Noah Holdings Ltd

NYSE:NOAH

Earnings Call Analysis

Revenue Growth and Healthy Financial Position

The company witnessed a year-on-year revenue increase of 11.9% with total revenues hitting RMB 2.5 billion, as growth was propelled by a surge in overseas revenue, up 85.1%, due to a strong demand for global asset allocations. Wealth management continued to dominate with revenue of RMB 1.9 billion, while asset management saw a slight decline. A substantial uptick in the insurance sector and digitalization of services highlighted the quarter's performance. Notably, the company has a robust financial situation with RMB 5 billion in cash, no interest-bearing debt, and a planned allocation of up to 50% of non-GAAP net income for shareholder returns, including dividends and share buybacks.

Noah's Strategic Shift and Client-Centric Approach

Striking a chord with high net worth individuals, Noah Holdings has successfully transitioned from product-driven offerings to comprehensive, solution-focused services over the past few years. The growth has been particularly notable internationally with a 2.9% year-over-year increase in wealth management revenue and an 85.1% surge in overseas revenue. This pivot reflects Noah's shift from simply selling products to deeply understanding and catering to the nuanced wealth management needs of its clients, including asset security, succession planning, and strategic global asset allocation.

Robust Demand in Comprehensive Services Fuels Growth

A substantive demand uptick for wealth preservation and inheritance solutions has driven exceptional growth in Noah's domestic insurance brokerage business, seeing a 63.4% year-over-year increase. What's more, overseas insurance, trust, and other comprehensive services have skyrocketed by 381.8%. Digital advancements are making insurance applications efficient and seamless, bolstering the operating profit margin to an impressive 35.2%.

Expanding International Footprint and Services

Noah Holding's commitment to serve high net worth Chinese clients globally is evident in the establishment of the Los Angeles office and plans for offices in Dubai, complementing the existing ones in Hong Kong and Singapore. Recurring service fees have slightly decreased due to a reduction in AUM. Performance-based income declined due to lower valuations, but the firm's global expansion strategy is expected to lead to increased overseas revenue contributions and a broader portfolio of structured products.

Asset Management: Reshaping the Future

The asset management division, Gopher's AUM, dipped slightly by 0.9% year-over-year, attributed primarily to exits from RMB private equity funds and downscaling in some public market securities. Despite market volatility, Noah is focused on boosting global investment product offerings with their AUM of actively managed products increasing by 13.4% internationally. They're also fostering relationships within the Silicon Valley VC ecosystem to tap into co-investment opportunities, indicating strategic moves to widen the product segment spectrum in the future.

ESG and Corporate Governance: The Bedrock of Trust

Noah's unwavering focus on effective corporate governance and ESG compliance underscores the importance of a committee-based operation and collective leadership decision-making. The firm is dedicated to data security, employing a rigorous client data usage audit mechanism, and has set up separate domestic and foreign data centers to ensure robust firewalls in place to safeguard client privacy. This operational integrity forms the crux of Noah's mandate to generate long-term value for shareholders.

Financial Robustness and Shareholder Returns Policy

Maintaining a healthy liquidity position with a current ratio of 3.5x and debt-to-asset ratio of 18.4%, Noah demonstrates strong financial health with RMB 5.0 billion in cash and cash equivalents. In line with the commitment to shareholder returns, the Board has authorized a new policy allocating up to 50% of annual non-GAAP net income attributable to shareholders for dividends and share repurchases. The revised shareholder return policy reiterates Noah's optimistic outlook on wealth management and its readiness to navigate the evolving marketplace while remaining flexible.

Earnings Call Transcript 2023-Q3

[Operator]

Good day, and welcome to Noah Holdings Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.I'd like to turn the conference over to Melo Xi, Investor Relations Director. Please go ahead.

[Melo Xi, executive]

Thank you, operator, and good morning, and welcome to Noah's 2023 third quarter's earnings call. Joining me on this call today are Ms. Wang Jingbo, our Co-Founder, Chairlady and CEO; and Mr. Grant Pan, our CFO. Ms. Wang will begin with an overview of our recent business highlights, followed by Mr. Pan, who will discuss our financial and operational results. They will both be available to take your questions in the Q&A session that follows.I would like to generally remind you that we just held our Annual Investor Day on November 14 in Hong Kong, where Noah's executive management team provided an in-depth review of the business and laid out our strategic priorities for the future. The presentations and the panel discussions focused on our resilient standardized product offering, overseas expansion plans, solution-driven advisory services, global product leadership, as well as the client service strategy. A full replay of the event and presentation materials can be found on our Investor Relations website, which I encourage all of you to watch.Before we begin, please note that the discussion today will contain forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from those in our forward-looking statements. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC and the Hong Kong Stock Exchange. Noah does not undertake any obligation to update any forward-looking statements, except as required under applicable law.In addition, today's call will include discussions of certain non-GAAP financial measures. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures can be found in our earnings release.Lastly, this call should not be interpreted as a solicitation to sell or purchase an interest in any Noah or Noah-affiliated products. Please also be aware that the link to a live webcast with presentation materials is available on our Investor Relations website.With that, I would like to pass the call to Ms. Wang. Please go ahead.

[Jingbo Wang, executive]

[Foreign Language]

[Melo Xi, executive]

[Interpreted] Thank you all for joining us. I would like to begin today's call by sharing some recent insights gleaned from the face-to-face interactions I had with Noah clients and my thoughts on the state of the wealth management industry. After that, I will cover the recent progress in our overseas business, provide a comprehensive overview of our third quarter performance and go over some updates from our business segments.Over the past 2 months, we have held numerous annual meetings with over 1,200 domestic clients at our new headquarters in Shanghai, where we offer each of them an asset allocation assessment, paired with strategic advice tailored to their unique circumstances. Subsequently, in Singapore and Hong Kong, we held meetings with over 150 and over 800 international Black Card clients, respectively, allowing us to gain valuable insights into their needs, while promoting Noah international product and service offerings.Our closed discussions reviewed an encouraging evolution in the wealth management needs of Noah's high net worth clients. In particular, there has been a noticeable shift in focus from specific products and returns to a broader array of considerations encompassing asset security, enterprise and family succession plans and global strategic asset allocation. This transition is particularly pronounced among Noah's international clients, reflecting their journey from product-centric to asset allocation-driven wealth management needs.Over the past 2 years to 3 years, Noah has overhauled its offering, transitioning from a product-driven to a solution-driven approach. In our International Wealth Management segment, we roll out the CCI model comprising of the Chief Investment Office, Client Strategy Office and Investment and Product Solution Office. Through the CCI model, we directly align our macro house views with the client demand to build product and solutions and improve relationship manager service standards and client satisfaction.Noah International Wealth Management product offering and services matrix provides high net worth clients with our 4 global account allocation schemes embedded in our technology infrastructure, significantly enhancing the ability of Noah's relationship managers to provide asset allocation advice and continuity of service.

[Jingbo Wang, executive]

[Foreign Language]

[Melo Xi, executive]

[Interpreted] We believe to achieve success, wealth and asset management firms must have a solid track record, offer a diverse product portfolio, maintain efficient sales channels and build high-quality AUM base. At Noah, we recognized a pivotal role of talent and focus on cultivating a strong team through a long-term talent screening and development system. We also believe it's crucial to have a mission vision and values that resonate with our clients. Our organizational and technological architecture underscores our commitment to providing high-quality, client-centric services with client satisfaction serving, as the cornerstone of our long-term relationships.Noah remains dedicated to serving high net worth Chinese clients globally. Leveraging Hong Kong, as the hub, we have begun -- building teams of relationship managers in key locations such as Singapore, Europe, and the United States to cater to Chinese clients' comprehensive asset allocation needs. As the International Wealth Management team continues to mature, we're confident that we'll sustain our growth and expand our reach to serve a growing number of clients globally.

[Jingbo Wang, executive]

[Foreign Language]

[Melo Xi, executive]

[Interpreted] Now turning to our financial performance for the first 3 quarters of 2023. We generated total revenues of RMB 2.5 billion, a year-on-year increase of 11.9%. The domestic business contributed RMB 1.5 billion, an year-on-year decrease of 11.6%, accounting for 59.9% of the total net revenues. The growing client demand for global asset allocation, coupled with Noah's ongoing investments in the channels, products and comprehensive services propelled overseas revenue to RMB 1 billion, a year-on-year increase of 85.1%, accounting for 40.1% of revenue, up from 24.3% in the previous year.Breaking it down by segment, Wealth Management contributed RMB 1.9 billion, a significant year-on-year increase of 2.9%. The domestic wealth management business contributed RMB 1.1 billion, a slight year-on-year decrease of 0.2%. The overseas wealth management business contributed RMB 784 million, a year-on-year increase of 72.3%, as it benefits from the growth in overseas transaction value and comprehensive services income.The Asset Management segment contributed RMB 582 million, a year-on-year decrease of 5.4%. The domestic asset management business contributed RMB 358 million, a year-on-year decline of 31.8%, while the overseas business contributed RMB 223 million, a year-on-year increase of [ 150.3% ], primarily driven by the growth of overseas AUA and AUM.On the comprehensive services front, we continue to see robust demand for wealth protection and inherent solutions from high net worth clients. Our domestic insurance brokerage business achieved a remarkable year-on-year growth of 63.4% in the first 3 quarters of 2023. Meanwhile, revenues from overseas insurance, trust and other comprehensive services surged 381.8% year-on-year. The number of active overseas insurance clients increased more than fourfold in -- year-on-year in Q3.Over the past quarters, we have increased our investment in digitalizing our insurance and comprehensive services program. Our technology team has begun integrating our systems with insurance companies worldwide, making us the first company in the Hong Kong market to offer fully digital insurance applications and premium payments through Noah's nominee account. This has made insurance application a significantly more efficient experience for our clients, while enhancing our ability to provide high-quality fulfillment services.For the first 3 quarters of 2023, operating profit stood at RMB 877 million, with an operating profit margin of 35.2%.

[Jingbo Wang, executive]

[Foreign Language]

[Melo Xi, executive]

[Interpreted] Our domestic wealth management strategy continues to focus on first tier and other highly populated cities in China. We have also implemented optimizational structure adjustments to ensure business compliance. As of the end of the third quarter, the number of domestic relationship managers increased by 6.7% year-on-year and 0.9% quarter-on-quarter to 1,331.Our domestic wealth management funds, we have continuously invested in technology infrastructure, rolling now functions such as CCI portfolio report in one click and the asset allocation review through our mobile app. This enhances the client experience, while generating new business leads within the fulfillment service program process. In the first 3 quarters, the transaction value of mutual funds exceeded RMB 36.9 billion, a year-on-year increase of 19.3%. The transaction value of private secondary products exceeded RMB 14.2 billion, a substantial year-on-year increase of 46.2%.In terms of corporate and institutional clients, the Smile Treasury platform that launched in 2022 has successfully onboarded nearly 6,000 clients. In the first 3 months of -- in the first 9 months of 2023, asset clients increased by 73.7% year-on-year, with an average client AUA exceeding RMB 600,000.On the international wealth management side, we continue to recruit private bankers in Hong Kong and Singapore. As of the end of the third quarter, we had 77 relationship managers in Hong Kong and Singapore, up 37.5% quarter-on-quarter, as we make steady progress towards our annual recruitment goal of 120 overseas relationship managers.Additionally, in the third quarter of 2023, we opened a client service center in Los Angeles. We launched our U.S. insurance products and continued setting up our Dubai office to better serve the wealth management needs of Chinese clients around the world. As of the third quarter of 2023, Noah International had more than 14,200 international clients with a number of clients in Hong Kong and Singapore growing by 12.8% and 315.2% year-on-year, respectively.Cash management product AUM reached USD 570 million, reflecting a quarter-on-quarter increase of 14.4%, with the number of active clients in Q3 increasing by [ 30.3% ] quarter-on-quarter and the number of cumulative clients reaching 2,598, up 3.5% quarter-on-quarter.Clients AUA with Noah on a discretionary investment basis reached USD 300 million, up 15.1% quarter-on-quarter with the active clients during the quarter increasing 40.5% quarter-on-quarter and cumulative number of clients hitting 653, up 38.6% quarter-on-quarter.In terms of international online wealth management, we continue to expand the product offerings on our wealth management app, expanding client service categories to provide different solutions to individual clients, institutions and, in particular, agency clients, which we have made significant progress during the quarter.In Q3, the number of overall assets overseas clients increased by 78.6% year-on-year and 14.6% quarter-on-quarter to 2,284. Overseas transaction value reached USD 957 million, reflecting a year-on-year increase of 106.9% quarter-on-quarter and quarter-on-quarter increase of 20.2% -- 22.9%. The number of active clients in the U.S. dollar mutual fund reached 1,758, reflecting a year-on-year increase of 105.6% with transaction value reaching USD 269 million, up 59% year-on-year.As of the end of Q3, we have successfully attracted more than 210 overseas corporate and institutional clients. The transaction value of overseas mutual funds reached over USD 120 million year-to-date.In addition, the international wealth -- online wealth management business began trial operations for its [ 2 ] agent business, which drives the development of EAMs and multifamily offices, leveraging its SaaS platform and Noah's comprehensive product offering. Our objective is to develop diverse sales channels and targeting the goal of serving 300 overseas EAMs and multifamily offices.

[Jingbo Wang, executive]

[Foreign Language]

[Melo Xi, executive]

[Interpreted] In terms of asset management, Gopher's total AUM was RMB 154.9 billion, representing a year-on-year decrease of 0.9%, driven by the continued exit of RMB private equity funds and decrease in NAV of some public market security products. As of the end of the third quarter, RMB AUM decreased by 5% year-on-year, reaching RMB 119.4 billion.The third quarter of 2023 was categorized by significant volatility in public markets, with the Shanghai Composite Index and Shenzhen Component Index falling by 4.1% and 9.4%, respectively. Gopher's actively managed target strategy product team remains committed to balancing drawdown volatility and maximizing long-term yields.As of the end of the third quarter, annualized returns for active investment products was negative 1.6% with the volatility of 6% and a sharp ratio of negative 0.5. The balanced investment products generated an annualized return of 3.1% with volatility of 5.7% and a sharp ratio of 0.3. Stable investment products generated an annualized return of 8.2% with volatility of 2.1% and a sharp ratio of 3.2.Internationally, we are fully committed to enhancing our global investment product matrix. The overseas AUM of actively managed products reached USD 4.9 billion, reflecting a year-on-year increase of 13.4% and its proportion of Group's total AUM also increased to 22.9%.In the primary market, beyond traditional [ PEVC ] products, we have gradually launched infrastructure, GP stakes, private credit, secondary funds and resulting in a more comprehensive product matrix. Mirroring the domestic strategy, our DSG strategy deployed across the Silicon Valley VC ecosystem focused on fundraising from the top GPs first, followed by investing as an LP through a fund of fund with a goal to ultimately establishing a long cooperative relationships with GPs to secure co-investment opportunities. We expect to deploy our DSG strategy across a wider spectrum of product segments in the future.As of the end of the third quarter, overseas PE AUM reached USD 3.8 billion, reflecting a year-on-year increase of 5.7%. In public markets, we have intensified our screening and coverage of top hedge fund managers worldwide. 10 of the top 50 hedge fund managers globally have been onboarded with 9 more in the due diligence process. Our offering encompasses a diverse range of strategies, including long, [ neutral ], hedging, trend following and multi-strategy. At the same time, our investment team is developing new actively managed products such as fund of hedge funds and discretionary investment products.

[Jingbo Wang, executive]

[Foreign Language]

[Melo Xi, executive]

[Interpreted] In terms of our ESG efforts, Noah's management places premium on promoting effective corporate governance and organizational decision-making mechanism. We employ a committee-based operation and collective leadership decision-making progress across our business units to ensure that Noah remains a dynamic organization and an industry leader.We maintain our strong focus on data security as well and prioritize in the confidentiality and security of client information. We have established separate domestic and foreign data centers, governed by stringent client data usage audit mechanism to create a robust firewall between domestic and foreign data and ensure that we safeguard client privacy at all times.In conclusion, as the independent wealth management institution, Noah's core competitive advantage stem from its profound client insights and strong track record. We are firmly committed to investing in the digital capabilities and infrastructure needed for our relationship managers to grow the business and provide the best client experience. We pride ourselves in providing high-quality asset allocation solutions rooted in prudent research-based house views.While acknowledging the significant role of technology, we recognize that the human touch, trust and personalized relationship remains indispensable, particularly in meeting the complex needs of Noah's high net worth clients. Our core competencies are centered on creating real and long-term client value encapsulated in the ethos of client-centric with survival as the bottom line. We firmly believe that only by helping our clients thrive can we succeed as a business and thereby creating enduring value for our shareholders.Finally, a note on our updated shareholder return policy. Noah's Board of Directors recently approved the plan to allocate up to 50% of company's annual non-GAAP net profit towards dividends and share repurchases. This strategic decision underscores management's confidence in the company's stable operations and long-term growth potential.I'll now hand over to Mr. Grant Pan for a detailed overview of our third quarter financial results. Thank you, everyone. Grant, please go ahead.

[Qing Pan, executive]

Thank you, Melo -- and yes. Thanks, Melo, and thank you, Chairlady, for walking us through the quarter 3 operations, and good morning, investors, analysts and good evening. For today's presentation, I'd like to start by sharing the latest insight of our clients' profile and how Noah's strategy has been adapting to meet their needs in order to drive the growth of business.According to a recent survey, more than half the clients are engaged in the past in export-oriented manufacturing, trade or [ Internet ] industries with very deep foreign currency assets already, including cash, equity and stock options.Age wise, most of the black card and diamond card clients are in their mid-50s or even 60s. They predominantly reside in China's major metropolitan centers, including our recent strategy of consolidating operations in key cities.In terms of their wealth management objectives, we're seeing 2 key shifts in investment appetite taking place in [indiscernible] client base. China's first-generation entrepreneurs continue to be the primary decision makers within their families and are seeking more balanced and security-driven allocation strategies for their wealth. This is marked by distinct shift from rather aggressively seeking high returns on investment in the past through a focus on wealth protection.Secondly, many of our clients are now entering a new phase of globalization in business and also [ capital ]. Not only is their personal demand for global asset allocation service increasing, but their enterprise side need to enter global markets, as entrepreneurs is also growing. This will lead to an accelerated wealth accumulation effect for our high net worth clients in the coming years. According to a survey, 70% of the clients demand global asset allocation, and as a result, the ability to provide global solutions is the key requirement for wealth management firms.With years of in-depth experience in building a business in the high net worth wealth management industry, we now possess a deep understanding of our clients and is capable of providing comprehensive solutions for their globalization needs. Our results for the first 3 quarters of 2023, which featured solid revenue growth driven by insurance product sales and robust expansion in our overseas business demonstrated how we're successfully meeting clients demand in both situations.Furthermore, our healthy financial position ensures we are well positioned to further expand with close to RMB 5 billion in cash on our balance sheet, a healthy debt to asset ratio and [ 0 ] interest-bearing debts on the balance sheet. Crucially, we also have a very clean AUA free from any legacy domestic private credit or residential real estate exposures. In addition, we have a deep bench of talent across our key functions, product investments, sales teams, both domestically and globally. These factors give us confidence that Noah is ideally positioned to meet the ever-evolving needs of Mandarin-speaking high net worth individuals in the next phase of China's globalization.With that, let's get into the details of our quarter 3 financial performance. In the third quarter, our top line continued to see robust year-over-year growth, with net revenues reaching RMB 750 million, close to 10% increase compared to the same period last year. Traditionally, our third quarters are relatively quiet future due to seasonality, as our sales and marketing teams prepare for the [ red ] opening season at the beginning of the fourth quarter.Net revenues for the first 3 quarters of 2023 increased by 12.5% year-over-year to RMB 2.5 billion. mainly driven by the 90% year-over-year growth of one-time commission fees, which amounted to RMB 780 million. The insurance products contributed 94% of total one-time commission fees in quarter 3 and have emerged as an important component of our revenue structure. This can be attributed to the more defensive position being adopted by our clients with an emphasis of safeguarding assets and wealth in light of ongoing market volatility and geopolitical factors.We believe the trend of clients increasing allocation towards protection-driven products will continue for the near future. That being said, we continue to strengthen our overseas alternative product offerings, including global primary market and hedge fund solutions to provide clients with more balanced solutions that can deliver long-term returns, while minimizing volatilities and risks.Overseas net revenues accounted for 39% of total net revenues during the third quarter, a figure we anticipate will continue to grow going forward. Notably, we officially opened our Los Angeles office in the third quarter, which will provide client service interface for local clients in the United States, expanding our U.S. insurance business and promote our investment business.Additionally, we have an exciting line up of events planned for our clients, including a flagship annual conference exclusively for esteemed black card clients. In addition, we recently began establishing a dedicated product selection team based in New York City, specifically focusing on U.S. hedge fund managers. We expect overseas revenue contribution to increase further, as we continue to expand our global footprint.Recurring service fees, which are a key stabilizer in our revenue mix were RMB 1.4 billion year-to-date, a slightly decrease of [ 3.2% ] year-over-year due to a decrease in our AUM, as we continue to exit RMB investments.Performance-based income was RMB 125 million in the first 9 months of 2023, down 45% year-over-year. This decline can be attributed to the relatively low valuation of assets, resulting from a high-yield environment. That being said, our Silicon Valley team was still able to achieve exits in this tough market, contributing to the performance-based income for this year.Other service fee income in the first 9 months of the year was RMB 205 million, up 37.2% year-over-year, primarily due to more value-added services provided to our clients.Operating profit for the third quarter was RMB 250 million, up 7.4% year-over-year and down 28% quarter-over-quarter. Operating profit and margin for the third quarter remained largely stable year-over-year at 33.2%.Our compensation and operating expenses decreased by 15% quarter-over-quarter, but increased by 10% year-over-year, mainly due to the high based effect created by COVID lockdown in 2022, which curtailed both marketing activity and business travel, as well as the increase in international travel this year in support of our global expansion.In addition, we incurred a number of one-time expenses related to the relocation to the Shanghai headquarter and the consolidation of our domestic network, among others, amounting to RMB 40 million. Over the long term, however, we would expect to reduce annual cost savings by RMB [ 50 million ].Government subsidies for the quarter were RMB 105.3 million, a sharp increase of 141% year-over-year, but flat on a year-to-date basis due to the delay in the distribution of government subsidies across various regions this year.Non-GAAP profit for quarter 3 was RMB 232 million, up 21.8% year-over-year and RMB 785 million year-to-date, down 8.7% year-over-year due to a soft first quarter earlier this year.Transaction values reached RMB 23.3 billion in the third quarter, representing a strong increase of 24% year-over-year and 21% quarter-over-quarter. By region, the total domestic transaction value in the first 3 quarters of 2023 was RMB 15.3 billion, up 4.5% year-over-year and 20% quarter-over-quarter. The total overseas transaction value was USD 967 million, up 106.9% year-over-year and 22.9% quarter-over-quarter. The increase in transaction value was primarily driven by mutual funds and overseas private secondary products, thanks to the introduction of U.S. dollar cash management and structured products.In the third quarter, mutual funds contributed RMB 14.9 billion in transaction value, up 28.1% year-over-year. Total transaction value for overseas private secondary products was USD 530 million in the third quarter, up [ 17x ] year-over-year and 65% quarter-over-quarter, driven mainly by strong demand for discretionary investment products and structured products. Going forward, we expect to increase the share of global investment products and foster the growth of overseas AUM. As of September 39 -- September 30th, our overseas AUM grew 13.4% year-over-year to USD 4.9 billion.Turning to the results of each segment in the first 9 months. Net revenues from Wealth Management were RMB 1.9 billion and net revenues from Asset Management were RMB 0.6 billion, accounting for 75% and 23% of total revenues, respectively.As of end of the quarter, we had 7,461 diamond card clients and 2,250 black card clients. The total number of diamond and black card clients were 9,711, up 0.3% quarter-over-quarter and down 0.7% year-over-year rather flat.The number of active clients of quarter 3 was 9,489 down 58% year-over-year, primarily due to individual clients adopted a rather conservative approach towards RMB public security progress, in light of 4.1% and 9.2% drop in Shanghai Securities Composite Index and Shenzhen Securities Composite Index, respectively, during the third quarter. That being said, transaction value during the quarter was not negatively impacted by this, as our corporate and institutional clients continue to transact with us.On the other hand, overseas active clients increased close to 80% year-over-year to 2,284, as we continue to build up our overseas distribution channels with 77 overseas RMs by end of this quarter.Turning to the balance sheet. Our debt-to-asset ratio and current ratio improved sequentially. We have maintained a very healthy liquidity position with our current ratio at 3.5x and our debt-to-asset ratio at 18.4% with [ 0 ] interest-bearing debt.We have RMB 5.0 billion in cash and cash equivalents, providing ample resources to support our global expansion plans. We also saw a decrease in accounts receivable in quarter 3, primarily due to an accelerated collection of domestic insurance commission.The Board has always placed shareholder return and capital management efficiency, as the priority. Based on strong and clean balance sheet and strong liquidity position and after considering the necessary investments associated with our global expansion plan, the Board has authorized new shareholder return policy, where we will allocate up to 50% of total annual non-GAAP net income attributable to shareholders to corporate actions budget to be used for purposes including dividends and share repurchases.Under this new policy, we will allocate no less than 35% of its annual non-GAAP net income attributable to shareholders towards dividends, subject to various factors. The final dividend payout ratio for fiscal year 2023 [ and still and timing ] of any share repurchase program will be determined at the company's fourth quarter board meeting in March 2024 and announced thereafter.To sum up, we remain optimistic for the high net worth individual wealth management industry. The third quarter showcased our ability and resilience to drive robust revenue growth and generate strong cash flow, given a relatively quiet market environment. Looking ahead, with a robust balance sheet and nearly RMB 5 billion in cash and cash equivalents, ample liquidity and a standardized product offering and AUM, we're well positioned to fuel future growth and execute our strategy, as well as increased returns for shareholders.Our other balance sheet "a clean AUA" with no legacy private credit or residential real estate exposure has built us a solid reputation, as a trusted advisor to our clients, which we're leveraging to drive our global expansion, as demand for global asset allocation grows. We will continue to scale our international operations following the successful launch of the LA office in the third quarter, we are still preparing to commence operations in Dubai and continue to recruit relationship managers in Hong Kong and Singapore and other talents actively, as we'll continue to execute our growth strategy, we will embrace evolving landscapes and maintain our corporate flexibility.In the long term, we're very confident that our diverse offerings and commitment to globalization will enable us to meet the needs of global clients, investors and continue creating value for our shareholders. Thank you for listening.I will now open the floor for questions.

[Operator]

[Operator Instructions] First question will be from Helen Li of UBS.

[Heqing Li, analyst]

Thanks, management. This is Helen from UBS. I have 2 questions, if I may. First, the gross increase in Gopher AUM was RMB 4.7 billion in the third quarter, almost double that of the second quarter, but why did one-time commissions from Gopher management funds declined sharply to RMB 32,000? That's my first question.And second question, in terms of the transaction value mix, I noticed that the proportion of Gopher products increased to 21% in the third quarter. I'm just wondering whether you have any longer-term target for the transaction value mix from Gopher products? And what are Gopher's product pipeline for the fourth quarter and into next year?[Foreign Language]

[Qing Pan, executive]

[Foreign Language] So Helen, I will explain your question. So basically, a good chunk of the AUM increase in the Gopher product actually came from U.S. dollar cash management products and some of the discretionary portfolio investment for deposits. So basically, the majority of the revenue structure will come from management fees going forward. The same quarter revenue actually doesn't reflect, as we actually don't charge a very high so-called subscription fee for this type of products.

[Jingbo Wang, executive]

[Foreign Language]

[Melo Xi, executive]

[Interpreted] Thank you, Helen. I will translate for Chairlady. So in terms of Gopher's international front, we are committed to increasing our capabilities in actively managed product space, including primary, secondary public securities, as well as cash management. So that is kind of more of a long-term process. Now in terms of the third-party distributed products versus our actively managed products, we don't have quite a clear picture in terms of the split yet. But then going forward, it will be depending on what the client really needs and also our investment in increasing our research and investment capabilities in Gopher's overseas market. Helen?Yes. Thank you, Helen. Operator, I believe we have Peter lining up in the queue as well.

[Operator]

[Operator Instructions] Next question will be from Peter Zhang, JPMorgan.

[Peter Zhang, analyst]

[Foreign Language] Let me do the translation. I have 2 questions. First one is on the Wealth Management transaction volume. We noted that the transaction volume increased sequentially in the third quarter. We wish to understand what's the driver behind, is it mainly driven by the transaction of say -- from international clients -- overseas clients. And management also mentioned that Noah engaged with clients in third quarter. What's the latest client investment sentiment you'll get back. This is the first question.Second question, we noticed that on the cost side for third quarter, there's a large, I think, contribution from the government [ subsidiary ], which helped you reduce the OpEx in third quarter. We wish to understand what's the -- what does that represent? Or what's the driver behind it? And what's the -- say the trend going forward?

[Jingbo Wang, executive]

[Foreign Language]

[Qing Pan, executive]

So Peter, the first question, the contribution actually mainly came from the U.S. dollar side, which we managed to actually distribute around USD 1 billion in the transaction value, which has seen a significant increase, about 132% year-over-year. At the same time, we maintained a rather healthy distribution on RMB side, which is attributable to the corporate client transaction, institutional client from Smile Treasury that account for about [ 100 ] -- actually [ RMB12.9 billion ] of mutual funds transaction. So both actually added and contributed to a rather healthy transaction values this year.And to your second question, in terms of -- I'll leave the client sentiment observation to Chairlady, and also, I will share a little bit of my insights as well. The second question, in terms of the government subsidy, the total year-to-date actually remained pretty stable in the first third quarters -- first 3 quarters comparing to last year. But the timing of the grant of the actual cash, the timing usually is, I would say, pretty spontaneous based on the government's fiscal situation. So this year, we happen to receive the subsidies in the third quarter. But the total amount actually remained rather stable from the last period of the year.[Foreign Language]

[Jingbo Wang, executive]

[Foreign Language]

[Melo Xi, executive]

[Interpreted] Yes. So I'll try to translate. Yes. I'll try to translate for both Grant and Chairlady. So we have held various conferences and annual gala events in the past couple of months, in Shanghai, Singapore and Hong Kong. We have interacted with over 1,000 clients lately. So what we have witnessed was that, first, overall, that the clients have remained rather rational, and they are seeking kind of a more balanced solution and diversity in their global asset management or global asset allocation needs.And also, we have witnessed a very obvious shift from focusing on product and risk and returns from the past comparing to now, that the clients are more focusing on the comprehensive solution on their overall wealth management needs, including their family and enterprise inheritance and succession plans. We have seen that the -- basically the maturity and sophistication of clients have increased, so which is a good news for independent wealth managers like Noah, we have spent quite a lot of resources in investor education and building our internal research capabilities. So now that we kind of are -- it's easier for us to reach a consensus with our clients.And Chairlady has also commented that in the past year or so, basically, the general market or high net worth individuals in China in general, not just only Noah's clients have seen many risk-related events in the past. And their demands and needs have become more clear and more focusing on asset protection and security and more focusing on global macro views, including currency risk and such. So we're spending more time to do investor education on those fronts. Hope that answered your question, Peter.

[Peter Zhang, analyst]

[Foreign Language] Let me do the translation. So I have a follow-up question on government [ subsidiary ] because Mr. Pan just mentioned that the year-to-date amount has been stable from previous level. Can I say that going forward, the annual amount likely to be stable, while there can be a seasonality in quarter-by-quarter?

[Qing Pan, executive]

Peter, I think for 2023, it's probably the right way to put it. Going forward, I think it's very hard to say in terms of the government service fees, which is a form of refund of taxes or actually some of that is associated with the job creation. So depending on the structure going forward on the RMB revenue income that we actually make domestically, I'm not sure whether or not safe to say that it will remain consistent. It's pretty hard to predict. So if we do have an increased revenue going forward on the domestic side, we'll probably will see a higher subsidy. But if not, we'll see a little bit of volatility in that. But I guess, from what we have seen, I believe, at least this year, the government is still honoring [ other ] subsidies to us. Yes.

[Operator]

Next question will be from Chiyao Huang of Morgan Stanley.

[Chiyao Huang, analyst]

[Foreign Language] Let me translate briefly. And the first question is a follow-up on the black card gala that took place in several cities recently, just wondering what's the progress in terms of transaction value generated and would it be a -- be a -- provide quite strong support to the 4Q revenue?And the second question is regarding the insurance commission rate. We saw some adjustment -- actually quite notable adjustment on the [ bank insurance ] commission rate. So could the management expect the commission rates in Noah would also see some potential changes going forward, and that could potentially impact the revenue?

[Qing Pan, executive]

Thank you. I'll take the first question. We're actually seeing a very good turnout attendance for the past 3 stops, and we have 2 more to go for the annual gala, but probably will take place in next year, early next year. From what we have seen for first 3 stops with high attendance, we believe the total creation of revenue or placement of financial products, we're pretty optimistic about what's going to come.But in terms of transaction value as much as we understand, it's a pretty key metric in terms of -- to measure how much of client wallet share you're taking. We are not aggressively pushing for any specific type of products, but we're mainly focusing on, as we mentioned earlier, the total solution for our clients. So basically, if the client prefers to allocate more towards insurance products, you probably wouldn't see as high as transaction values, as in traditional investment products. But we're okay with that. I think we're pretty comfortable with the strategy of as long as it caters to our clients' real need, as we believe that they are much more sophisticated than before.But with that said, we do have very ample supplies of investment products, especially on the overseas side. We believe our clients are still very globally minded comparing to the past. They are more, I think, more sophisticated and deeper understanding how the global investment products play as compared to [ 3 years back ].I believe there is a second question. Can you remind me what the second question is? No, that's the only one.

[Chiyao Huang, analyst]

Yes. I can [indiscernible] insurance commission rate change. So is there any risk for [indiscernible] commission.

[Qing Pan, executive]

[Foreign Language]

[Jingbo Wang, executive]

[Foreign Language]

[Melo Xi, executive]

[Interpreted] Yeah. So on the insurance commission side, in terms of insurance brokerage commission declines, right now, the regulation is mainly focused on bank insurance channel. So the independent insurance brokers are not affected yet. But if the regulation should change in the future to include the independent brokers, then we would be -- have no choice, but to follow.But in terms of a global scale, we're not seeing any regulatory changes in the overseas insurance brokerage business or market. So that part should not be affected. And in fact, that after COVID, the overseas insurance brokerage business has been generating more revenue share comparing to our domestic business at the moment.

[Operator]

Thank you. That concludes our question-and-answer session. It also concludes our conference for today. Thank you for attending today's presentation. You may now disconnect.

[Melo Xi, executive]

Thank you, operator.

[Qing Pan, executive]

Thank you.

[Melo Xi, executive]

Thank you all.[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]