Peter Zhang

Peter Zhang asked how investors can track Noah Holdings' progress on its three core strategies: increasing investment product proportion, AI integration, and establishing four booking centers. He also sought clarification on the financial impact, specifically if AI investments would lead to cost savings or revenue growth, and the potential upfront investment and cost implications for the US booking center in 2026. Additionally, he questioned the rationale behind the observed drop in overseas RM numbers and the increase in domestic covered cities, noting a deviation from past trends.

Answer

CFO Grant Pan suggested tracking the proportion of revenue from investment-related products and the accumulation of investment-related AUM/AUA. He explained that AI investment aims to innovate the business model, enhance client acquisition, and upgrade services, with strategic investment starting in 2026, and the US booking center requiring necessary but not significant infrastructure additions. CEO Zander Yin emphasized the correlation of the three strategies, aiming for an AUM-driven model, with AI enhancing efficiency and booking centers supporting global Chinese clients. He clarified that the overseas RM drop was an active internal adjustment, not a strategic shift, and domestic city increases were for 'clubhouse' client experiences. Chairwoman Jingbo Wang added that Noah's long-standing tech investments and operational-driven model, supported by AI, are key to efficient global expansion and client service.

Peter Zhang asked about the potential financial impact of Noah Holdings' three core strategies: AI adoption, increasing investment product proportion, and establishing four booking centers. He specifically questioned if AI would lead to cost savings or revenue improvements, and if the U.S. booking center would require significant upfront investment in 2026. He also asked for trackable metrics for these strategies over the next 1-2 years. Additionally, Peter inquired about the rationale behind the observed drop in overseas relationship managers (RMs) and the increase in domestic covered cities, asking if this signifies a strategic shift or fine-tuning.

Answer

CFO Grant Pan stated that investors could track the weight of revenue from investment-related products and the accumulation of investment-related AUM/AUA. He explained that AI investment aims to innovate the business model, increase client acquisition, and upgrade future business models, with strategic investment starting in 2026. He noted that the U.S. booking center would require necessary infrastructure but not a very significant addition to operating expenses. CEO Zander Yin emphasized that the strategies are correlated, aiming to make Noah an AUM-driven company, with AI enhancing efficiency and booking centers supporting global client demand. He clarified that the drop in overseas RMs is an active internal adjustment to find the 'right RMs,' and AI RMs like NOIA can cover significantly more clients. Chairwoman Jingbo Wang highlighted Noah's deep knowledge of AI from past investments, believing it will drive a shift from an RM-driven to an operational-driven model, enhancing efficiency and scalability, especially in overseas markets where human RM costs and loyalty can be challenging. She also clarified that increased domestic covered cities are mainly 'clubhouses' for elite client relationships, not full offices, and the focus on overseas markets remains.

Peter Zhang from JPMorgan Chase & Co. asked about the effects of recent market volatility and potential trade tariffs on client behavior, and sought details on the key drivers for the overseas business and any signs of recovery in overseas insurance.

Answer

An unnamed executive responded that while some business-owner clients see short-term trade disruptions, the broader trend is toward asset diversification and overseas expansion. Clients are currently favoring products with higher liquidity and those with an AI theme. For the overseas insurance business, the executive noted the Hong Kong market is competitive, so Noah is focusing on tailor-made, high-premium products, which has successfully increased average premiums. They also see clients shifting from cash to investment products as the interest rate environment changes.

Peter Zhang of JPMorgan Chase & Co. asked about business trends in the first quarter of 2025, including client sentiment and product sales. He also sought guidance on the revenue outlook for 2025 following the domestic strategic transformation. Additionally, he questioned the reasons for the sequential decline in overseas relationship managers (RMs) in Q4 2024 and requested an outlook for both overseas and overall headcount in 2025.

Answer

CEO Zander Yin, Chairlady Wang Jingbo, and CFO Qing Pan provided a comprehensive response. They confirmed that client investment sentiment has been rebounding significantly, evidenced by record attendance at recent client summits. While not providing specific guidance, they suggested 2024 was a bottom and expect a recovery in 2025, with growth in overseas investment products offsetting declines in domestic private market fees. The Q4 sequential decline in overseas RMs was attributed to year-end performance evaluations and a conservative approach to hiring, noting the year-over-year headcount still grew 55%. For 2025, the 'ARK 200' hiring program will continue, supplemented by campus recruitment and a new business development team to drive client acquisition.

Peter Zhang of JPMorgan Chase & Co. asked if Noah's revenue has reached a turning point due to its international expansion strategy and what the primary revenue drivers will be. He also followed up on Q4 client purchasing trends and the potential for sequential revenue improvement.

Answer

CFO Qing Pan stated it is likely too early to declare a revenue turning point but confirmed the structural shift towards international expansion is becoming dominant. CEO Zander Yin added that while policy effectiveness is uncertain, client engagement has increased, creating more opportunities for long-term asset allocation advice. He acknowledged the company's new sales model is still in transition but expects it to positively impact future financial performance.

Peter Zhang inquired about the current investment sentiment in mainland China, client product preferences amid declining domestic insurance demand, the drivers behind the Q1 revenue decline, and the outlook for fee rates on insurance and other products.

Answer

CEO Zander Yin explained that high-net-worth investor sentiment has not yet seen a significant improvement despite recent market rebounds. He noted that the decline in domestic insurance demand aligns with the lower interest rate environment, with Noah now focusing on retirement and medical-related products. The Q1 revenue drop was attributed to lower recurring fees from domestic AUM exits, the lag in recognizing revenue from growing overseas cash management products, and a decrease in performance-based income. Regarding fee rates, Mr. Yin stated the impact from insurance commission changes is minimal, and while cash management products have naturally lower fees, rates for private market products remain stable, with the core focus remaining on long-term client value.

Peter Zhang asked about the driving forces behind the strong sequential growth in Q3 interest income, requesting a breakdown into client idle cash, margin financing, and security lending. He also questioned if the strong security borrowing contribution was market-driven or due to Futu's content-level efforts. Additionally, he sought details on crypto business revenue contribution in Q3 and future expansion drivers, such as token offerings, derivatives, or staking.

Answer

CFO Arthur Chen stated that interest income sources from client idle cash, margin financing, and security borrowing/lending were quite evenly split in Q3. He attributed the strong momentum in security borrowing/lending primarily to market dynamics, particularly increased utilization of hard-to-borrow stocks. Chief of Staff to CEO, Head of Strategy and IR Daniel Yuan elaborated on crypto growth, noting broad-based triple-digit sequential growth in Hong Kong and Singapore, and new functions/coins in the U.S. He confirmed crypto's small current revenue contribution but significant long-term potential, contingent on regulatory approvals for derivatives and broader token offerings.

Peter Zhang asked for a breakdown of interest income sources, specifically from client idle cash, margin financing, and securities lending, and whether the strong growth in securities borrowing was market-driven or due to Futu's actions. He also inquired about the Crypto business's Q3 revenue contribution and future growth drivers, such as token offerings, derivatives, or staking.

Answer

CFO Arthur Chen stated that interest income in Q3 was quite evenly sourced from client idle cash, margin financing, and securities borrowing and lending, with the strong momentum in securities borrowing primarily market-driven, particularly for hard-to-borrow stocks. Chief of Staff Daniel Yuan noted that Crypto growth was broad-based across markets, with Solana being popular in Hong Kong and new functions/coins in the U.S. He added that Crypto contributed a small percentage to current revenue but had a long runway for growth, with catalysts including broader token offerings and derivatives, contingent on regulatory approvals.

Peter Zhang of JPMorgan asked about the reasons for the increase in the effective tax rate to 18.6% in Q1 and its long-term outlook. He also inquired about the drivers behind the stabilization of the blended commission rate and its future trend.

Answer

CFO Arthur Yu Chen explained the higher tax rate was due to the full utilization of historical tax credits in profitable overseas markets and the implementation of OECD's Pillar Two rules, guiding for a 17-18% rate going forward. He attributed the stable commission rate to a product mix shift towards derivatives and expects it to remain stable.

Peter Zhang of JPMorgan Chase & Co. asked for the drivers behind the significant sequential increase in G&A expenses versus the modest rise in R&D costs in Q4. He also inquired about the reasons for the record-high 'Other Income' and the outlook for 2025.

Answer

Chief Financial Officer Arthur Chen attributed the Q4 G&A expense increase to year-end bonuses, one-off professional fees for new licenses, and organizational restructuring costs. He projected low-to-mid single-digit headcount growth for 2025. The growth in 'Other Income' was driven by higher fees from wealth management products and increased currency exchange income as clients moved assets between the U.S. and Hong Kong markets.