Noah Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 28, 2024

There are 4 speakers on the call.

Operator

Good day, and welcome to the Noah Holdings Second Quarter and Half Year twenty twenty four Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. This event is being recorded. I would now like to turn the conference over to Mr.

Operator

Mello Cee, Investor Relations Director. Please go ahead, sir.

Speaker 1

Thank you, operator. Good morning, and welcome to Noah's 2024 Second Quarter Earnings Call. Joining me today on the call today are Ms. Wang Jingbo, our Co Founder and Chairlady and Mr. Tanner Ng, our Co Founder, Director and CEO and Mr.

Speaker 1

Graham Pan, our CFO. Mr. Ng will begin with an overview of our recent business highlights, followed by Mr. Pan, who will discuss our financial and operational results. They will all be available to take your questions in the Q and A session that follows.

Speaker 1

Before we begin, please note that this discussion today will contain forward looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from those in our forward looking statements. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC and the Hong Kong Stock Exchange. Noah does not undertake any obligation to update any forward looking statements, except as required under applicable law. With that, I would like to pass the call over to Mr. Yin.

Speaker 1

Please go ahead. Thank you and good morning or evening to everyone. Our domestic business model has undergone significant restructuring lately, including the clear separation between our domestic and international business, optimization of our operating model and adjustments to our organizational structure and relationship manager team. As a result, we are adjusting our financial reporting disclosures. Starting this quarter, we'll begin reporting financial data based on this new organizational structure, which we believe will provide a more accurate reflection of the progress we're making during this transition.

Speaker 1

Therefore, on today's conference call, I will go over our Q2 results, separating them into domestic and international segments, followed by an overview of our growth strategies for both. Domestically, we have been adjusting our client service model and deepening the organizational restructuring in recent years to comply with the evolving regulatory requirements, including dividing and deploying sales personnel to specific independent and licensed business units, namely Noah upfront fund distribution, Glory Insurance Brokerage and Gopher Asset Management. Each sales personnel is able to only recommend products and service clients of that specific independent business unit. At the group level, our branding and business development departments are responsible for branding, marketing activities, client acquisition, investor education and other tasks, but will not directly recommend financial products. In the global market, we launched a new wealth management brand called ARC Wealth Management and continue to expand its overseas RM team with 113 currently on board.

Speaker 1

Through its offices in Hong Kong, Singapore and the U. S, ARC provides comprehensive wealth management and value add services targeting the local Mandarin speaking population. Likewise, we launched a new overseas asset management brand, which is focused on building a more comprehensive product matrix covering different asset classes globally. We have recently established a U. S.

Speaker 1

Product center to deepen the relationship with local GPs. Under Olive, we're also gradually building out its own dedicated RM team targeting its institutional clients with 9 currently on board. In the first half of twenty twenty four, we raised US338 million dollars for overseas private equity products, private equity, private credits and other primary market products, a significant 40.2% year on year increase as a result of the above. Additionally, U. S.

Speaker 1

Dollar primary AUM and AUA also grew 14.9% and 5.5% year on year respectively. We also launched a new overseas insurance and comprehensive services arm Glory Family Heritage, which is primarily focused on building global insurance, trust and identity planning products and capabilities. Glory has also began establishing a new commission only agency team and has made notable progress. 20 agents are already on boarded with each one already starting to make contributions. On the international online wealth management front, we established a dedicated team focusing on serving clients through online channels.

Speaker 1

With the rollout of iARC app in different countries and regions, including Singapore most recently. We are providing services to local Mandarin speaking clients, institutions as well as ISAs, RIAs and EAMs and have already made notable progress. I'll go into more detail on their operational performance during the quarter later. Domestically, while the investment and regulatory environment is becoming increasingly challenging, demand for RMB asset allocation from high net worth clients remains strong. We are confident that this industry will continue to generate growth opportunities for us.

Speaker 1

Our core strategy is client centric, survival is the bottom line. So client centric in this sense means prioritizing protection of clients' assets and allocating them to achieve long term returns, which is central to all of our efforts. Survival is the bottom line, emphasizes our commitment to absolute compliance, managing our team operations conservatively, even stricter than regulatory requirements. Long term sustainability is our fundamental goal as we continue to refine our domestic operations. Turning to our financials for the quarter, total revenues were RMB621 1,000,000, a decrease of 34.3 percent year on year and 5.1% sequentially, primarily due to our strategic decision to reduce the distribution of various products domestically.

Speaker 1

Starting this quarter, we have broken down revenues by business units or BUs to more accurately reflect the progress we're making in each area. Going forward, I will use these BUs as the primary framework for updating investors on the performance and operations of each business unit. Following my remarks, our CFO, Mr. Pan, will provide an analysis of our overall financial performance. Firstly, we roll out initiatives to align domestic business with our adjusted strategic direction.

Speaker 1

These initiatives include a persistent focus on investor education, selecting products that can safeguard client interest in the long term, effectively reducing costs and ensuring compliance to drive healthy growth. In the public security segment, the primary products offered are mutual funds and private secondary products, which are distributed through Noah Upright. This segment generated RMB118 1,000,000 in revenue, RMB during the quarter, a decrease of 20.8% year on year. By the end of the first half of the year, Noah Upright had over 10,600 clients with assets over RMB1 1,000,000. Thanks to the outstanding performance of the carefully selected fund managers, we generated over RMB4 1,000,000,000 in profits for our clients during the first half, with 86% of the clients achieving overall positive investment returns.

Speaker 1

In domestic public markets, we advised our clients to invest in QDII and QDLP products denominated in RMB to generate beta returns from global markets. During the first half of twenty twenty four, our QD products generated transaction value of RMB3.1 billion with AUM totaling RMB3.8 billion. The percentage of clients who achieved overall positive investment returns was 82.7%. In the domestic asset and management segment, our key products include RMB denominated private equity funds and RMB private secondary funds managed by Gopher Asset Management. This segment generated total revenue of RMB198 1,000,000 in the 2nd quarter, a decrease 5.4% year on year.

Speaker 1

In the primary market, our investment team has been actively expanding exit strategies. We strengthened the daily supervision and management of our portfolio funds and projects, exploring diverse exit and enhancing dividends of underlying assets to improve DPI. Additionally, the investment team is proactively broadening buyer's market, pursuing asset opportunities through asset acquisition or secondary fund transactions, successfully generated approximately RMB 4,000,000,000 in primary market assets during the first half of the year. In the secondary market, private secondary products managed by Gopher primarily focused on deploying RMB to invest in onshore cross border ETFs aiming to capture beta returns from the global market. In the domestic insurance brokerage segment, total revenue during the quarter was RMB12 1,000,000, a 93.1% year on year decrease, which was primarily due to concerns over the underlying asset quality of insurance firms, which resulted in us temporarily suspending the distribution of domestic insurance products in the first half, while we conducted thorough due diligence on these existing insurance products and underlying assets.

Speaker 1

During this period, we repositioned the strategic focus of our insurance business, identifying medical and retirement caring insurance as key products to drive our efforts forward. We have clearly defined the strategic direction of our business domestically, launched insurance products centered on retirement and global healthcare solutions. We are confident in this new positioning as these products align well with the needs of newer clients, entrepreneurs and business leaders born in the age of 1950s, 60s 70s era who are seeking retirement, healthcare and elderly care resources for themselves and their aging parents. Internationally, our strategic direction is squarely focused on expanding the global market. Key initiatives include enhancing our product matrix, improving operational efficiency and serving both Mandarin speaking clients and business already overseas and those preparing to move abroad.

Speaker 1

Successfully serving our existing clients while driving new client acquisition growth is crucial to our success. In our overseas wealth management business, we launched 2 new brands, ARC Wealth Management for offline services and I ARC for online services. Our offline international wealth management operations focused on Hong Kong, Singapore and the U. S. Where we serve existing clients and expanding our businesses by targeting Mandarin speaking clients.

Speaker 1

We continue to expand our overseas RM team and enhance our professional service capabilities to strengthen local client acquisition capabilities and capture a larger share of their wallets. As of the Q2 of 2024, Noah had 113 relationship managers in Hong Kong and Singapore, an increase of 101.8% year on year and 24.2% sequentially. Overseas AUA including distributed products reached US8.5 billion dollars a 7.4% year on year increase. For overseas new market expansion, we expect to complete the establishment of our branch offices in Japan and Dubai by the end of the year. We're also actively expanding our footprint in the U.

Speaker 1

S. With our U. S. Product center, our service now in the U. S.

Speaker 1

Encompass actively managed BC funds, rental apartment funds, fund of funds and external partner products, also comprehensive services like insurance and family trust. Establishments of our wealth management business in the U. S. Are also well underway and we anticipate completing the groundwork within this year. By the end of the second quarter, the number of overseas registered clients exceeded 16,700, an increase of 23% year on year.

Speaker 1

The number of clients who purchased our cash management products reached 5,047, a remarkable increase of 101.2% year on year, while the number of discretionary investment clients reached 959, an increase of 103.6% sequentially, sorry, year on year. Our online international wealth management business, which includes money market mutual funds and securities trading generated total revenue of RMB7 1,000,000 during the quarter, an increase of 221.9 percent year on year. We have already successfully launched IR app in Singapore and we will continue to implement the same in other regions. As our online product has spent, our client base is also growing, allowing us to provide tailored solutions for both individual and institutional clients. In the Q2, the number of the overseas active high net worth clients reached 3,244, an increase of 62.8% year on year.

Speaker 1

Total transaction value during the same period reached US1.1 billion dollars up 40.4 percent year on year. The number of active clients for U. S. Dollar mutual funds reached 2,822, an increase of 108.1% year on year. With the transaction value of US484 $1,000,000 up 80.5 percent year on year.

Speaker 1

In terms of overseas transaction value for corporate institutional clients reached US70 $1,000,000 in the 2nd quarter, an increase of 84.8 percent year on year, while the AUA reached US185 $1,000,000 a year on year increase of 46%. Our online international wealth management business began trial operations for agency clients in late 2023, empowering EAM, IRAs and family office clients with the SaaS platform integrated with our full suite of products. To date, we have signed more than 20 agency clients. On the international asset management front, our key offerings include actively managed and externally managed alternative investment products, as well as non money market mutual fund products. During the Q2, transaction value for U.

Speaker 1

S. Dollar private equity products reached US152 million dollars dollars a significant increase of 46.2 percent year on year. Transaction value of US dollar private secondary products including hedge funds and structured products reached US401 million dollars an increase of 23% year on year. At the end of the Q2, AUM for overseas products reached US5.4 billion dollars a 14% year on year increase and accounting for 25% of the total AUM compared with 21.8% during the same period last year. AUM for overseas private equity and other primary market funds reached US4.1 billion dollars a 14.9 percent year on year increase.

Speaker 1

Our goal is to increase U. S. Dollar AUA including externally managed products from the current U. S. Dollar 8,000,000,000 to over $20,000,000,000 within the next 3 to 5 years.

Speaker 1

In the insurance product segment, we provide comprehensive solutions including global insurance products to clients through our Glory brand. This segment generated total revenue of RMB 101,000,000 in the 2nd quarter, a decrease of 52.6 percent year on year, primarily due to the intensified competition in Hong Kong market, increasing product homogeneity and the prevalence of malicious market competition for commission rebates. To address these challenges, we strengthened our customized product services for key clients and partnered with leading insurance companies to develop exclusive and customized products. We also launched comprehensive businesses and individual solutions such as VIP Insurance for major clients and continued to build a diverse product portfolio in Singapore, the U. S.

Speaker 1

And Bermuda, providing clients with globally tailored insurance solutions. These efforts have enhanced our competitive edge through differentiated products and professional services. Additionally, we're encouraged by the Hong Kong Insurance Regulatory Authorities efforts to strengthen the management and penalties for malicious competition such as excessive commission rebates. In the long run, we believe customers will benefit from a healthier competitive environment in the industry. By utilizing regulated institutions like Noah for integrated wealth management and insurance solutions, clients can expect lower cost and better service.

Speaker 1

In summary, while we anticipate a slowdown in the performance of our business overall in the next few quarters due to external challenges in our internal transformation, we view this as a necessary phase in our growth trajectory. We have clearly defined our strategy of refining the domestic market and expanding the international market and we remain confident in the wealth management opportunities available for global high network management speaking clients. The separation of our domestic and international businesses enhances our ability to serve clients and ensures better compliance. We believe that wealth management segment is a long term endeavor and the initiatives we have implemented will deliver long term value to our clients, shareholders and management team. Given the management team and the Board of Directors' confidence in the expensive opportunities in the wealth management industry for global Mandarin speaking clients.

Speaker 1

We are rewarding long term shareholders who have supported Noah's development during this transition phase through enhanced shareholder return initiatives. Leveraging our healthy balance sheet, the Board has authorized US15 $1,000,000 share repurchase program. The share repurchase plan does not form a part of our corporate action budget under our new capital management and shareholder return policy. We believe that our stock is deeply undervalued and this share repurchase program will effectively enhance our ROE and capital allocation efficiency, while also reflecting our unwavering commitment to prioritizing shareholder interest and delivering sustained returns. I would now like to turn the call over to Grant to go over financial results in more detail, as well as the details of the repurchase program.

Speaker 1

Thank you, everyone.

Speaker 2

Thanks, Mello, and thank you, Wanda, and greetings to everyone joining us today. During the first half of twenty twenty four, our total revenues were RMB1.3 billion, a decrease of 27.5 percent year over year. The short term pressure on the performance is mainly due to the challenges brought about transformation as just described by our CEO and vendor. As you noted, we're undergoing a profound transformation on the R and M service model and are actively adjusting the business directions of several business units. This decision making process has been thoughtful, but it has taken some time to ensure that we're making strategic choices that align with our long term vision and client interest.

Speaker 2

While the path forward is clear now, it also takes some time to optimize the processes involved and ensure that they could smoothly integrate it into our sales and service activities. In the short term, the integration of the new sales processes are indeed more intricate and time consuming. It's crucial for our sales team to have the time needed to adapt to these changes and their new roles. This transition, however, will lead to a greater success in terms of serving the client's interest, but with a temporary dip in sales efficiency and short term pressure. Now let's get into the details of financials.

Speaker 2

Starting this quarter, we have included additional disclosures of revenues by product category and global metrics in the supplemental information section of our release. This enhanced disclosure will provide a more precise picture of our strategic direction, enabling investors to track our business development efforts on a global basis, assess the development status and financial contributions of our various businesses and see how they align with our resource allocation. The encouraging sign that our U. S. Dollar investment products performed well, generating stronger transaction value and increasingly contributing to revenues.

Speaker 2

As the Fed's higher for longer interest rate lasted, the demand for U. S. Dollar cash management products remained strong in the first half of the year, with revenues increasing 2 78% year over year. And the revenue growth in U. S.

Speaker 2

Dollar alternative investment products were also impressive. On a comparable basis, excluding the impact of one off performance based income, the revenue contribution of U. S. Dollar alternative investment products increased by 9.3% year over year to RMB245 1,000,000 during the first half. In addition, their share of total one time commissions and recurring service fees increased from 14.9% to 21%.

Speaker 2

However, revenue from global insurance products slowed down due to the higher competitive market environment. Continuing on the positive side, our overseas total net revenues in the hotel reached RMB585 1,000,000 accounting for 46% of the total net revenues, up from 41% during the same period last year. For our domestic business, the revenue decline was significant, mainly attributed to the strategic realignment of our business focuses. In line with our CIO house view, we have slowed down the distribution of domestic investment insurance products and also RMB RPE products. The focus of RMB secondary product has been shifted towards QDII and QDLP offerings for our clients to capture growth opportunities elsewhere in the group, especially in a stronger U.

Speaker 2

S. Equity market. On a quarterly basis, our total net revenues were RMB616 1,000,000 during the Q2, a decrease of 34.6% year over year and 5.2% sequentially. By revenue type, one time commissions fell 26.9% sequentially to RMB136 1,000,000 mainly due to reduced insurance products distribution. Recurring service fees dipped slightly 2.9% sequentially to RMB404 1,000,000 primarily influenced by decrease in onshore AUM.

Speaker 2

Performance based income saw a robust 95% sequential increase to RMB28 1,000,000 driven by exits from private equity investments. Notably, CS1 PE RMB secondary fund managed by Gopher generated carry income of RMB12 1,000,000 reflecting our continuing efforts in exiting domestic PE products and thereby delivering substantial returns to our clients. In terms of transaction value, we distributed RMB33.3 billion products during the first half of the year, down 5% year over year, reflecting a continued shift towards USD products. Specifically, RMB transaction value fell 30% year over year to RMB17 1,000,000,000 while transaction value of U. S.

Speaker 2

Dollars increased by 45.6 percent to USD2.3 billion. The proportion of U. S. Dollar products in our total transaction value has increased significantly, therefore, from 31% last year to 49% this year. This quarter, we also observed the clear trends our clients are increasingly interested in the wider array of US dollar investment products moving beyond just cash management solutions.

Speaker 2

In particular, our long term alternative US dollar investment products including private equity, private securities and private credit products have seen a notable increase in demand, raising US463 $1,000,000 in the first half, a substantial 39% increase year over year. These products are set to deliver a consistent flow of recurring service fees for us in the longer term. Our AUM and AUM remained stable overall with a decline in RMBR AUM and AUA due to ongoing exits, while the U. S. Dollar AUM and AUA ticked up its growth.

Speaker 2

At the end of second quarter, our U. S. Dollar AUM grew significantly by 14% year over year and 4.4% sequentially. And U. S.

Speaker 2

Dollar AUA grew by 7.4% year over year and 2.5% sequentially, reflecting our ability to capture larger share of clients' U. S. Dollar wallets. Moving on to the income statement. Operating costs and expenses fell by 18.7% year over year during the quarter and almost 10% year over year during the first half of twenty twenty four, reflecting continuing efforts of controlling costs.

Speaker 2

Compensation and benefits decreased significantly by over 20%, both year over year and sequentially. As mentioned last quarter, we're continuing to consolidate our network centers in smaller cities and further improve human capital efficiency by reducing overhead costs. While the financial benefits of these optimizations might not be immediately fully apparent, we're now starting to see the cost savings in our latest financials. Selling expenses, general and administrative expenses fell sharply by 19% year over year and increased 6.3% sequentially. The slight sequential increase was primarily driven by technology related costs.

Speaker 2

Operating profit for the quarter increased by 10.3% sequentially to RMB134 1,000,000, while operating margin expanded by 3.1% to 21 0.8%. For the first half this year, operating profit was RMB256 1,000,000 and operating margin was 20.2%. Total other income increased to RMB62 1,000,000 during the quarter and RMB117 1,000,000 during the first half of the year due to continued optimization of treasury management. Non GAAP net income was RMB106 1,000,000 for the quarter and RMB267 1,000,000 for the first half of the year. As our global business accelerates, our overseas client base is obviously experienced robust growth with overseas registered clients now exceeding 16,000, up 23.0 percent year over year.

Speaker 2

The total number of overseas Diamond and Black Card clients, which require minimum investments with US dollar $2,000,000 $5,000,000 respectively, continue to grow this quarter, exceeding $1500,000,000 Overseas active clients reached 3,244 increasing 62.8% and 18.2% sequentially. Turning to the balance sheet. We have maintained a healthy liquidity position and very strong cash reserve with our current ratio of 3.0x and debt to asset ratio at 22 percent with 0 interest bearing debt. We have RMB4.6 billion cash after the distribution of RMB1 1,000,000,000 dividend providing ample resources to support our global expansion plans and allocate further to shareholder returns, which remains a priority for the Board. As you know, in August, we paid out the annual dividend, and special dividend for 2023, totaling RMB1 1,000,000,000 and equivalent to 100% of our annual non GAAP net income last year.

Speaker 2

Based on the share price before the ex dividend date, the total dividend yield reached and exceeded 20%. This reflects our strong liquidity position and confidence in our long term growth prospects. While China's wealth management industry is facing a challenging time and it's undergoing a transition mode, we remain very confident of Noah's unique advantage, benefiting from our deep understanding of high net worth individuals' demands and capability to deliver products and services to the still growing client base. We're one of the few independent firms that still have access through years of investor education, access to the largest group of qualified individual investors who are still seeking professional services. Hence, we believe that our stock is deeply undervalued, which doesn't reflect the growth prospects, robust balance sheet and cash reserve or our special bonds to this client group all over the world.

Speaker 2

So I'm very pleased to report that our Board has approved the share repurchase program on top of already existing capital policy, which will allow the company to buy back up to US15 $1,000,000 of its ADMs effective immediately. It's worth noting that this program is separate from the corporate action project for 2024 under the new shareholder return policy announced last year in November. The specific 2024 budget will be determined later on. We're very excited about the prospects ahead and believe our value will be fairly reflected by the market. We value the long term and new shareholders and are committed to continue to share our successes with them through more proactive capital allocation policies in the future.

Speaker 2

In conclusion, 2024 is a year of significant transformation for Noah. Our performance this quarter clearly reflects the progress we're making and at the same time the pressure we're facing. We recognize this transformation will take time, but are confident that these adjustments will lay a solid foundation for future growth. Once again, thank you all for your trust and support. I'll now open the floor for questions.

Operator

We will now begin the question and answer session. And the first question will come from Peter Chong with JPMorgan. Please go ahead.

Speaker 3

This is Peter Zhang from JPMorgan. I have two questions. The first question is, I wish to understand what's the driver behind the $50,000,000 loss from equity affiliates record in our 2nd quarter results. My second question is management mentions that overseas AUA will increase from RMB8 1,000,000,000 in this quarter to RMB20 1,000,000,000 dollars US28 $1,000,000,000 in this quarter to US20 $1,000,000,000 in next 3 to 5 years. But in the meantime, we also expect our business remain relative slow in next few quarters due to the external and internal environment.

Speaker 3

I wish to understand how long management expenses transition period will be And in medium to longer term, what will be the driver behind the increasing the strong increase in this overseas AUA? How long I will achieve the growth? Thank you.

Speaker 2

Peter, I'll answer the first question. The decrease on the is more or less related to as the general partner of many, many fund to funds, Gopher actually has co investments in these funds. And sometimes when the valuation of the underlying funds adjusted down, it will be reflected proportionately onto our balance sheet as equity pickup. So this quarter reflects that equity pickup in some of the underperformance of the following underlying funds. Then on the second question, and we're obviously have very high confidence in terms of the ample growth, the depth actually is the market of high net worth individuals in the future and especially how we'll be able to maintain the growth on both the quality of service as well as the accumulation of AUM and AUA especially on the U.

Speaker 2

S. Dollar side.

Speaker 1

Thank you, Xander. Thank you, Xander and thank you, Peter, for the question. So regarding the second question, first of all, I guess the near term challenges, a few aspects that were previously mentioned during the call as well that causing the near term financial performance slowdown, first of all, is I guess on the domestic market, driven from our, I guess, fundamental is to protect our clients' assets. So we'd rather lose the client than losing our clients' assets. So we basically, during the first half of the year, we suspended the distribution of domestic insurance products due to aforementioned reasoning.

Speaker 1

And secondly, in the overseas market, as mentioned before, the competition for Hong Kong insurance market has become quite, I guess, competitive. But we're glad to see that the regulatory authorities have implemented various adjustments to limit the malicious competition aspect. And also internally, we're also implementing the transformation of our sales functions. So the sales personnels are being adjusted or have been adjusted into different independent business units. So I guess the sales network or the sales model has been significantly changed.

Speaker 1

So these are the near term challenges. I guess looking forward to the future, first of all, in terms of domestic insurance, we are the strategic direction has been very clear now. We are positioning ourselves to our clients' healthcare as well as retirement wellness position products. And we have already started the marketing process and we see very high interest among our clients. So basically we take a lot of our clients to these offline senior care facilities and we are seeing that the transition or the clients' subscription rate is about 10%.

Speaker 1

So we expect this business to slowly pick up starting from the Q3. And we think that the product is well suited for our clientele. In terms of overseas, we have very high client stickiness and we understand our clients' demand. A lot of our clients are going outbound for their businesses as well as their investment allocation needs. And also in the overseas market, there are a lot of local Mandarin speaking Hanover clients as potential clients for Noah who are, I guess, underserved in their asset allocation demand and needs.

Speaker 1

So we have done some early stage attempt, including acquiring new clients and servicing clients online, acquiring clients offline, we realized that this is a very, I guess, a blue ocean market for us to further capture. In terms of the product competitiveness, as mentioned, we established our U. S. Product center. I guess in the overseas market, our strategy is to increase our product competitiveness and also increase the expand the coverage of global top tier GPs, including VCs, PEs, hedge fund managers and so forth.

Speaker 1

Thank you, Chair Lady. Thank you, Chairlady. So overall, we are very confident in our overseas business growth or global business growth. Aside from the local overseas local management speaking clients and their high demand for wealth management services, especially from Chinese background wealth managers like us. On the supply of product side, we're also seeing that basically all of the top tier global GPs are putting more resources in their private wealth channel, whereas before their fundraising efforts were mainly driven by institutional LPs.

Speaker 1

But before, I guess, the private wealth channel only account for less than 10% of their overall new fundraising amount, but they're aiming to increase this percentage to over 30%. So I guess, Noah, due to our product specialty, we are known as an alternative wealth asset manager and wealth manager. So comparing with a lot of, I guess, global private banks or competitors who are less familiar with prep equity, venture capital and just alternative products overall, we do have an edge comparing to when we're comparing to those local peers. Operator, turning back to you.

Operator

Thank you. And this will conclude our conference call as well as our question and answer session. I wanted to thank everyone for your participation today. You may now disconnect.

Speaker 1

Thank you all.

Speaker 2

Thank you.

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Key Takeaways

  • Noah has realigned its operations by clearly separating domestic and international segments, optimizing its sales model into independent licensed business units and launching new overseas brands (ARC Wealth Management for offline and iARC for online) to enhance compliance and service transparency.
  • Second quarter revenue fell 34.3% year-on-year to RMB621 million, driven by a strategic reduction in domestic product distribution, while U.S. dollar cash management revenues rose 278% YoY and alternative investment income grew 9.3%.
  • International expansion gained traction as overseas AUA rose to US$8.5 billion (+7.4% YoY), relationship managers nearly doubled to 113, and Noah targets boosting U.S. dollar AUA from US$8 billion to over US$20 billion within 3–5 years.
  • The board approved a US$15 million share repurchase program and paid a 100% special dividend of RMB1 billion for 2023, underscoring management’s confidence in the stock’s undervaluation and commitment to shareholder returns.
  • Noah anticipates short-term headwinds from its ongoing transformation and regulatory challenges but remains confident that its refined domestic focus and international growth initiatives will lay the foundation for long-term value creation.
AI Generated. May Contain Errors.
Earnings Conference Call
Noah Q2 2024
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