Noah results (US dollars)
| Q2 | Y-O-Y | 1H | Y-O-Y | |
|
Net revenue |
120.5m | 12.8% | 246.1m |
14.6% |
| Net income | 28.2m | -9.5% | 67.6m |
6.1% |
Source: Noah Holdings
At the end of June, Noah’s total number of clients was 220,601, up 33.9% from a year ago, driven by marketing efforts in Hong Kong and Shanghai, the firm said in its recent financial report.
“Building up the brand equity and recognition with the large-scale marketing campaign encouraged investors to open an account. Clients, especially new clients who open the account in this quarter, tend to be more cautious during market volatility,” said Chuang Shangyan, Noah’s chief financial officer, on the financial results conference call.
However, the number of active clients who purchased investment products at least once during the second quarter, was down 0.5% to 4,461 over the same period in 2017. Each active client transacted an average of RMB6.5m or 11.4% less in value than the same period one year ago.
The decline in transaction value led to a 21.7% decrease (to RMB233m) in quarterly one-time commissions.
Driven by financial products previously distributed, net revenues derived from recurring service fees grew 35.8% to RMB284.2m.
In terms of products distributed to wealth management clients, fixed income represents 66% of offerings.
Investors move to sidelines
Investors turned pessimistic and hesitant in making investment decisions in the volatile and lacklustre market environment, Noah’s chairwoman Wang Jingbo said during the earnings call. She added that the wait-and-see attitude has caused a decline in investor risk appetite, boosting demand for fixed income products.
Market volatility is expected to continue and therefore management expects tighter cost management in the second half, in particular with advertising campaigns and recruitment.
The firm’s group president Kenny Lam said expenses on middle and back-end functions will be better controlled but investment in front-line staff and training will remain. At the end of June, Noah had 1,495 relationship managers, up 18.7% year-on-year.
Noah maintains its earlier forecast that annual net income for full year 2018 will be in a range of RMB 1bn to RMB 1.05bn, which represents a year-on-year increase of 16.7%-22.6%.
“We are quite pleased with the financial results of the second quarter despite the difficulties in terms of the operating environment as we still achieved double-digit revenue growth,” said Chuang.
The asset management arm, Gopher, reported AUM of RMB161.5bn, up 2.9% quarter-on-quarter, with discretionary portfolio assets taking up RMB4.4bn.
In March, Lam revealed that the firm is interested in expanding to Singapore, where management believes high net worth clients are increasingly interested in China investments.
Lam added during the earnings announcement that Singapore entity is awaiting regulatory approval and the country head has been appointed, though he did not name the person.
Apart from the expected office in Singapore, the wealth manager’s other offices outside China are in Hong Kong, the US, Canada and Australia.
