Summary of Futu Holdings Conference Call Company Overview - **Company**: Futu Holdings - **Industry**: Banks & Financial Services Key Points and Arguments Financial Performance - **Strong 3Q25 Results**: Futu reported a 33% quarter-over-quarter increase in net interest income (NII), surpassing expectations by 19% [7] - **Earnings Growth**: Adjusted EPS estimates for 2025, 2026, and 2027 were raised by 6%, 8%, and 7% respectively, reflecting strong asset under management (AUM) growth and better-than-expected interest income trends [15][28] - **Client Growth**: The number of paying clients increased by 9% quarter-over-quarter, reaching 3.13 million, with 254,300 new paying clients added in 3Q25 [20][25] Market Position and Client Base - **Diversified Client Mix**: Management indicated that only 46% of total funded accounts are from HK/China clients, with Mainland Chinese clients representing less than 20% of paying clients [7] - **AUM Growth**: Total client assets grew by 27% quarter-over-quarter to HK$1.24 trillion, driven by mark-to-market gains and robust net asset inflows [20][25] Interest Rate Sensitivity - **Reduced Vulnerability**: The contribution of idle cash to NII decreased from 43% in FY24 to one-third in 3Q25, reducing overall sensitivity to Fed rate cuts [7] - **Impact of Rate Cuts**: A 25 basis point Fed rate cut would lead to a HK$7 million decline in monthly pre-tax profit, down from HK$8-10 million previously guided [7] Crypto Business - **Significant Growth**: Crypto trading volume surged by 161% quarter-over-quarter, with Ethereum becoming the most traded coin [20] - **Long-term Outlook**: Management remains optimistic about the long-term potential of the crypto business, which is still in early stages of penetration [7][20] Operational Insights - **Increased Operating Expenses**: Operating expenses grew by 32% quarter-over-quarter, attributed to higher selling and marketing expenses and investments in crypto and AI capabilities [20] - **Client Acquisition Cost**: The cost of acquiring new clients was HK$2,300 in 3Q, lower than previous guidance of HK$2,500-3,000 [21] Share Buyback Program - **New Repurchase Plan**: Futu's board authorized a new share repurchase program of up to US$800 million, to be funded from existing cash [20] Valuation and Price Target - **Price Target Raised**: The price target for December 2026 was increased to US$300, based on a 26x earnings multiple applied to 2026E earnings [11][33] - **Valuation Drivers**: Factors expected to drive multiple expansion include a more stable regulatory environment and growth in the crypto and digital assets business [11][33] Additional Important Insights - **Market Performance**: Despite strong results, the stock reaction was muted due to broader market concerns, particularly in the US and crypto sectors [1] - **Future Growth Potential**: Futu is expected to continue expanding its client base and market presence, particularly in new markets like Japan and Malaysia [10][32] Risks - **Downside Risks**: Include weakness in China tech stocks, regulatory risks, and declining HIBOR affecting interest income [34] - **Upside Risks**: Include higher-than-expected growth in paying clients and trading volume [34]