Noah Holdings Limited (NYSE:NOAH) Q4 2022 Earnings Call Transcript

Noah Holdings Limited (NYSE:NOAH) Q4 2022 Earnings Call Transcript March 28, 2023

Operator: Hi, good morning, everyone and welcome to Noah’s Fourth Quarter and Yearend Conference Call. I’m Melo Xi, Director of Investor Relations in Noah Group. The Presenter today — joining us today are Ms. Jingbo Wang, our Co-Founder, Chairlady and CEO and Mr. Qing Pan, our CFO. Before we start, we would like to kindly remind you that during today’s call, we may make four looking statements based on our current expectation of the business. Please keep in mind that these statements are subject to risk and uncertainties that may cause Noah’s actual results to differ from these statements. We do not undertake any duty to update these statements. For discussion of some of the risks that could affect results, please see the safe harbor statement section of our 6-K filing.

We also refer to certain non-GAAP measures and you’ll find reconciliations in our 6-K report made available on the Financial Report section of Noah’s Investor Relation website. Also, please know that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Noah or Noah affiliated products. This call is copyrighted material of Noah and may not be duplicated without consent. Also, we will appreciate for you to change your display name to first and last name, plus your institution name. With that, I would like to welcome our Chairlady and CEO; Ms Wang Jingbo.

Jingbo Wang: For the agenda of today’s conference call, I’d like to start by discussing the macroeconomic landscape and update on our globalization strategy; then report on Noah’s overall performance and development of various business segments in 2022. Mr. Wang will then present the financial information for the year and conclude with the Q&A session Year 2022 was ex an extraordinary year with an extremely complex global macroeconomic environment. The extreme market gyrations caused by the Russian and Ukraine conflict during the first quarter; China — Shanghai lockdown during the second and the rapid fed rate hike spanning almost the entire year has by far exceeded our expectations. In other words, we have seen the most drastic drop in investor confidence — confidence in decades.

Domestically, the Chinese lockdown index reaches highest level twice since the first outbreak of COVID19 in 2020. Frequent lockdowns severely restricted economic activities with the household savings rates reaching its highest level since the beginning of the outbreak and consumer confidence hitting rock bottom. Turning to the global market; since the subprime financial crisis in 2008, prolonged quantitative easing and abundant liquidities have led to a significant level of global asset inflation, with global supply chains severely disrupted over the past three years by the raging pandemic, coupled with the impact of surging commodity prices due to geopolitical conflicts, we have seen the most acute global inflation in decades. In order to tame inflation, the roles major central banks led by the US Federal Reserves moved quickly to raise interest rate at the fastest pace in almost 40 years.

The sudden quantitative tightening measures and escalating risk-free rate of return led huge losses in risk assets, with both equity and bond markets experiencing their worst year since 2008. The significant shift in investor sentiment led to a decrease in preference for high yield products and an increase in demand for asset with lower volatilities and higher liquidities. As a wealth and asset management firm, focusing on serving global Chinese clients, Noah’s mission is to understand and gain insight into the ever-changing needs of our clients In the CIO report published at the beginning of 2022, based on our assessment of the macroeconomic and capital market environment, we propose our clients to adopt a protection-before growth as asset allocation strategy, advising them to protect and diversify their portfolios using various wealth management tools against the upcoming uncertainties.

We recommended our clients to increase their allocations in absolute return-oriented multi-strategy funds and private equity funds, in order to reduce asset volatility and capture cross-cycle growth opportunities, which effectively help helped our clients to protect their wealth in turbulent capital market environment. We have become increasingly aware that the concept and the understanding of wealth management through the lens of Chinese hand worth individuals undergoing is undergoing fundamental changes with safety and security becoming the number one demand. The need for globalized allocation also increased. Since the opening of the Hong Kong office in 2012, the gradual and gradual establishments in foreign markets, including the US, Singapore, Canada and Australia, Noah International has accumulated a decade of experience and capabilities in the overseas segment.

In the past, we serve our overseas Chinese clients with our overseas staff, which many consisted of investment, product selection, operation and middle and back office professionals. In 2022, we further reshaped Noah’s international capabilities by building an international wealth management team, based in their overseas market, creating new overseas products in order to better serve the asset allocation needs of Chinese Hana individuals living abroad, on top of the capabilities and system we have already built in the past. In 2022, the company delivered solid financial performance by proactively adjusting our business strategy, achieving our annual net revenues of RMB3.1 billion and non-GAAP net income of RMB1 billion, meeting the annual non-GAAP earnings guidance.

Operating income margin improved to 35.1% from 27.9%, driven by more efficient cost management and less travel activities due to COVID lockdowns. Wealth management segment reported annual net revenues are up RMB2.2 billion, down 31.1% year-over-year, primarily due to clients leaning towards — leaning more towards products with higher liquidity such as money market funds and fixed income — fixed term deposits, leading to a decline in one-time commissions. Transaction value was RMB70.3 billion for the year, down 27.7% year-over-year. In 2022 with significant volatilities in the global public markets, with the average MSCI world index down 17.8%, the S&P500 index down 18.7% and the MSCI China index down 21.2%. Noah’s strategy was to capture and maintain clients’ wallet share and help clients preserve their wealth, instead of trying to chase higher revenues and profits through pushing products with higher risk profiles.

Mutual fund transaction value increased by 16% year-over-year, driven by the launch of our small treasury SaaS platform, specifically targeting corporate and institutional clients’ treasury management needs. In the past, corporate treasury management from mid and small enterprises lacked specialized and systematic services, capitalizing on Noah’s existing mutual fund platform and asset allocation capabilities. We have offered services to more than 5,000 — 4,500 mid to small size corporate institutional clients who open accounts and transacted through small treasury platform during the year. In terms of clients, the number of Diamond and Black Card clients reached 9,689, an increase of 18.2% year-over-year, with a 22.2% increase in Black Card clients in particular; growing our core client base has always been a key strategic objective.

Over the past year, we have effectively enhanced our client experience by improving our client interface and branding, improving our client’s reward system and enhancing the integrity of our client’s asset allocation through the introduction of a star rating system. Furthermore, we recovered over 1,000 loss of our dormant account and after the incident in 2019, many lost clients have started to turn back to us. In 2022, through better client segmentation strategies and personalized asset allocation devices, we recognize over 3,000 potential Diamond and Black Card clients during the year. Through referrals of our existing clients, we gained over 1,000 new clients that became goal level or above. As the management segment recorded net revenues of RMB835 million, down 19.9% year-over-year, primarily due to a 66% decline in performance-based income caused by capital market volatility and limited exit opportunities in the primary market.

Through our subsidiary, Gopher Asset Management, AUM reached RMB157.1 billion by the end of 2022, up 0.7% year-over-year. On the other hand, the overseas AUM reached RMB32.5 billion, up 14.7% year-over-year, thanks to the successful fundraisings of Gopher’s actively managed overseas real estate and private equity funds, as well as the launch of our US dollar cash management and fixed income products. The US real estate investment team focusing on multi-family residential development investments have achieved excellent investment performances on the first two series of funds and the separate account with two successful profit — and profitable assets, the launched series three fundraising in the second half of 2022. The Silicon Valley early stage tech focused investment team has achieved multiple profitable exits for LPs through investing in a number of unicorn companies.

They launched their series four fundraising during the second half of 2022 as well. We believe that the current economic cycle, which is close to bottoming out, provides a very rare entry opportunity for VC&P funds. As a result, we have also launched a VC fund of funds managed by our Silicon Valley team as well in Q4 2022, aiming to further enhance Gopher’s ecosystem in the overseas market. In terms of cash management and fixed income products as US dollar yields continue to rise due to the fed’s rate hike, our product team developed and launched our US dollar cash management and fixed income products in a tiny manner, effectively increasing our client’s share of overseas wallets with Noah. By yearend, overseas AUA grouped by 25.2% year-on-year accounting for 21.6% of the total AUA comparing to 16.3% at the end of 2021 In terms of ESG, Noah has been voluntarily publishing sustainability report since 2014.

We also formulated and initiated the supply chain ESG management guidelines and received a 100% of the signatories of the ESG Letter of Acknowledgement for suppliers and Noah’s very first supplier conference, bringing awareness to our supplier partners to better create a sustainable ecosystem. Noah has cooperated with non-profit organizations for many years in projects, such as one 100 million Since 2014, Noah’s Heart Forest has planted over 387,000 trees in region in China, covering over 8,000 acres of land, achieving about 3.8% square kilometers of sand stabilization and 7,000 tons of carbon stabilization, helping restore the local desert system and slow down desertification while increasing local income . I’m also pleased to announce that company has successfully completed the conversion to primary listing status on the Hong Kong Stock Exchange on December 23, 2022, becoming the first Chinese wealth management company to have dual primary listing status in both the US and Hong Kong; also completely eliminating the potential delisting risk of ADR stocks.

At our Board Meeting earlier this month, the board has approved the annual dividend plan to pay out 17.5% of non-GAAP net income of RMB1 billion for 2022. The final dividend proposal will be evaluated at the upcoming AGM in mid-June. We’re committed to creating value for our shareholders in a stable and sustainable manner through a long-term cash dividend plan. Reaching common sense and consensus, which are scarce qualities to possess is often time consuming and costly. In 2022, some common sense and consensus are beginning to unite. Successful wealth management and investment returns are the reflection of correct perceptions of the future. Bridging the gap between perception and reality requires the fine tuning of decision making skills. The probability of making the right decision is possibly — positively correlated with one’s understanding of the world.

Today in 2023, the consensus of client’s need has been mostly clear. The foundation of this thought process framework is what shapes Noah’s CIO our advices on client’s allocations solutions and our core values, which distinguish Noah from other wealth management institutions. We are committed to becoming a leading name by capturing at least 1% of the market share in the wealth management industry for Chinese high net worth clients around the world, a goal that has tremendous room for growth, but also requires us to always maintain our founding principle and work hard towards achieving it. Finally, we hope that the pain of 2022 will become the gain of 2023. Now, I’d like to pass to our CFO, Mr. Pan, to give you a detailed walkthrough of this year’s results.

Thank you, all.

Qin Pan: Thanks Melo and thank you Chairlady. Welcome investors, analysts. Looking back at 2022, is obviously undoubtedly a challenging year. The United States Federal Reserve has raised interest raised by accumulative 425 Bps to 4.4% as of the end of last year, the rapidest hike in decades, coupled with geopolitical conflicts and ongoing increasing global inflation rate from 4.7% to 8.8%, creating volatilities in both the equity and bond markets, consequently, the MSCI world index S&P500 and MSCI China Index have all dropped 18%, 19%, and 21% throughout the year respectively. In China, the prolonged COVID-19 restrictions during almost the entire year of 2022 greatly affected economic activities, with a China effective lockdown index, a third party index that measures the level of COVID-related restrictions reaching highest level twice since 2020.

The Chinese household saving rate climbed significantly from 30% pre-COVID up to 37% by end of that year, while the Chinese consumer confidence index hit a decade low, capital market activities and investor’s sentiments also became more conservative, evidenced by a 50% year-over-year decrease in new issuance of mutual funds across the board. Meanwhile, Noah has been investing to improve our research capabilities to counter this adversity and our CLO office published the investment outlook for 2022 at the beginning of last year, recommending the strategy of preservation before growth to our clients Looking back at the capital market fluctuations, our recommendation helped preserve clients’ assets and our dedication and efforts on enhancing investment abilities paid off.

As a result, although 2022 was a top year, we still achieve the increase in number of core clients up 18% year-over-year, that’s Diamond and Black Card client and overseas AUM also increased by 15% year-over-year; due to stricter cost management measures and higher operational efficiency, Noah’s operating margin grew from 27.9% to 35.1%. On top of that, we have met our annual non-GAAP net income profit guidance, absorbing the impact of an unexpected and unfavorable outcome of legal proceeding towards the end of last year. Now, please let me walk you through the detailed financial results of the year and the fourth quarter. Full year net revenues were RMB3.1 billion, down 28% year-over-year, primarily due to the decreasing onetime commissions and performance based income.

One time commissions fell by 46% year-over-year to RMB678 million, due to lower transaction values and the change in product mix, partially as a result of our proactive direction away from public security-based products, in the face of volatile market conditions last year, that usually bear high take rates for that type of product. Performance-based income failed by 61% year-over-year to RMB308 million as expected in the face of the bumpy capital market environment. Recurring service fees remained relatively stable at RMB1.9 billion down 9%. Operating costs and expenses were RMB2 billion, decreased 35% year-over-year, due to lower relationship manager compensation expenses as transaction values decreased combined with lower selling and G&A expenses, resulting from a decreased in traveling and offline client activities both affected by COVID-19 restrictions.

Correspondingly annual operating income market increased 7.2% year-over-year to 35.1%. With regard to non-operating results, we incurred a one-off contingent expense of RMB99 million due to the provision of legal proceeding related to one of our subsidiaries, that we disclosed on December 12, 2022. We believe that the associated first instance ruling was reached based on incomplete factual information and have already initiated a appealing process and intent to vigorously defend against the civil claim from the plaintiff. Equity and earnings of affiliates decreased 71% year-over-year, attributed to the downward yields of fund funds that we manage and invest in as the general partner fund manager. In spite of non-operating costs, our non-GAAP net income for RMB1 billion still achieved annual non-GAAP net income profit guidance with this margin up to 32.5%.

Growth in core clients Diamond and Black Card clients still remains as a top strategic priority throughout the year, benefiting from our continuous strategic investments. Expanding our core client group, Diamond and Black Card clients grew to 9,689 an 18% year-over-year increase overall, among, which the number of Black Card clients increased by 22% year-over-year. We also have an innovative program to recognize potential Diamond and Black Card clients and grand trial benefits advance for a limited period of time to attract new clients, which enabled us to identify over 3,000 high potential core client leads. Our total active clients during the year was 35,877, down 16% year-over-year, due to the transformation to standardized products starting from 2019.

We have also been making efforts on reactivating dormant accounts and retrieving last accounts. As of December, 2022, reactivated and retrieved accounts amounted to more than thousand. At the same time, we have gained significant growth in a new tier of clients i.e. corporate and institutional clients. We launched the Smile Treasury platform to facilitate corporate institutional clients treasure management efforts with over 4,500 new corporate and institutional clients, who have open accounts and transacted with us in 2022. With respect to transaction value, we distributed RMB70.3 billion of products during the year down 28% year-over-year, among which mutual funds RMB43.1 billion, up 16% year-over-year, thanks to the aforementioned increase in corporate and extension of clients.

Private secondary products were RMB13.1 billion, down 65% year-over-year as we proactively decreased allocation and distribution of equity-linked public market products due to heightened market volatilities. In terms of segmented results, full year net revenues from wealth management business were RMB2.2 billion down 31% due to the decrease in transaction value accounting for 71% of total net revenues of the growth. The revenues from asset management business were RMB834 million down 20% due to a decrease in performance-based income from private equity fund products, accounting for 27% of total net revenues of the group. Gopher’s AEM was RMB157.1 billion as of the end of the year, slightly higher than last year, due to increase in private equity.

As mentioned by Chairlady, we have started to establish our international wealth management team with relationship managers based in oversee markets, catering to our oversee clients asset allocation needs. Our oversee AUM grew 15% year-over-year and 7% quarter-over-quarter, contributed by the successful fundraising activities. Our Gopher’s real estate investment team and Rancher capital investment team in the states and the launch of US dollar cash management and fixed income products. Besides, we have also been corroborating with nine of the top 25 international private equity GPs and look forward to expanding that list. Overall, full year overseeing revenue was RMB828 million accounting for 27% of total net revenue compared to 24% in the year before.

When it comes to our fourth quarter results, net revenues were RMB882 million down 30% year-over-year and recovered quickly by 29% from the quarter three. One time commissions were RMB269 million, down 44% year-over-year, but up 170% quarter-over-quarter, due to increase in insurance distributions. Recurring service fees were RMB472 million down 15% year-over-year, but slightly increased 4% quarter-over quarter, many due to the service fees generated from liquidity in certain credit products with higher fee rates during the corresponding period In last year. Performance-based income was RMB80 million down 54% year-over-year due to decrease in carry from public security products and private equity fund products, but it was up 191% quarter-over-quarter due to a exists generated from some of the private equity funds products in this quarter.

Total operating costs and expenses were RMB662 million down 41% year over year, but up 46% quarter-over-quarter, mainly due to increased expenses related to offline client activities after COVID19. Restrictions were lifted as well as increased relationship manager compensations, performance fee compensations in the quarter. On top of that, operating income were RMB220 million, up 66% year-over-year, but down 5% quarter-over-quarter. Quarterly non-GAAP income was RMB149 million, down 49% year-over-year for 2020, but 22% quarter-over-quarter increase due to one-time contingent expenses. Regarding the balance sheet, our cash increased to RMB4.4 billion and total assets stood at RMB11.8 billion as of December, 2022. The current ratio was RMB3.3 multiple and debt asset ratio was 19.5% with no interest bearing debt, implying a very healthy and strong liquidity position and balance sheet.

Supported by a healthy balance sheet and continuous strong cash flow generating capabilities, pursuant to the dividend policy announced on August 10, 2022, the annual dividends to be declared and distributed for year 2022 will be 17.5% of the group’s non-GAAP net income of 2022, approximately amounting to RMB176.5 million implicating US dollar $0.40 per ADS and Hong Kong dollars $6.25 per share equals to USD280, subject to final approval of our AGM on June 12, 2023 this year. We look forward to providing stable and sustainable returns to the shareholders with the growth of our business. Looking back to 2022, obviously great challenges stemmed from global macro macroeconomic uncertainties and domestic difficulties including zero COVID limitations.

We’re glad that we completed the secondary listing on the main board of Hong Kong Stock Exchange and within the same year with the effort of the team, also completed voluntary conversion to primary listing in Hong Kong within the same year. Due to the regulations of Hong Kong start exchange, by the way, would also like to kind of inform our investors that Noah will not be able to publish annual non-GAAP net income profit guidance going forward. Looking forward to 2023, we’ll continue to invest talents and resources into expanding our global footprint and improving our client service experience and quality. At the same time, we’ll also be mindful of both cost controls and growth initiatives. Again, we sincerely appreciate all shareholders for ongoing trust and support and strive to create long-term value for clients and shareholders.

And thank you everyone for listening and I’ll now open the floor for questions. Thank you.

Operator: And now I believe we have Helen from UBS. So moderator, could you please turn out her microphone. Thank you.

Unidentified Analyst: Okay. Let me translate my question. This is Helen from UBS. Two questions, if I may; one for insurance product distribution, since the fourth quarter of 2021, the gross momentum was very strong. Insurance product seemed to the key driver for one time commission fee. It’s been five quarters since the fourth quarter of 2021. So what’s the insurance product penetration rate for existing clients? Do you think the strong growth momentum could persist this year and next year? If not, what types of product or services may bridge the revenue gap? And could you please give us more color on transaction value outlook this year, both in terms of growth outlook and product mix? My second question is on Gopher AUM. I noticed that back to 2015 to 2016, private equity products were a major driver for transaction value and this product may enter the redemption period very soon, I guess.

So what’s the impact on Gopher AUM? Well Gopher AUM decline in the next one to two years and what’s Gopher’s product strategy this year in the coming two to three years. Thank you.

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Q&A Session

Qin Pan: Thank you, Helen. I’ll supple some data points and also do a quick summary of which our Chairlady has mentioned. So I guess we would do look at this allocation of product mix from a slightly different angle that basically we don’t necessarily just voluntarily put out a product mix or recommendation to our clients without understanding the client’s need. So, throughout 2022, the sentiment of the entire market is actually preservation and risk averse. So the demand from insurance products actually grew across the board in the market. We are not manufacturing any insurance products. So basically just having an insurance brokerage and responsible for picking the right product for our clients. So as mentioned by Chairlady, the coverage of penetration rate especially in the Diamond and Black Card group is relatively low, 21% for overseeing insurance products and 24% for the domestic one.

And the contribution to the total revenue by insurance related revenue for 2022 is about 77% slightly higher than 60% in 2021 as well. So we still believe that, still abundant room to grow in terms of insurance products, if the client still considers that insurance product becoming a very fundamental important layer of the asset allocation strategy. In terms of Gopher’s AUM, domestically, we believe that our fund of funds portfolio will benefit greatly from the registration scheme Asia stock market that provide more exiting opportunities for these portfolio companies to become IPO companies and provide better exiting routes for this type of funds. And in terms of the secondary market, public security products within Gopher, we actually also invest heavily into the R&D team.

We have a team about 40 people focused on the macro and also micro researchers on different kind of stocks and strategies for multiple strategy sort of fund and for overseas, we are investing heavily both in budget and talents actually for 2023 to make sure that we’ll be able to meet the demand for our clients especially for the oversee allocation of more products towards public market type of products that in the past the market probably provides a lot of volume, but we weren’t able to provide too much on the US dollar denominated public markets. And we’re assembling a team to focus on that selection and believe that we’ll be able to provide more on that type of product for our clients. Helen, back to you.

Unidentified Analyst: Thank you, Helen. I believe we have from Morgan Stanley also raised his hand. Operator, please.

Qin Pan: So thanks Tria . I think those are great questions and also we want to stress that the strategy in terms of recommending our clients to preserve first, then pursue growth opportunities didn’t start in quarter four last year. Actually, we published the CR report in the first quarter when we sensed a very highly volatile market of the entire year. So actually a majority of the allocation as which is mentioned in the market actually, and also consistently our client’s strategy are highly liquid products including money market funds, including the US dollar denominated deposit type of funds towards the end of last year when the fed actually raised the interest rate very quickly. In terms of overseas, we have about over USD1.1 billion AUM for clients to put their money in the actual deposit type of products and we’re seeing actually a very good increase in the fourth quarter alone, that’s about USD1.6 billion raised in that single quarter and in the face of very complex market situation, Noah actually never pushed any products that we don’t even believe in.

So, we still try to recommend the more conservative and safe strategy for our clients to actually place. We’re actually seeing a huge influx of repatriating clients last year. As you mentioned, in the press release, we’re seeing probably around 1,000 clients either reactivated from long-time dormant accounts or repatriated back to Noah from other platforms. I believe that clients are very impressed with Noah’s strategy that we actually didn’t have any exposure AUM or AUA to real estate type of products to the non-standard credit products and we have a very clean and light AUM for our clients. In 2023, we continue to hold a very conservative view, especially for our clients, but probably we’ll more emphasize on the provision of supply of oversee asset for our client to carry out the global allocation strategy.

And we’re putting a lot of effort also budget actually in developing our oversee businesses. We believe that the opening up of new tier or new group of clients overseas, the high net worth Chinese individuals overseas will actually provide very strong growth driving factors behind the incremental revenue in 2023, if you will.

Unidentified Analyst: Thank you, management. That’s very clear.

Operator: We also have Peter from JPMorgan. Operator, please turn on Peter’s microphone. Thanks.

Unidentified Analyst: Let me translate. Noah sales and Gopher’s AUM decreased in the first quarter. How does Noah differentiate from leading banks in China when it comes to strategy and products? In 2023, there is talk of release of excess saving in China. How do you think Noah will benefit from the trend, if any? The second question is we do expand more spill over risk from SVB and the CS81 write-down and 2023 is going to be volatile. Then how does Noah position for this? Does Noah offer investment products like issued by banks to your clients? Thank you.

Qin Pan: Thanks, Peter. Great questions again. Yeah, we actually don’t have — didn’t have HG1 or Gopher-related products for our clients. I guess part of the reason is because we’re still relatively small in terms of providing US dollar and offshore products for our clients. Like was mentioned in the past, that we focused on pretty much product maintenance capabilities in oversee offices. In the US we have two investment teams in Hong Kong, pretty much mid back office for the US dollar asset management. And in 2023, you can probably look at as year zero for our oversee piece of business and plan to actually really increase the number of relationship managers in Hong Kong to probably a hundred compared to what we have is about 20 professionals.

And for Singapore team is from zero basic, from scratch to 20 and we’re in the process actively hiring talents in those two places. And also looking at opportunities potentially to be able to actually access to local market to serve the Chinese nationals in those nations, including in the US and probably other popular destinations where Chinese immigrants conventionally will go and work. In terms of wealth management, for the past eight months folks, pretty much US dollar products and also spend quite a bit of time and investment established global insurance platform and we’re moving on to the primary market and secondary market products, both denominated in the US dollars. And just to supplement on the numbers when you mentioned that the growth in the fourth quarter, I think still benefited greatly from products that we have in the Silicon Valley.

We raised about more than a $1 billion in the fourth quarter alone that actually fit the client’s need for more exposure to a deeper and probably more stronger markets in terms for oversee products. And the focus for 2023 is to expand the interfaces where we can reach out to our clients in different ways, including for example, institutional client sales group the online platform, and also including direct sales or direct distribution from Gopher manager, especially the screening of the global products and to be able to actually put them into a portfolio for our clients. And in terms of domestic development strategy, we focus on continue to heighten investment in both branding, talents in large cities first tier cities. But in terms of the probably third, fourth tier cities, we used to have network and branch offices, we’re looking at to consolidate these offices into the nearby hub cities.

One is to obviously control the cost efficiency, and two, is actually to ensure that we’ll provide better quality service to our clients, as you would probably understand that majority of the high net worth individuals will probably gradually move to the nearby big cities for better life quality. So we’ll also want to make sure that our service team is also there to be able to serve our clients. Peter, back to you.