Q1 2019 Earnings Call
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[music], ladies and gentlemen, this goal is to get to begin shortly thank you for standing by.
We thank you for your patients once again disclose it to begin shortly.
Meantime, it'll be a musical thank you.
[music], ladies and gentlemen, thank you for standing by and welcome to you and I first quarter 2019 earnings Conference call. At this time all participants are now listen only mode. There will be a presentation followed by question and answer session at which time if at least there was a question you will need to press star one on your telephone I must advise you that peace conference is being recorded today 11th of July 2019, I would now like the conference over to your first speaker today Ms. Li Gay Yu. Thank you. Please go ahead.
Thank you and welcome to <unk> first quarter 2019 earnings Conference call today's call speakers, there I've been sanctioned by the founder Chairman and CEO Oscar to eat and C O a young Guy Mr. Nate.
Our CFO Mr. desktop our board of director NCR, All Mr., Juan Carlos Ms. Wei Wall RC All your credit Ms., Delstar seal up here and well and Ms. Joann. They are co CFO of young Guy will join a presenters and the key way session before beginning we would like to remind you that the discussions during this call contain forward looking statements made under the safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1985.
Such statements are subject to risks uncertainties and factors that may cause actual results to differ materially from those contained in any such statements.
Further information regarding potential risks uncertainties or factors is included at the end like solving the U.S. Securities and Exchange Commission.
And that does not undertake any obligation to update any forward looking statement, except as required under applicable law.
During this call we will be referring to several non-GAAP financial measures a supplemental measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance to U.S. GAAP.
For information about these non-GAAP measures reconciliations to GAAP measures. Please refer to our earnings press release, I will not have an entre see owning for opening remarks.
Thank you all for can be our first earnings conference call post the years done a pretty good business realignment.
This transaction is a significant milestone for us.
As it sets the stage for our next strategic business transformation.
The business unit and I assume from Christie.
Cool all on wealth management targeting the mass affluent.
And secured and unsecured consumer lending and the small business lending, which worked nicely with that existing credit and the wealth management operation.
And we'll provide a strong foundation for our future growth.
Post the realignment.
The company will have two main business lines.
Consumer credit and the wealth management.
The new consumer credit business, you don't quit.
No one of the largest accretive type platforms in China.
That provides a full suite of online and offline multi channel lending products and services.
With our unique and a high quality fixed income assets.
We have attracted and retained a large number of affluent investors on our online wealth management platform.
And provide a strong investor base for us.
View, our you know well business.
Once all the location based wealth management solution for affluent investors.
We believe were well positioned to capture the significant synergies presented by this business realignment and the strategic transformation to deliver long term operating performance and shareholder value.
Post the transaction.
We will be re run things that this company and a new name you did did you too.
As we are broadening our business to include more holistic person no financial services to our customers.
I would like to take the time, though to introduce our new management team for your digital.
MS. We want will be our CEO or you don't quite.
Ms. Wong joined credit you in 2010 and has extensive operational and leadership experience in the consumer credit industry.
Maybe show some will be our CEO for you as well.
She brings invaluable wealth management and investment experience too you did well with over 10 years working experience and accordingly.
Ms. Once again, our board of director will be always see our old for you to digital.
He is currently also serving as chief strategy officer for credit <unk>.
And that brings with him over 11 years working spirit Cody.
Along with the new and experienced management team.
I look forward to building, a leading digital personal financial services platform that provides both wealth management and the consumer credit services to our clients.
Now I would like to highlight our strategic plan for the remaining.
2019 and beyond.
On the credit consumer credit Rob.
We will focus on high quality assets grow near term.
And streamline our online and offline operations to better serve our consumer customers with improved customer acquisition and operational efficiencies.
And get ready for the upcoming regulatory registration process.
Were also making proactive strategic initiatives to expand our business and to further strengthen our market leadership position.
I'm excited to announce that we have signed a preliminary memorandum of understanding for the acquisition of both leading supply chain financing platform. So that technology limited based in Beijing.
Which will bring a strong team of experts to help us better serve our small and medium sized enterprises.
We have also formed a joint venture with the B O Fintech after our strategic investment.
VB or pin pad, it's a b to b to C. I was hoping for a company incubated by the insurance, leading insurance company P.I.D.C.
The joint venture will provide a credit card and the writing solution services for both the B O pin pad as well as various financial institutions.
Which we believe will further strengthen our business cooperation with P. I see.
Eatingwell as part of our strategic transformation, we have started providing multiple non P to P investment products on our either well platforms.
Including bank wealth management products mutual funds and insurance products.
We believe with our deep wealth management expertise developed through the years, serving our credit Eve high net worth and ultra high net worth clients were well positioned to provide the customer centric you frac cost effective asset allocation based wealth management services to China large mass affluent you Master base.
Finally on regulation.
We have successfully completed the Beijing local financial Bureau, onsite inspection at years died in May.
And has been stopped meeting our operational they talk to the National Internet Finance Association as required on a monthly basis.
From our interaction and dialogue with government and regulators, we expect a potential trial registration for the online lending industry to begin by the end of the year.
Well also in process of increasing our registered capital by RMB 500 million to prepare ourselves for the registration process and ensure our full compliance.
Thank you now I will turn the call over to our CFO Dennis to review, our first quarter financial results.
[noise], Thanks, Nate Hello, everyone.
First let me provide our financial operational highlights, which reflects the combined financial results.
And the business, we assume from prior years.
On the credit business side, we continue to focus on the quality of our asset growth and operate at a concerns or risk management mode with controlled loan origination volume as we continue to monitor the remaining uncertainties in the regulatory environment and persistent challenges in the risk management with PDP, leading platform going through consolidation.
Total norms nation for the quarter was going to be 11 billion with about 38.8% of loan volume came from repeat customers in Q1 2019.
About 96% of loans out our unsecured consumer loans and the rest are secured loans and SMB lending product.
The accumulated a number of borrowers we have served reached more than 4 million as of March 31st 2019, representing an important customer asset to us.
The first quarter was a quarter of integration adjustment and investment for the company.
Near term, we are making strong efforts to optimize our internal resources and operational efficiencies by integrating and consolidating various business functions that will help us to grow our business more effectively in the future.
Longer term, we plan to transition our operational strategy from being product focus to being more customer focus.
And from a distinct online offline customer acquisition approach to a more integrated online to offline model to improve operating efficiencies and customer experience.
In addition, we'll continue to expand our consumer credit product portfolio to include products with different tenures size and pricing to better meet the needs of our customer.
Institutional funding were continuing to make progress in terms of funding source diversification and today, we have already secured a total approximately 19 billion from selected the national joint stock and CD commercial banks.
We're in the process of wrapping up institutional funding for our credit business and expect institutional bonding to become a meaningful percentage of our funding source towards second half of 2019, which could bring us the access to BB credit reports system that you could also improve our risk performance.
Now onto our wealth management business over the past few years, we have accumulated a large and loyal yesterday.
As of March 31st 2019, we have sort of close to 2.2 million New Master cumulatively.
Total number of active investors in the fourth quarter of 2019 with more than 700.
70000.
Which Tony will elaborate on well and then the 43.3 billion.
Average AUM per Investor reached again, maybe 141000, which is a strong evidence of our high quality measure base.
AOL up non P to P products were going to maybe 457.7 million in the first quarter of 2019, which includes money markets bounce me for phone any insurance demonstrate the early traction up our non P to P was management business progress.
Now I would like to update the closure of our business realignment transaction. The final consideration paid cranky is 31 million 80, our shares and then B 2.89 billion in cash we haven't revised down to share portion of the transaction from previous 53 million HDR and increase the cash portion of the transaction to better utilize our cash position and minimize shareholder dilution for our year end I existing investors.
The bulk of the cash payment is contingent on the monthly total loan volume originated by the acquired target operation, reaching certain pre set targets for the next six quarters.
For our financial update I will focus on key terms of our business operation and financial performance and you can refer to the detailed financial results, so our earning release.
Just a reminder, that due to the closure of our business realignment deal the financials were presenting and discussing today are all on a consolidated basis.
Total net revenues declined 47% year over year to renminbi to EUR 2 billion during the quarter due to decrease in loan volume not revenue take rate from the credit business is 13.6% for first quarter 2019.
Net revenue take rate from the wealth management business is 4.5% for first quarter 2019.
This quarter, we have maintained our contribution to the credit assurance program at 14% to ensure our investors will be fully protected.
On the balance sheet side as after March 31st 2019, our cash and cash equivalents, we're going to be 2.5 billion. The balance of held to maturity investments, we're going to be 313 minutes and the balance available for sale investments were in the 1.2 billion.
As of March 31st 2019, how usable cash increased from 23.4 billion in December 2008 to remedy 3.7 billion.
I would like to also provide an update on our share buyback program that was approved by our board last year for a total value of 20 million U.S. dollar today, we have brought up bought back over 360000 shares equivalent to a total value of close to 6 million U.S. dollar.
That concludes my.
Update on the financial results and I will now pass the call to one our board of director to give a brief update our risk.
Since then.
Okay, Good performance and risk management, we noted an improvement in credit quality new loan originations.
15 to 29 days delinquent ratio for a decreasing to 1.9% as of March 31st 2019, compared with 1% as of December 31st.
2018, and 1.1% as of September 32018.
In spite of a challenging economic and the crappy environment, we probably see list promise to remain within our expectations in the near term.
In the first half of 2019, we successfully implemented a new and has the credit scoring.
To improve our risk management capabilities.
In the second half of 2019, we will continue to adjust our recent positive and has our customer decision trials to maintain it at a reasonable level.
This concludes our prepared remarks.
We already popular today.
Thank you ladies and gentlemen, we will now begin the question and answer session. If can we go ask a question. Please press star one or your telephone and we couldn't be unknown. If you wish to cancel request. Please press the founder I ski.
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Your first question comes from the line of John <unk> from Morgan Stanley . Please ask your question.
Hi, Good morning, Hum. Thank you Thanks management for taking my questions.
So I have a few questions on a combined business. So that's oh I haven't look into the <unk> for now, but it seems that as he said creative base on the based on my comparison, if the restated number for 2018 and the previous reported numbers. So I'm just one just wonder if the management cassia to a multitenant <unk> on on them a valuation for the acquired business.
Has that changed because that the you seems to.
On to the shift between mix and that that makes speech in the cash payment and the share payment or has something changed there, but I'm not sure if that the total kinds of consideration has tranche and so thats. The first part and the second part is assistant to the first quarter. The revenue has declined and also the I'll pass has declined so just wonder first off on the loan volume what what what do you see the trend for this year can we see some rebound and then on the Opex side. So I just wonder what caused the decline it ought to stick a difficulty kind of off to our passing the year on year basis, and how do we see on T. cost income ratio of the combined business going forward end to end the final Christian says on the regulations. So.
But is there anything more we need to do on the record Asians and also how many of them patents do we need to cuts for the P to P or for the rest of the year. Thank you very much.
This is a I mean, oh I'm a regulation a prompt.
We are going through the inspection.
Process and.
I mean, the whole country and.
Recently, the regulators how the meeting to discuss next steps.
Regarding the.
Marketplace lending industry and.
We expect that.
HM.
Many.
Lower quality.
Companies will have to exit the market.
The leading strong.
Companies will have.
The opportunity to be calm.
Fool.
Fully regulated.
And that process will likely.
Begin.
In Q4.
Okay.
Maybe next week and talk a little bit.
The business trends for the rest of year.
Yeah.
They went down 172 should.
I think you mentioned one shot I feel Clinton trend or you know she told on a t. to Saudi city to shield.
Josh on the tissue that.
See much I'm, sorry, I didn't get your whole shutting down the teams here in my town Sharia Centre Shahar Fisher teach out or take a central there yeah.
Essentially or me a call Champlain Collie Ah Ah sound, one a yellow tool number one the second way our children. She was a share Oh I wish it could be at a younger that seems like that when they get to you. When we say a cabin yen, let me show minions than any other show how that went away maybe at a central I can jump back under sanctions will heal.
[noise].
So John I'll briefly translate that into English so on on a normal normally though and each year February as our low season due to the Chinese new year holiday and going into the second hundred year and going into December that that should be the peak for our volume and fourth this year.
And considerations regulations on depending on you know when the P to P. Online registration will start you know we expect the later half of the year to receiving a monthly loan growth off about 30%.
Yeah. So I think when we knew that the first half was flattish due to our risk control nodes, but both from a seasonality perspective as our search business readiness perspective, we're seeing a ramp up trend in the second half of the year and then.
Regarding the.
Consideration, if we take the number of shares and still assume the same press.
Ill shares as we announced the deal in March the total consider isn't did not change.
FFO for the acquisition. However, if you consider the current stock price and it's somewhat changed.
In terms of the EPA create business, yet or indeed, if we look at the consolidated combined 2019 numbers versus the year to date 2018, Standalone numbers and look at the total shares outstanding we do see the EPS accretive by about a 10% to 15% roughly.
In terms of the margin.
Structure actually we see the margin are reasonably.
Similar between the 2018 versus the first quarter 2019.
Oh, the customer acquisition, those marketing costs, a bit higher but the operating lines are a bit of a lower given the nature of our new combined business of online to offline operation, especially when the total business volume where at a measured level that the utilization or the capacity, it's not that the two speed, but as we have mentioned, we're ready and we're in the process of ramping our business and we would expect that well more productive salesforce in channels and we should see more leverage coming out from the sales marketing site.
So John does that answer your question.
Oh, yes, it's helpful home so.
If I can I can just oh for two follow up questions on the funding side. So I just want to clarify us and we have Oh long bottoms home piece 3 billion B and then within the U.M. of yen Rose is 47 and to some PDP product.
I'm not sure if that's credit, but so just wonder what's the funding mix for this this is to see pickup BT and crafted long and then maybe just for the seven is the yen rose you and what's the respiratory and how much of that is from institutional fund. Thank you.
[noise].
Uh huh.
Yes, actually right now even though we have already achieved 19 billion line of credit from the banks financial institutions, which is very significant if you compare with our current loan volume growth and balance but at the current level deep portion of the institutional are still not very thick.
A single digit percentage, but we're in the process of ramping up in terms of the gap between the 63 and 47, we do have.
Outside.
Investor channels, that's taking part of those fundings.
Some of them are actually from the historical business remained a balance from the business we acquired.
Yes.
Okay. Thank you very much.
Yeah.
Again, if you wish to watch a question. Please press star one or telephone en route they need to be announced.
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Your next question comes from the line of me yarn. Please ask your question.
Hi, Thank you for the opportunity to ask questions. It's me I'm from a you'd be us.
Can you explain a bit on the rationale for doing these transactions acquisition, Oh, Darko die a technology and also the.
The incubation as a.
Be always seen tag et cetera, and how do you expect those to contribute to your business going forward.
I'll take a b and a.
Any other colleagues can jump in as well.
Actually regarding the acquisition of Ah DAPL Die Oh that company is a very high quality marketplace lending platform serving.
Medium to small sized or.
Enterprise customers and.
Enjoy is a very good reputation in the industry and.
It's oh from being a party or is the to my University, the leading school a school of Ah finance of a two megawatt university. They have a finpac lab incubating, a leading business models in fintech marketplace lending being one of them and so we are being a strategic partners I mean quite to use and a few more universities school finance for many years and we understand each other very well and have shared a vision how to serve a China. It's a small business community which is a.
Very key.
Government a growth agenda. So is the national priority and we believe jointly we can do a much much better job in that space and also we can better a draw upon a vast resources yeah.
Yeah from a a to my universities schools finance. So that's the rationale for the acquisition of a bulk of that.
Regarding be a strategic investment and joint venture with Vvo.
We actively look for.
The acquisition channels and a high quality data.
For our lending business and.
Working together with leading insurance company like a P.I.C.C. will give us such a opportunity yeah too.
Broaden our borrower acquisition channels and also the Datacom affiliated.
With that I cannot help us better assess a borrower credit to want that knees. So a yeah. This is the rationale for that yeah, our joint venture or excise Dennis you had.
Anything to add.
Yeah, maybe just a little bit on the skill in terms stuff with that of course, we're in the early preliminary discussion.
Their business a size at about a 3 billion or so in terms of loan origination volumes and then the balance of the loans spout a bidding.
That's the skill.
Okay, and then in terms of Debio, Fintech JV or just the starting point.
You, probably not going to see a near term meaningful impact on our business, but I need has mentioned this would that take living span our business collaboration with T.I.D.C. and all of you know that we already have a very strong working relationship with PNC see certain products, but this is a more significant for us in terms of a collaboration potentially extending panties its own business operation as walk, which has a significant potential market opportunity.
Thanks, two questions my questions and just to follow up so with the combined to NTP now what percentage of your credit or loan our SMB east versus consumer loans, and Uh Huh, what percentage is online versus offline.
Yeah.
Okay, Yeah as a as we mentioned a close to 96% of our loans our consumer loans. So the SNB right now is still a very small percentage, but we do have a certainly unique products and unique online channels for supply chain as well as online version a small business lending that's very unique and data driven advanced.
Ah I in terms of the channels, yes, actually we used to have as we mentioned we used to have and what do you think online offline customer acquisition process, but as we are going through the integration or actually at the lines between online and offline has been blurred a world class team customer lists or from the online channels and then we utilizing both online direct conversion as well as telemarketing conversion as well as offline conversions. So the last becoming a blur, but if we have to talk about a customer that direct convert on the mobile app versus customers that have to in person filling the forms or closing their applications.
It's roughly 50 50.
Thank you.
Sure.
Next question is a follow up question I'm trying to <unk>. Please ask your question.
Hi, Thank you for taking my questions again, so Oh I have another look at the numbers for 2018, so it's a pretty to the combined versus the previous year and.
Well, it's in this Oh take green pool, So I'm just curious in deep they revenue onto muddied by the them facilitation. So the take rate has increased and so Jonathan the to the acquired business and so that's oh.
Take rates and against a kinda management explain what's driving them. So from maybe a introduce more about those products off the shelf life business in terms of.
The loan pen or Oh, the quite the laws et cetera. So just just wonder.
What makes the offline business reporting the higher take rates here and also on the Opex side. It seems the metrology healthy the offline business is also sounds that marketing expense. So just just wonder is that you know as so so you seem centers get up all right. So when we have to utilize relationships outside magazine small it's a it put the.
Sounds or not get an expense it will go down. So just wondering if that's a proper understand and all three have Saturday launch a fixed cost base. So it seems to me. It's mostly you some say marketing their variable a stimulus with your online business. Thank you very much.
I see so what's your tell me what I would ask everyone here yeah.
Women's I since Apple quarter show Hall, no hung door the jewelry at Topia got tinge, we seem to have the same way that difficult when I say Ah we have got to pick on the job Oh shall shall we either hello.
Pete hung on media and you know you can withstand szalay sorted a yield of Copel will trickle into your either tied to the number one and the year. One machine you make sure we're getting jobs. So unusual well nuclear you deem the chaza other times you are.
Sandra I since I put on the co portraits here, how should we don't want to Usher Tony <unk> bashes up to have a cool you'll go no go out he understands something we go door or be dark habit for pointing out in the cool because he understands how the thing we can do so usual establish I'm sure. You'll you see attached to that sure yet which is pretty high on the pay out with that.
The weekly column and the <unk>.
<unk>.
Yeah, I I know the bidding.
[laughter] Oh, Yeah, Let me let me first briefly translate on what she has that gone I know customers acquired offline versus online have different attributes and therefore eight countries networks. So it was it was really being leveled.
So we have a real good branding so many cities or and do we have.
The higher or negotiate a pause over to the cosmos and which.
Give us a good advantage on pricing.
So.
<unk>, which.
Let us enjoy higher take rate, so our production and the Florida products or features actually true.
Similar to the previous year died product the old.
The Montana.
It is also.
Mostly two years three years product and because we have a better.
China too.
He has to equal our list.
The makeup and the progress being that we just we can have real based phase truck was the bars. So.
We are the.
ER.
Potentially.
Yeah. So oh, we can have a a way would be our new Oh part of business. We can't have a higher average ticket size and the let's see what a tennis.
With the old business yeah.
So I think the online product has to be the wider price French, but I've been mentioned got caught with the in person service network.
Helps to us are servicing the client and what do you reckon managing the upfront risk as well as the follow a collection process actually or the profitability of that business actually tend to be better Ah you probably can see that from the consolidated results as well as a risk averse.
Yes, yes, I'm social on the sounds of market interest wonder up for the offline. So I'm basically oh deducting the.
The the <unk> using the full consolidated amount that they buy that the previous status. So he seems like last year, we have for beauty and fashion magazine for the offline business. So just wonder how many of that is fake sent home and health dancer area, but just want to see how scalable is the offline.
Thank you.
[noise], Yeah, I'll try to answer that if you think about the offline those network, probably around 15% and rental related.
I think investors and I think the remaining accordingly.
At the current level at 40.
It's you can quite base salary the out of what he is coming from the self condition and so that the split I you kind of looking at rate right now close to 60% is fixed and 40% is.
Volume for that at the productivity goes up for both cells as well as the.
You know offline stores as we integrate more technology firms that enable customer conversion process Oh, we wouldn't expect the variable portion to increase that you should see a certain efficiency coming out from the business volume and revenue.
In the second half.
Sure I'm, so sorry, maybe I know questions on on the U.M. for the non P to P products and that's going to be half like fungicide and 57 median there is <unk>.
What's the economics on local ISO how many percentage we can take as revenue out of that thank you.
John do you want to answer the question.
[noise].
It's okay I think right now a majority of the product were selling through on our online platform about third party financial products, We're taking you know and readying between.
0.3, 0.5% on an annual basis on these sales volumes, even though the revenue it's not significant but it's actually on the U.N. basis, and it's it's a cross sell for us so its upside a in terms of our revenue opportunity and also this is really helping us to be a more holistic customer what's vendors and a service and is significant for us to get the business going forward as we see that so more sticky and investor you mess more up there.
Investable assets onto our platform.
Thank you very much.
No. My question is really bad if you wish to ask a question you don't need to press star, one I know telephone and where they need to be done.
Your next question comes from the line of death in the food. Please ask your question.
Hi, Hi management team the team so oh, the follow up about the pick wage so can you actually help too.
Oh sure just difference in terms of like a p. out and also the credit costs for.
The acquired business versus the original get in that business.
And a second is on the AOAC number so are your back earlier in your employees.
Well said.
47 billion, but I also see it be Oh Q1, we saw a nice number on the web.
Let me wish it 67 billion.
So what's the difference between that.
And also in terms of the strategy between the wealth management business and the PDP business.
So which you see as the key.
Who struggle.
The rest of the year and in the longer term and what is the percentage of this rough national business.
Contribution in terms of revenue that.
You will be targeting that.
So that's that's all my question. Thank you.
Yeah, first Oh, let's talk a bit about an hour a wealth management business strategy.
Yeah, basically we are moving from single product.
Two comprehensive.
Wealth management based on asset allocation.
So an investor.
And mass affluent middle class Investor.
Now Ken.
Access.
A full suite of products.
Our wealth management platform at the beginning.
Well when we lifted the company there was only one investment opportunity, which was Peter blending.
But we purposefully targeted this mass affluent.
Investor base, not focusing on long tail, because we had the vision we have ideas that eventually was this.
Investor community people need.
It's not single investment product opportunity is actually wealth management.
Advisory work.
So ambition is that we have already.
Bill this.
Capped to Investor base.
Mass affluent investors with a much higher.
Per investor.
Are you.
Then the industry.
They actually have.
Their wallet size is much bigger than what they have invested with us.
So we are cross selling insurance mutual funds banking investment products. So on.
So in the future and investor portfolio should.
Follow actually the asset allocation strategy.
Very soon we are going to announce our allocation strategy to these investor group.
Telling them how much of their portfolio should go to fixed income how much go to like real liquid bank investment product.
How much going to mid term long term investment opportunities like fund the solutions like a mutual fund the solutions for their pension retirement planning for their kids and location planning so on and how much going to insurance for their basic protection.
This represents a 100 trillion.
RMB opportunity.
20 million more mass affluent investors in China.
And the we have the lead in this opportunity because one through marketplace lending business development. We have already built this you masturbate, although in the past.
It's mainly a funding source for the borrower side of the business, but now it's becoming a wealth manager.
Two quickies has a wealth management business targeting high now was ultra high net worth investors.
Is highly recognized as a leading wealth management business rang the by the Asian banker and Asia money as the bad the non bank.
Well manager.
So weve accumulated a lot of knowledge will be with a lot of expertise in wealth management in asset allocation.
Of course, serving the middle class mass affluent investors is very different from serving the high now in that you know we now is serving.
Mass affluent you matters.
More.
Stendal products like mutual funds like a bank investment product so on.
And also we need to serve them digitally cannot afford to do one on one like probably banking type of business. So in that sense is much more scalable and that were going to cross sell to these existing customer base.
And in the future, we expect that bank investment products.
Fun solutions for long term investment like pension like a kids' education like objective based investment as well as insurance or being like a high growth areas within our wealth management business of course were going to continue building our PDP lending fixed income part of the business that is also a key like asset class for client portfolio construction and asset allocation.
Okay, Let me talk a little bit about the take rate and if you are in terms of a year and a car business. So if you look at.
In our IR deck, we actually show the unique Nami comparison between your that the numbers of 2018 versus the consultant by 2018 number as well as the 2019 Q1 numbers. You can think you can look at that run your take rate. After the consolidation is about two percentage points higher than historical you're in that average. So if you remember a year in direct loan pricing is renting you know somewhere between high Twentys to mid Thirtys HDR Ranch, you can think about the because I see the combined business is about two or three percentage higher if you think of it that way in terms of the crater or performance of the acquired assets. If you look at our vintage curves or the table that we showed on the yearly vintages. If you remember the number for the 2015 2016, you will probably clearly see a drop a decrease in terms of the.
Vintage charge off so that probably give you a pretty good a direction in terms of that asset performance.
In general and then.
Danny I I want to clarify so that your question. The next question is regarding the discrepancy between the low end of the investment which is 67 billion versus the remaining principal for performing loans, which is 63 billing. That's your question right.
No actually I am referring to so your first mentioned the Eagle and we either well wishes 47 billion and then.
Yes, yes, and that's another number it's called UEM, often batsmen wishes 67 billion. So what's the difference between that.
Yeah, well still have some third party channels a immediate your investors, providing a funding source for our loan business. So that's what's the difference between Gattex, which indeed, you EM versus the overall anyway.
Okay actually I just wanted to follow up more on D.
Wealth management business strategy. So it seems to me that this wealth management or for the distribution business is actually pacing very keen competition from banks or brokers and.
I guess one of your close here looks like they are also.
I'm going to have a similar directionally shifting from opinion P. tool.
More come back it's a wealth manager. So can you highlight to us like a few points in terms of what you see as your key competitive advantage compared with its peers.
Sure and I'll start and Shao, please yeah add to it and actually if you look at the China. So wealth management the industry. It's very early stage yeah in that to investors don't have a good idea about asset allocation.
Don't have a good idea about long term investment.
They are rather short term.
And the very used to.
Fixed income type of products.
Guaranteed return.
So the whole industry the whole market is going through profound change moving from fixed income mainly to equity.
More than fixed income.
From domestic on be only two global.
Portfolio construction, including Q D type of.
Products Express type of products like a you know Hong Kong.
Shanghai Express and so on.
Yeah moving from.
Short term speculation to long term investment long term holding.
From single product to centric to portfolio construction at that location.
So these are very profound changes happening right now in China wealth management industry.
In the past many many players do this product manufacturing or product that distribution kind of business.
But what investors really need is a trusted advisor tried to guide helping them construct the portfolio first.
Leading them to the right asset classes and the right products.
So from this point of view, we have a lead in the market.
Also.
It matters a lot we each investor sentiment you serve.
We are not in the business of serving long tail.
Small small investors. These investors don't have asset allocation wealth management neat.
They want to buy some simple math on products.
So we're talking about really wealthy people, but now that wealthy but these people having like a 100000 the U.S. dollars to one meeting U.S. dollars. They have just enough money to think about wealth management goal based investment long term holding for pension retirement planning so on and they don't have.
Good health.
From wealth managers. So this is our positioning this is our edge because we've been focusing on attracting these segment of investors. If you compare our per investor eight you that's much higher than industry, nor yeah as Danny mentioned, it's over 140000 RMB industry average is well below 50000, RMB. Some leading players have allowed this 50000 RMB per investor a little higher.
Yeah, and many other platforms have even much smaller investor base.
Yeah. So that's a very key differentiation point.
Second these investors have already build trust with us after many years of working with US. So it's not a new relationship is a trusted relationship already many years long.
And now we serve them with.
Other things they also need so it's a very kind of like a low acquisition cost the high traffic that kind of ball game. So that's very different from like just going out to acquiring like new customers, Yeah, and another point is that quite east has a leading position in serving high net worth cultural high numbers investors in order to get there we need to be very good at.
Investment like asset allocation.
Expertise.
We need to be really global yeah because.
Investors look for global portfolio, not just the tying up products arm b products.
And we're also like a very technology oriented yeah, we work with our.
Mass affluent investors DG totally yeah.
Compared with them like.
Players in the market are they still do this face to face like our branch level kind of acquisition or yeah, Knotts Berry technology savvy.
I think these are the differentiation points, yeah, I see for our wealth management business.
Right, that's very clear thank you.
No more question at this time again, if you wish to ask a question. Please press star one of your telephone anyway.
Mm Hmm.
Okay.
So there's no my question I'll hand back its confidential, but gosh speaker today. Please continue.
Thanks, everyone for joining the call and this concludes our first quarter conference call. Thank you.
Thank you.
Ladies and gentlemen that does conclude our conference for today. Thank you for participating you may all disconnect.