Net profits -5.6% yoy, implying 2Q17 -29.0%Haitong announced 1H17 results today. Net profit came in at Rmb4,023mn（-5.6% yoy）， in-line with the pre-announcement, which implied 2Q17 decline of19.4% yoy. It accounted for 50% of 2017E DBe and 43% of BBG consensus.
　　The drag came mainly from brokerage and net interest income, which weredown 31.7% and 13.8%, respectively. Asset management （AM） and investmentbanking （IB） were the sweet spot, recording yoy growth of 44.5% （on a lowbase） and 8.7% （on higher income from equity underwriting）。 Investmentincome, similar to most major brokers, recorded decent recovery of 64.4% yoy.
　　Cost-to-income ratio saw deterioration to 52.6% （vs. 51.1% in 1H16）。 Similar toCITICS and GFS, Haitong has also returned to CSRC AA-rating in 2017 （fromBBB in 2016）， which should help lower costs going forward. Book valueexpanded slightly by 2.1% hoh to Rmb112,466mn. Maintain Hold.
　　Key business segments
Brokerage: Net brokerage commission fees were down 31.7% yoy toRmb2,237mn, accounting for 19% of op revenue. DBe commission ratesaw a decline of 0.7bps to 4.4bps, one of the biggest declines in 1H17among major brokers. Market share of stock and funds turnover declined0.2ppt yoy to 4.5%.
IB: Net IB fees were up 8.7% to Rmb1,721mn, thanks mainly to stronggrowth in income from equity underwriting. The company completed 18IPOs in 1H17, ranking second in the market. However, its debtunderwriting amount was down 20.3% yoy according to WIND. IB feesaccounted for 15% of op revenue.
AM: Net AM fees grew strongly at 44.5% yoy to Rmb913mn, accountingfor 8% of op revenue. The decent recovery was mainly due to a low base（AM fee -49.0% in 1H16 on lower performance fees）。 While the company’sown AM business was up 24.8% yoy （to Rmb300mn）， a biggercontribution came from income of fund subsidiaries.
Net interest income: Net interest income was down 13.8% yoy toRmb1,743mn （15% of op revenue） on lower interest income from marginfinancing and repo assets.
Trading: Net investment gains recovered by 64.4% yoy. The company hasan equity inv to net capital ratio of 28.5% （vs. 29.7% in 2016） and nonequityinv to net capital ratio of 87.5% （vs. 81.0%）。