Huafu Securities' net profit in 2025 surges by 39.86%, but underlying concerns remain; 70% of senior executives leave, ongoing compliance controversies.

Ask AI · How Will the Compliance Storm Reshape Investor Confidence?

HuaFu Securities Co., Ltd. recently disclosed its 2025 annual bond report, which shows that the company’s overall operating performance achieved significant growth throughout the year, with total operating revenue reaching 4.19 billion yuan, a year-on-year increase of 26.20%; net profit of 1B yuan, up 39.86% year-on-year, with profit scale steadily expanding. However, at the same time, the company’s business segments showed obvious differentiation, with several sectors such as investment banking and asset management underperforming expectations, some businesses incurring losses, and profitability stability still posing considerable concerns.

Obvious Segmentation of Business Sectors

From a business structure perspective, wealth management became the company’s core growth engine. In 2025, this segment achieved an annual operating revenue of 2.48B yuan, a substantial increase of 47.94% year-on-year, accounting for 59.13% of the company’s total operating revenue, with a gross profit margin maintained at a high level of 50.47%. This impressive performance was mainly due to increased activity in the capital markets throughout the year, which boosted the company’s brokerage commission income and interest income from margin trading and securities lending, becoming a key pillar supporting overall profitability; proprietary trading also maintained high profitability, with annual operating revenue of 715 million yuan and a gross profit margin of 93.14%, demonstrating outstanding efficiency. However, these businesses are heavily influenced by market fluctuations, with insufficient profit stability, and they rely heavily on market conditions, making long-term sustainable profitability challenging.

In stark contrast to the strong performance of core businesses, several other sectors faced losses or declines, highlighting significant segmentation issues. Among them, investment banking performed poorly, with only 104 million yuan in revenue for the year and a gross profit margin of -9.54%. Asset management also faced clear pressure, with annual revenue of 712 million yuan and a gross profit margin dropping to 19.21% (compared to 36.08% in the same period last year), mainly due to industry environment impacts, reduced performance fees, and rising operational costs squeezing profit margins, significantly weakening business profitability. Additionally, overseas and other businesses performed poorly, with a gross profit margin as low as -355.16%, revenue of only 226 million yuan, but costs reaching 1.03B yuan, becoming one of the main factors dragging down the company’s overall profitability.

In 2025, the company completed a shareholding system reform, but there were significant changes in senior management personnel. During the period, 14 directors, supervisors, and senior managers (including changes) left or were replaced, accounting for 70% of the total at the beginning of the period, an unusually large personnel adjustment. This large-scale personnel change involved core management positions such as chairman, chairman of the supervisory board, independent directors, and vice presidents. Major changes in the core team could adversely affect the continuity of business decision-making and the stability of strategic execution.

Multiple Operational Risks Draw Attention

Looking back at 2025, HuaFu Securities faced multiple challenges in compliance operations and asset management, receiving numerous warning letters throughout the year, raising questions about its compliance capabilities. Specifically, in November last year, the Xiamen Securities Regulatory Bureau issued a warning letter to HuaFu Securities and recorded the matter in its integrity archive because the company, as the lead underwriter for Jiangping Biological, a company listed on the New Third Board, failed to exercise sufficient diligence and responsibility during its two private placements in 2021 and 2022, did not carefully perform due diligence, failed to promptly identify false statements in Jiangping Biological’s private placement prospectus, and did not ensure the authenticity and accuracy of its own recommendation reports and review opinions, violating relevant regulatory requirements.

In May of the same year, the Shanghai Stock Exchange also issued a written warning letter to HuaFu Securities due to insufficient verification of the commercial rationality of the trading business and income recognition basis during the listing application for a non-public issuance of corporate bonds by a certain issuer, with inadequate due diligence procedures, and the company’s quality control department failing to highlight key areas for review, internal review departments not conducting focused deliberations, revealing obvious internal control loopholes.

Furthermore, the company’s branches were not immune. In April, the Shanghai Securities Regulatory Bureau issued a warning letter to HuaFu Securities’ Shanghai proprietary trading branch. After the branch manager completed a business registration change, they failed to apply for a new securities and futures business license within seven days, violating branch change reporting requirements, reflecting weak management at the branch level.

More concerning is that in March 2025, HuaFu Securities was embroiled in controversy after the failure of its agency sale of Yingxue Capital’s “Yingxue Fu Niu No.1” private placement product. According to investor disclosures, the product was labeled as R2 low-risk during sales, promoted as mainly investing in AAA/AA-rated high-quality bonds with an annualized return of 5.5% and monthly interest payments, but in reality, its holdings included high-risk real estate bonds from companies like Times China and Sunac, which had defaulted or faced significant issues, including bonds from Brilliance Auto that had already defaulted in 2020.

As of the liquidation in April 2024, the net value of this product was only 0.3522, with nearly 100 investors experiencing an average loss of 63%, and the maximum loss reaching 72%. Some investors with 1.5 million yuan in principal had only about 450k yuan remaining. In response to investor doubts and rights protection efforts, HuaFu Securities claimed, “We have reviewed the product entry conditions and have no authority to interfere with investment decisions.” However, investors did not accept this explanation, believing that the company was at fault in misleading publicity and operational procedures.