Financials Author: 孟凤翔 Editor: Skye Lan, Zhiqing Chen May 13, 2021 10:21 AM (GMT+8)

In 2020, the company transformed its product mix, reducing operational risks. As a result, its full-year earnings exceeded the expectations by 2.4%.

wealth management

  • Noah Holdings has made real progress in the 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, 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.

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' 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.'

Noah's standardized wealth management products became a revenue driver in 2020

Digital transformation

In addition to its business strategy, Noah Holdings has also well-performed in risk control management and therefore attracted more investors.  

Since 2014, the company has faced several risky events that were resolved from lopsided risk control management. For example, in July 2019, Noah Holdings provided a supply chain financing up to CNY 3.4 billion to Camsing. But the actual controller of Camsing was criminally detained for suspected fraudulent activities, and the relevant credit fund was postponed as a result. Finally, Noah holdings offered a settlement plan to the investors of Camsing Products by issuing a fixed number of the company's restricted share units (the 'RSU') for consecutive 10 years. As of December 31, 2020, approximately 67.5% of the Camsing investors had accepted the settlement plan, representing approximately 70.6% of the total outstanding Camsing fund balance.

What's more, the Camsing incident further highlighted the seriousness of Noah's internal risk control situation – the weak ability of proactive management of assets.

Noah has been facing negative scenarios since 2014

These risky incidents certainly hindered Noah Holdings' development, but it also refined the company's strategy to improve understanding based on the needs of clients and correct track for its brand positioning. Therefore, since 2020, the company has engaged in digital transformation, strengthening risk management, and improved customer experience.

Digital product mix of Noah Holdings

Noah Holdings' comprehensive digital transformation has significantly reduced its operating costs and improved its efficiency. Specifically, its annual operating costs reached CNY 2.05 billion, a 17.3% decrease from the calendar year of 2019. Its operating costs account for 61.9% of revenue, a decrease of 11.13% YoY. The most direct manifestation of the digital transformation is in the company's wealth management, as its operating costs in the sector declined by 17.7% and elevated its profitability.

Starting from the fourth quarter of 2020, Noah Holdings has been integrating its internal resources to launch a new consolidated platform called 'Noah Digital Intelligence' that offers comprehensive services. This platform is led by Mr. Jin Chen, the former General Manager and co-CEO of Zhong An.

The future seems promising

In 2020, Noah Holdings was making significant changes in multiple segments, such as product structure, business system architecture and platform operation. If the company can keep up the momentum and actively embrace the trend of digital transformation, it may have something to say in the future of Chinese fintech.


[1] PBOC = The People's Bank Of China, CIRC = China Banking and Insurance Regulatory Commission, CSRC = China Securities Regulatory Commission, SAFE = State Administration of Foreign Exchange.

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