 101.7% to HKD 259 million Revenue and Other Income Details | Item | 2022 (HKD thousands) | 2021 (HKD thousands) | | :--- | :--- | :--- | | Commission and Fee Income | 212,080 | 354,461 | | Interest Income | 684,951 | 760,843 | | Proprietary Trading Income | (1,741,260) | 399,136 | | Other Income | 258,539 | 128,194 | Finance Costs and Staff Costs Finance costs increased by 109.3% to HKD 478 million, driven by higher interest expenses on bank loans and repurchase agreements, while staff costs slightly decreased by 7.2% to HKD 371 million - Total finance costs amounted to HKD 478 million, an increase of 109.3% from HKD 228 million in 202140 - Total staff costs were HKD 371 million, a 7.2% decrease from HKD 399 million in 202157 Impairment Provisions and Income Tax Impairment provisions increased to HKD 1.195 billion in 2022, significantly higher than HKD 257 million in 2021, primarily due to HKD 677 million for debt investments and HKD 431 million for loans and advances, while income tax turned into a HKD 785 thousand gain due to pre-tax loss Details of Changes in Impairment Provisions | Item | 2022 (HKD thousands) | 2021 (HKD thousands) | | :--- | :--- | :--- | | Loans and Advances | 430,568 | 153,831 | | Debt Investments | 677,388 | 74,948 | | Margin Client Loans | 19,764 | 24,629 | | Others | 67,471 | 3,317 | | Total | 1,195,191 | 256,724 | - Due to the recorded loss, the Group recognized an income tax gain of HKD 785 thousand in profit or loss, compared to an expense of HKD 39.197 million last year56 Earnings Per Share and Dividends Due to a HKD 2.98 billion loss attributable to shareholders, basic loss per share was HKD 1.09 in 2022, compared to HKD 0.10 earnings per share in 2021, leading the Board to recommend no final dividend for 2022, unlike the HKD 0.05 per share dividend in 2021 - Basic loss per share was HKD 1.09, calculated based on a loss attributable to shareholders of HKD 2.98 billion and weighted average ordinary shares outstanding of 2.73 billion4847 - The Board did not recommend a final dividend for 2022, whereas the total dividend payout in 2021 was HKD 137 million5846 Corporate Governance and Other Information Corporate Governance The company adopted and complied with the Listing Rules' Corporate Governance Code, with all code provisions met during the reporting period, except for the Chairman also serving as Chief Executive before July 11, 2022, and the Audit and Risk Management Committee reviewed the annual results - Before Ms. Zhu Chen's appointment as CEO on July 11, 2022, Chairman Mr. Tan Yueheng performed Chief Executive duties, deviating from the Corporate Governance Code's provision on role segregation148 - The Audit and Risk Management Committee reviewed the accounting standards adopted and the annual results of the Group with management and the auditors138180 Other Disclosures As of end-2022, the Group had 495 employees with total staff costs of HKD 370 million, reported no significant acquisitions, disposals, investments, asset pledges, or capital commitments, experienced limited COVID-19 impact, and did not purchase, sell, or redeem any listed securities during the year - As of December 31, 2022, the Group had 495 employees, with total annual staff costs of approximately HKD 371 million144 - During the reporting period, the Group had no significant acquisitions or disposals, no significant investments, no asset pledges, and no significant capital commitments131132142143 - The COVID-19 pandemic had no significant impact on the Group's business operations, financial position, cost control, or funding plans174134
交银国际(03329) - 2022 - 年度业绩