Noah Holdings: On The Right Track After Major Strategic Changes In 2020

  • Noah Holdings has made real progress in product transformation while increasing its profit in 2020.

  • The company has taken initiatives to weaken its dependency on non-standard lending businesses and strengthen its capability to manage assets proactively.

  • We are bullish on Noah as it overcame the challenging year of 2020, showing agility.

On March 16, 2021, Chinese asset-management firm Noah Holdings (NOAH:NYSE) released its 2020 financial results. The revenue reached CNY 3.31 billion, representing a 102.4% completion of its projection. In addition, many Wall Street analysts raised Noah's target price and gave a buy rating. For example, JP Morgan lifted its figure to USD 53, one month after the annual report is published.

In general, Noah Holdings' success is indispensable to its business strategy transformation. The following article will demonstrate the company's approaches to achieve such a successful transition.

Pioneering independent wealth management in China

Founded in 2003, Noah Holdings is the first independent wealth management institution in China. It was originally founded as a private finance department of Xiangcai Securities. After it was listed on the New York Exchange in 2010, it has become a comprehensive financial services group engaging in various sectors by providing services regarding investment, insurance, education, wealth management and auto loans.

Business layout of Noah Holdings

Ups and downs

In recent years, Noah Holdings' revenue has been primarily generated from wealth and asset management, accounting for 95% of its entire revenue. However, before 2020, the two business segments did not contribute that much, with asset management even showing negative growth. Noah's earnings growth came from the non-standard lending and other businesses, while the core business development suffered difficulties.

The company then overcame this hurdle and witnessed its growth rates turning back to positive gradually since the second half of 2019. One of the measures to resolve this challenge was to transform its product structure. However, during this process, Noah stopped its legacy lending products proactively, which led to an objectively poor operating performance.

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Disclaimer: Please consult your own advisor before making any investment decision. 

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