Sharp drop in annual earnings for Jupai

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The NYSE-listed Chinese wealth management provider posted a net loss in 2018 on lower revenues and higher costs.

In a conference call accompanying the results, Jupai chairman and CEO, Jiandi Ni, blamed the Chinese government’s attempts to squeeze consumer borrowing, the uncertainty caused by the US-China trade conflict and tighter regulations on the domestic wealth management industry.

The net loss attributable to ordinary shareholders for 2018 was RMB 387.7m ($56.4m), compared to net profits of RMB 409.5m in 2017 – a net margin of -29.3% compared with 24% in 2017. Operating losses were RMB 159.9m and revenues slumped 22.5% from the previous year to RMB 1.32bn.

“Jupai’s operating results in 2018 were under pressure due to the severe industry headwinds, and we saw declines in our revenue and bottom-line results for the full year,” said Min Liu, the company’s chief financial officer in a written statement.

The malaise was reflected in the 44.3% decline to RMB 30.3bn in the value of wealth management products distributed by the company last year, although there was a significant shift in demand for the types of products sold.

Surge in PE products

Despite Beijing’s de-leveraging campaign on capital flight and regulators’ stricter product approval requirements, private equity products comprised 63% (RMB 19bn) of wealth management products sold by Jupai last year, up from 12% (6.4bn) in 2017. In contrast, the proportion made up of fixed income products fell from 83% to 28, as lower interest rates reduced their appeal.

As a further indication of the difficulties faced by the Chinese wealth management industry last year, Jupai also wrote off $39m in goodwill from its acquisition of Scepter, a rival firm, in 2015.

One positive aspect was the company’s ability to raise its average one-time commission rate to 2.4% from 1.9% due to its stronger bargaining power over property facing rising costs of capital. Jupai has been developing a real estate equity product line, as well as overseas products, including private equity.

“Looking into 2019, we remain cautiously optimistic about China’s overall economic outlook, as the government has introduced various stimulus policies to support private enterprises, especially SMEs, to enhance economic growth,” said Ni.

 

 

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