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

Since 2020, Noah has been actively adjusting the product structure.

The company's Q1 2020 - Q4 2020 QoQ CAGR of operating income of wealth and asset management was 7.30% and 18.56% respectively. At the same time, the proportion of lending and other businesses reduced to almost zero.

On the other hand, the negative operating income recorded CNY 740 million in 2020. It resulted from a one-off settlement expense related to the Camsing settlement, accounting for CNY 1.83 billion. Without this adverse impact, the company's net income would have reached CNY 1.13 billion with a 25.3% increase from 2019.

The operating results show that Noah has finally gone through the downturn and starts growing rapidly, with a significant increase in profitability.

Noah saw its revenue from key segments grow fast in the pandemic era

It is worth noting that many factors contributed to Noah's performance, including those below.

Adjusting business strategy under regulation

In April 2018, PBOC, CIRC, CSRC and SAFE [1] released the 'Guiding Opinions on Regulating Asset Management Business of Financial Institutions' (the 'New Regulation'), aiming to break the rigid payment and limit non-standard products, was officially released. This regulation boosted the unification of wealth management in China. In practice, the new regulation has been extended twice in terms of the transition period, all the way from June 2019 to the end of 2021.

Under the regulation, Noah Holdings has scaled down profitable lending products and returned its focus to wealth and asset management. For 2020, in the wealth management segment, its standard products scale jumped to CNY 73.14 billion, marking a significant increase of 177.3% YoY; in the asset management segment, Gopher continued to withdraw from non-standard fixed income products. The management scale of non-standard products dropped from CNY 29.64 billion at the end of 2019 to CNY 10.23 billion at the end of 2020. So far, Noah Holdings says its standard products are at the leading position in the production scale, marking a  successful low-risk transformation in product structure of 'non-standard to standard.'

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