Haitong Securities, a prominent financial institution, has been preparing for an anticipated merger with Guotai Junan Securities. According to S&P Global Ratings, the company's recent financial actions are aimed at streamlining its balance sheet before this significant corporate event. Haitong recently issued a profit warning, forecasting a substantial loss in the fourth quarter of 2024, following another loss in the third quarter. These measures are seen as strategic steps to enhance the merged entity's financial stability and creditworthiness. The ratings agency highlighted that by addressing these financial challenges proactively, Haitong is positioning itself for a smoother integration process.

On January 24, 2025, Haitong announced a significant financial setback, projecting a $2.9 billion loss for the final quarter of 2024. This announcement followed earlier reports of a $1.7 billion loss in the preceding quarter. Analysts from S&P Global suggest that these financial adjustments are part of a broader strategy to clean up the company's balance sheet. Specifically, Haitong appears to be writing off portions of its legacy portfolio in Hong Kong, which has been adversely affected by the volatility in China's property market. By taking these steps, Haitong aims to enter the proposed merger with fewer liabilities, thereby strengthening the combined entity's overall financial position.

The decision to address these financial issues upfront reflects a forward-thinking approach by Haitong's leadership. S&P Global Ratings noted that this proactive stance will likely contribute positively to the merged group's credit profile. The ratings agency currently rates Haitong one notch lower than Guotai Junan, reflecting the current disparity between the two firms. However, the anticipated merger could potentially lead to improved ratings for the combined entity, given the enhanced financial health and reduced baggage.

As Haitong and Guotai Junan move closer to merging, the financial sector is closely watching how these strategic moves will shape the future of the consolidated company. The proactive handling of financial challenges by Haitong suggests a commitment to ensuring that the merged entity starts on a solid foundation. This approach not only addresses immediate financial concerns but also sets the stage for long-term stability and growth within the competitive landscape of the financial industry.