Net Revenues Double At Noah Wealth, Cautions On Risks

Tara Loader Wilkinson

27 April 2012

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.