Posted inNews

Jupai revenues plunge in tough WM climate

The NYSE-listed Chinese wealth manager reports a sharp drop in Q2 revenue and profit as HNWI clients turn risk-averse.

Shanghai-based wealth manager Jupai Holdings saw its net revenues of RMB 185.9m ($27.1 m) fall 58.1% from the corresponding period in 2018, according to the unaudited financial results for the second quarter of 2019, released yesterday.

The firm attributed the results to decreases in both one-time commissions and recurring management fees.

As for the first half of 2019, which ended 30 June, the net revenues were RMB 466.9m, a decrease of 46.7% from the same period last year, the report noted.

The China wealth manager is listed on the New York Stock Exchange. It focuses on distributing wealth management products and providing product advisory services to high net worth individuals in China.

Clients turn risk-averse

For the remainder of the year, Jupai officials admitted they face a rough macro-environment.

“Since early 2018, the [Chinese] government has accelerated the de-leveraging of the overall economy and significantly tightened the regulatory requirement and supervision on the financial institutions,” said Jianda Ni, chairman of the board and chief executive officer, in an analyst conference call yesterday.

“These changes have led to extremely tight cash cycles for many enterprises, some of which fail to adjust their business model in a timely manner and will even push towards the edge of bankruptcy.

“This has caused a ripple effect to negatively impact the counter parties, which are financial institutions such as private equity funds and wealth management companies and led to much negative news coverage on the wealth management industry over the past quarters.”

As a result, investors have turned risk-averse, he said.

Ni did not specifically mention the impact of the US-China trade dispute on wealth management. He alluded to “international political and economic instability” which “has also made investors more conservative”.

The macro-situation is expected to get tougher for the firm as the US-China trade dispute escalates and GDP growth slows. Additionally, the RMB value versus the US dollar is at its weakest level since 2010, which could prompt the Chinese government to stop domestic capital going into offshore assets.

Ni said investor confidence “will be slow to recover, as we expect concerns over the slowdown in domestic economic growth and the instability in international markets will still continue.

“As a result, the market environment will likely remain challenging for both the wealth management industry and Jupai in the coming quarter.”

Reducing headcount

For the full year 2018, the firm posted a net loss  on lower revenues and higher costs.

Ni said the firm has been on a cost cutting mission. Jupai cut staff to 1300 from 2,500 at the beginning of 2018. During the same period, it has also “condensed” its offices in China to 61 in 45 cities from 72 in 46 cities.

“Although the second quarter of 2019 remained challenging for Jupai, we saw initial signs of stabilisation in our core business,” said Ni.

“Despite sustained weakness in investor confidence, our cost control efforts began to pay off, adding to our bottom line performance in the second quarter.”

The net loss attributable to ordinary shareholders in the second quarter of 2019 was RMB 61.0m, compared with RMB 87.8m from the corresponding period last year.

For the first half of 2019, the figure was RMB 86.6m, compared to RMB 203.7m in the same period in 2018.

“If the performance fee income from the disposal of Focus Media shares was excluded from our first quarter results, our net loss attributable to ordinary shareholders in the second quarter would represent a substantial recovery from the first quarter,” Ni added.

 

 

 

 

 

 

 

 

 

 

 

 

Part of the Bonhill Group.