Net profit +5.3% yoy, supported by AM, trading and net interest income
Huatai announced 1H17 results today. Net profits came in at Rmb2,993mn（+5.3%）， implying 2Q17 growth of 4.3%. It accounted for 51% of 2017E DBeand 41% of BBG consensus. The key sweet spot is net asset management fees（+7 times）， net investment gains （+32.3%） and net interest income （+8.0%）。
　　Net IB fees was up 3.6% yoy as the strong IPO was largely offset by tightenedregulations on equities placement and M&A business. The continued decline inbrokerage commission （-32.0% yoy） was not surprising, given a lacklustermarket turnover in 1H17 （-18% yoy to Rmb439bn）。 However, we noted thedecline in commission rate moderated, down 0.2bps yoy to 2.4bps. Revenuemix improved with market sensitive businesses （brokerage, margin financingand trading） contribution declined to 73% （vs. 84% in 1H16）， while cost-toincomeratio deteriorated to 50.2% （vs. 49.0%）。 Overall, we see this as adecent set of results. Maintain Buy and one of our Top Picks.
　　Key business segments
　　Brokerage: Net brokerage commission fees was down 32.0% yoy toRmb2,029mn. Commission rate saw moderated decline of 0.2bps yoy to2,4bps. Market share of stock and funds turnover decline 0.6ppt yoy to7.9%, but remained No.1 in the industry.
　　Investment banking （IB）： Net IB fees was up 3.6% yoy to Rmb864mn. Debtunderwriting was a sweet spot. Despite weakening demand, thecompanies achieved 34.1% growth in debt underwriting amount, rankingNo. 6 in the industry. However, equity underwriting amount was down26.6% and M&A advisory volume was down 20.6%.
　　Asset management （AM）： Net AM fees grew strongly by 705.5% thanks toa low base. Net income from CAM grew 45% yoy to Rmb868mn,accounting for 79% of AM income, despite the 10.7% hoh decline in CAMAUM. TAM achieved 70.4% increase in net income, thanks to 10.3% hohexpansion in AUM.
　　Net interest income: Net interest income was up 8.0% yoy to Rmb1,671mn,thanks to lower interest expenses （mainly in repo）。 Interest income frommargin financing was down 11.3%.