UP Fintech gets lift from tariff-induced market volatility

The online stockbroker’s revenue and net profit grew substantially in the first quarter as its trading volume surged on volatility in global stock markets

Key Takeaways:

• UP Fintech’s revenue jumped 55% year-on-year in the first quarter, and its net profit surged 150%
• The online stockbroker benefitted from increased market volatility as uncertainty about U.S. tariffs led to higher frequency stock trading

By Warren Yang

Uncertainty is one of investors’ biggest enemies. But it can be a stockbroker’s best friend.

That was certainly the case in the first quarter for many stockbrokers that make a big portion of their money from transaction fees tied to trading volume. During the period, the group benefitted from heightened volatility in global markets as questions about Donald Trump’s tariff policies kept investors around the world on their toes. The unpredictability at times triggered both stock selloffs and rallies. Either way, stockbrokers gained from high trading volumes, translating into more income from transaction fees. 

Among those brokers, UP Fintech Holding Ltd. (TIGR.US), which targets Chinese investors living outside China and is better known as Tiger Brokers, saw its first-quarter revenue jump 55% year-on-year to $122.6 million as its trading volume surged more than 150%, according to its latest results released last Friday. Better yet, its net profit soared 147% to $30.4 million, translating to a net profit margin of about 25%, up from 19% in the first quarter of 2024.

UP Fintech also likely benefitted from strong equity markets in China, given that investors in Greater China, which includes Mainland China, Hong Kong and Taiwan, are one of its key customer groups. Chinese stocks traded in Shanghai, Shenzhen and Hong Kong posted solid gains in the first quarter, buoyed by a series of policy efforts to stimulate the country’s economy, including measures to spur consumption. Optimism about tech companies following the breakthrough by home-grown AI startup DeepSeek also helped to boost sentiment.

As impressive as it was, UP Fintech’s first-quarter revenue growth looked rather modest compared to rival Futu’s (FUTU.US) even stronger 81% increase. But UP Fintech didn’t necessarily underperform its larger rival in terms of sales.

The company’s commission income grew about 110% to $58 million during the quarter, accounting for 48% of its total revenue. Such revenue for Futu increased by a similar 114% to HK$2.3 billion ($297 million) to account for about 49% of its total. So, both companies’ commission income grew at around the same rate, outpacing a 46% increase for Webull Corp. (BULL.US), a more U.S.-centric online stockbroker that went public in April and also targets Chinese investors living outside Mainland China.

The gap in overall revenue growth between UP Fintech and Futu was mostly the result of interest income each earns from margin financing and securities lending services. UP Fintech’s interest income, which was its largest revenue source in the first quarter of 2024, increased 23% to $53.8 million in the same period this year. By comparison, Futu’s revenue for the category grew at double that rate, by 53%, to HK$2 billion.

Volatility continues

The stock market volatility that helped boost this sector in the first quarter has continued into the second quarter, meaning companies could post more strong results. UP Fintech’s trading volume in April hit a single-month high, as uncertainty around Trump’s tariff policy continued to send stocks gyrating, CEO Wu Tianhua said on a conference call to discuss the company’s first-quarter results.

“Overall, we are quite pleased with how things are shaping up in the second quarter so far,” he said. “In terms of trading volume, we saw a significant pickup in market volatility in April, mainly driven by the concerns over the tariffs. That actually pushed our monthly trading volume to a new record, crossing $100 billion for the first time in our history.”

Apart from less predictable factors like stock market volatility, UP Fintech is taking more strategic steps to keep its revenue growing by trying to gain market share in Hong Kong, which is Futu’s home turf and where “the quality of users is significantly higher,” said CFO Zeng Fei. The average revenue per user (ARPU) for UP Fintech is the highest in Hong Kong among all the markets where it operates.

UP Fintech and Futu have both been branching out overseas in recent years to avoid regulatory pitfalls in their original home China market. Such risks culminated in January 2023 when the China Securities Regulatory Commission (CSRC) determined the pair were acting illegally by allowing domestic customers on the Chinese Mainland to make cross-border trades without a required brokerage license. The regulator ordered them to stop accepting new clients in China, though it allowed them to keep servicing existing customers.

Both companies were already diversifying their customer bases away from China at that time, and now their growth efforts are exclusively focused on such markets.

UP Fintech initially focused on Singapore, while Futu went after Hong Kong. UP Fintech’s recent new focus on Hong Kong will put it in direct competition with Futu — and many others in the highly competitive market. Both companies will also face a formidable newcomer in Ant Group, the fintech arm of tech giant Alibaba, which threw its hat into the ring with its acquisition of a majority stake of Hong Kong-based brokerage Bright Smart Securities & Commodities (1428.HK) in April.

Intensified competition means more spending on marketing to win new customers, which will eat into margins. That’s already showing up in UP Fintech’s marketing costs, which jumped 148% in the first quarter year-on-year to become its largest expense outside employee compensation. 

UP Fintech’s bottom-line profitability still improved significantly as product diversification led its ARPU to increase, which helped it contain increases in its fixed costs, Wu said. Basically, that means the company benefitted from improved economies of scale by having its customers use more of the growing number of services on its platform.

UP Fintech shares fell on the day it released its latest report, but rallied quite a bit the next trading day. The stock trades at a trailing price-to-earnings (P/E) ratio of 18.6, which indicates investor caution about its prospects. The story seems similar for Futu, which commands a P/E ratio of 17, while the multiple for Webull is less lofty, at 9.2. All those ratios trail a much higher 41 for global peer Robinhood Markets (HOOD.US) and 27 for Charles Schwab (SCHW.US), indicating investors may be less bullish on the China-focused players.

If the global economy eventually takes a big hit from the ongoing trade tensions and company profits start to decline, as many worry they might, then investors may ultimately curb their trading, ending the party for stockbrokers. But until that happens, the good times for them look likely to continue for at least the next few months.  

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