Net revenues at China’s Noah Holdings nearly doubled last year, off the back of growing product sales to the country’s burgeoning high net worth.

Net revenues at China’s Noah Holdings nearly
doubled last year, off the back of growing product sales  to the country’s
burgeoning high net worth, according to the wealth manager’s annual results
published yesterday.

Net revenues grew from $37.8 million to
$72.2 million as at the end of 2011, representing a compound annual growth rate
122.9 per cent since 2009. Meanwhile pre-tax income rose from $16.3 million to
$31.7 million. Operating costs more than doubled last year, from $22.1 million
to $47 million.

HNW client numbers soared from 15,857 in
December 2010 to 26,340 at December 2011. The total transactions value of HNW
clients nearly doubled from RMB10,154 million to RMB17,618 million at the end
of last year.

The firm has been aiming more at the
higher end of the wealth spectrum in recent months. Currently,
the wealth manager accepts clients with investable assets (excluding primary
residence) with an aggregate value exceeding $500 million.

“In recent years, we have been raising the required level
of investable assets when we target high net worth individuals in order to
focus our resources on serving the high-end segment of China's high net worth population,”
said Noah in a statement.

As of December 31, 2011, Noah had more than 500
relationship managers and 59 branch offices, which receive operational support
from its headquarters in Shanghai. The firm was established in 2005.

Growth and risks

The firm attributed its strong results to a number of factors.  “We have benefited from the
overall economic growth, the growing high net worth population and the
increasing demand for sophisticated and personalized wealth management
solutions in China, which we anticipate will continue to increase as the
overall economy and the high net worth population continue to grow in China,”
said Noah.

“However, any adverse changes in the economic
conditions or regulatory environment in China may have a material adverse
effect on China's wealth management services industry, which in turn may harm
our business and results of operations.”

The firm said China's slowing growth may affect Noah: “We
may not be able to grow at the historical rate of growth, and if we fail to
manage our growth effectively, our business may be materially and adversely affected.”

“Our rapid growth has placed, and will
continue to place, a significant strain on our management, personnel, systems
and resources. To accommodate our growth, we will need to implement a variety
of new and upgraded operational and financial systems, procedures and controls,
including the improvement of our accounting and other internal management
systems."

Noah is looking to add more branch
offices in new cities and regions where it has no previous
presence, recruit and train more relationship managers and grow its
client base, which it said presented risks.

"As we introduce new wealth management services or enter into
new markets, we may face unfamiliar market and technological and operational
risks and challenges which we may fail to successfully address. We may be
unable to manage our growth effectively."

The bank also pointed to new laws and regulations governing the
wealth management services industry in China, which are developing and subject to
further change. "If we fail to maintain or renew existing licenses or obtain
additional licenses and permits necessary to conduct our operations in China,
our business would be materially and adversely affected," said Noah.