Barclays: Futu is the Asian version of "Robinhood + Coinbase + Charles Schwab"

Barclays stated that Futu, as a leading online brokerage in Asia, is a combination of Robinhood and Coinbase, incorporating elements of wealth management from Fidelity or Charles Schwab.

Written by: Li Xiaoyin

Source: Wall Street Journal

Barclays has initiated coverage and is optimistic about Futu, expecting that the recovery of Hong Kong stocks and the expansion of its cryptocurrency business will drive its growth.

According to news from the Chasing Wind trading platform, on July 17, Barclays Bank stated in its research report that Futu, as a leading online brokerage in Asia, is a combination of Robinhood and Coinbase, incorporating wealth management elements from Fidelity or Charles Schwab.

Barclays believes that Futu, with its strong customer growth, asset management scale, and revenue expansion, is seizing the opportunity presented by the recovery of the Asian capital markets. It is expected that growth will accelerate in the coming years, making it attractive to investors seeking exposure to emerging market tech stocks.

The report emphasizes that Futu currently has a customer base of 2.7 million paying retail investors, with assets under management exceeding 100 billion USD, and an annual growth rate of 20%-25%.

Growth Drivers: Hong Kong Market Recovery and Crypto Expansion

Futu's recent growth momentum mainly comes from the improvement of the Hong Kong stock market and the introduction of crypto trading.

The report states that the Hang Seng Index has risen by about 20% this year, with significant liquidity improvements, reaching an average daily trading volume of 40 billion USD, ranking third globally; IPO activities have also increased significantly, with a record number of applications in June. Futu, as a leading IPO subscription broker in Hong Kong, has acquired new customers at a low cost through this channel.

Futu launched cryptocurrency trading services in Hong Kong in August 2024. Data shows that in the third quarter, Futu's average daily trading volume for cryptocurrencies reached HKD 10 million to HKD 20 million, increasing to over HKD 35 million in the fourth quarter.

Although cryptocurrency trading volume currently accounts for only about 0.1% of total trading volume, Futu charges higher commission rates for cryptocurrency clients, and this business is expected to become an efficient customer acquisition channel. The company also plans to venture into stablecoin issuance. According to media reports, Hong Kong has recently approved regulations related to stablecoins, with nearly 50 applicants, and Futu expects to become a leading participant.

The report points out that although cryptocurrency currently contributes limitedly, it will serve as a growth catalyst to help Futu solidify its leadership position in online brokerage.

In addition, Futu uses the same strategy to promote international stock and options trading in markets such as Malaysia and Japan. These factors are expected to drive accelerated growth in the coming years, and Barclays expects revenue to remain strong, helping investors capture the wave of digital finance in Asia.

Market Expansion: From Hong Kong to Asia and the World

Futu initially focused on Hong Kong, China, and has now expanded into markets such as Singapore, Malaysia, Japan, and has a presence in the US and Australia.

Currently, Hong Kong is still the largest market for Futu, with approximately 8.7 million paying customers, accounting for 33% of the total; Singapore has 4.3 million, accounting for 16%; Malaysia has 2 million, accounting for 7%. The company deepens its penetration through offline stores and product innovations (such as crypto and ETF robo-advisors), especially among middle-aged and high-net-worth customers.

In terms of competitive landscape, the report emphasizes that Futu leads Tiger Brokers and Webull, possessing the most paid accounts and asset scale. Despite facing local competitors like Rakuten and Interactive Brokers, Futu's pricing strategy and community features (such as real-time data and investor forums) have maintained its market share.

Barclays stated that Futu is committed to becoming the preferred broker and wealth manager for the mass affluent and may expand into the U.S. in the future to compete directly with Robinhood.

Financial Outlook: Strong Growth and Profit Potential

Public data shows that Futu's financial performance is strong, with revenues reaching HKD 13.6 billion in 2024, a year-on-year increase of 136%; adjusted net income is HKD 5.8 billion. Brokerage commission income accounts for 44%, interest income accounts for 49%, and other income (such as wealth management) accounts for 6%.

Key indicators include total trading volume reaching HKD 7.8 trillion, a year-on-year increase of 83%; gross profit margin at 82%, and operating profit margin at 51%. Interest income relies on customers' idle cash and margin financing, accounting for half of the revenue, affected by the interest rate environment.

Barclays pointed out that a 25 basis point rate cut would reduce monthly pre-tax profits by HKD 8 million to HKD 10 million, but an increase in trading volume could offset some of the negative impact.

Barclays expects Futu's revenue to grow by 48% in 2025, reaching HKD 18.9 billion; a 13% growth in 2026, reaching HKD 19.6 billion; the expected EPS for 2025 is USD 60.94 and for 2026 it is USD 68.66.