Q3 2023 Earnings Summary
- Significant growth in overseas transaction volume, particularly in US dollar transactions, which increased about 132% year-over-year in Q3 2023, driven by strong demand from international clients.
- Substantial growth in Gopher's assets under management (AUM), especially in overseas cash management products, indicating strong inflow of assets and potential for increased management fee revenue going forward.
- Positive client engagement at recent Black Card gala events, with high attendance and clients becoming more globally minded and sophisticated, leading to optimism about revenue generation and product placements in Q4 2023.
- Reliance on Government Subsidies with Uncertain Future: The company reported that government subsidies for the quarter were RMB 105.3 million, a sharp increase of 141% year-over-year. However, management acknowledged that the timing and amount of these subsidies are unpredictable going forward. CFO Mr. Pan stated, "I'm not sure whether or not safe to say that it will remain consistent. It's pretty hard to predict." This uncertainty poses a risk to future profitability.
- Significant Decrease in Active Clients: The number of active clients in Q3 was 9,489, down 58% year-over-year. This decline was attributed to clients adopting a conservative approach due to market conditions. A shrinking active client base could negatively impact future revenues.
- Potential Regulatory Risks Affecting Insurance Commissions: An analyst questioned whether regulatory changes affecting bank insurance commission rates might impact Noah's insurance brokerage commissions. Chairlady Wang responded that if regulations change to include independent brokers, "we would be -- have no choice, but to follow". Given that insurance products contributed 94% of total one-time commission fees in Q3 , any reduction in commission rates could significantly affect the company's revenue.
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Government Subsidies
Q: Will government subsidies remain stable?
A: Management stated that year-to-date government subsidies have remained stable compared to last year. However, they cautioned that future subsidies are difficult to predict, as they depend on domestic RMB revenue and government fiscal situations. Increased domestic revenue might lead to higher subsidies, but there could be volatility. -
Gopher Fund Commissions
Q: Why did Gopher's one-time commissions drop?
A: The sharp decline in one-time commissions to RMB 32,000 was due to AUM growth coming mainly from USD cash management products and discretionary portfolio investments for deposits, which generate revenue through management fees rather than upfront commissions. These products don't have high subscription fees, so immediate revenue doesn't reflect the AUM increase. -
Transaction Volume Drivers
Q: What's driving the increased transaction volume?
A: The primary driver was USD products, with approximately $1 billion in transaction value, up 132% year-over-year. The RMB side also remained healthy, with RMB 12.9 billion in mutual fund transactions from corporate and institutional clients via Smile Treasury. -
Insurance Commission Rates
Q: Will regulatory changes affect insurance commissions?
A: Currently, regulatory adjustments impacting bank insurance channels do not affect independent brokers like Noah. If regulations expand to include independent brokers, Noah will comply. Overseas insurance brokerage remains unaffected and has been generating more revenue since COVID. -
Client Investment Sentiment
Q: What is the latest client investment sentiment?
A: Clients remain rational, seeking balanced and diversified global asset allocations. There's a shift toward comprehensive wealth management solutions, including family and enterprise succession planning. Clients focus more on asset protection, security, and global macro views like currency risk. -
Black Card Gala Impact
Q: Will the Black Card Galas boost Q4 revenue?
A: The recent galas had high attendance, and management is optimistic about revenue generation. They're focusing on total client solutions rather than pushing specific products. Clients allocating more to insurance may not immediately boost transaction value, but the company is comfortable with this strategy.
Research analysts covering NOAH HOLDINGS.