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Yirendai Ltd. (YRD) Q1 2019 Earnings Call Transcript

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Yirendai Ltd. (NYSE: YRD)
Q1 2019 Earnings Call
Jul 11, 2019, 8:00 p.m. ET


  • Prepared Remarks

  • Questions and Answers

  • Call Participants

Prepared Remarks:


Ladies and gentlemen, thank you for standing by, and welcome to Yirendai First Quarter 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions) I must advise you that this conference is being recorded today 11th of July, 2019.

I would now like to hand the conference over to your first speaker today, Ms. Lydia Yu. Thank you, please go ahead.

Lydia Yu -- Investor Relations

Thank you, and welcome to Yirendai's first quarter 2019 earnings conference call. Today's call features a presentation by the Founder, Chairman and CEO of CreditEase, and CEO of Yirendai Mr. Ning Tang, our CFO, Mr. Dennis Cong, our Board of Director and CRO, Mr. Huan Chen. Ms. Wei Wang our CEO of Yiren Credit, Ms. Xiao Shang our CEO of Yiren Wealth and Ms. Jia Liu, our Co-CFO of Yirendai will join the presenters in the Q&A session.

Before beginning, we will like to remind you that the discussions during this call contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Such statements are subject to risks uncertainties and factors that can cause actual results to differ materially from those contained in any such statements. Further information regarding potential risks, uncertainties or factors is included in Yirendai's filing with the US Securities and Exchange Commission. Yirendai 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 or 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 with US GAAP. For information about these non-GAAP measures and reconciliation to GAAP measures, please refer to our earnings press release.

I will now pass it on to our CEO, Ning for opening remarks.

Ning Tang -- Executive Chairman of the Board of the company

Thank you all for attending our first earnings conference call post the Yirendai and the CreditEase business realignment. This transaction is a significant milestone for us as it sets the stage for our next strategic business transformation. The business Yirendai assumed from CreditEase includes online wealth management, targeting the mass affluent, unsecured and secured consumer lending, and small business lending, which work nicely with Yirendai's existing credit and wealth management operation, and will provide a strong foundation for our future growth.

Post the realignment, the company will have two main business lines, consumer credit and wealth management. The new consumer credit business, Yiren Credit is now one of the largest of credit type platforms in China that provides a full suite of online and offline multi-channel lending products and services. With our unique and 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 to build our Yiren Wealth business, one-stop asset allocation-based wealth management solution for affluent investors.

We believe we are well positioned to capture the significant synergies presented by this business realignment and strategic transformation to deliver long term operating performance and shareholder value. Post the transaction, we will be rebranding the listed company under a new name Yiren Digital as we are broadening our business to include more holistic personal financial services to our customers.

I would like to take the time now to introduce our new management team for Yiren Digital. Ms. Wei Wang will be our CEO for Yiren Credit. Ms. Wang joined CreditEase in 2010 and has extensive operational and leadership experience in the consumer credit industry.

Ms. Xiao Shang will be our CEO for Yiren Wealth. She brings invaluable wealth management and investment experience to Yiren Wealth, with over 10 years working experience at CreditEase.

Mr. Huan Chen, our Board of Director will be our CRO for Yiren Digital. He is currently also serving as Chief Strategy Officer for CreditEase, and brings with him over 11 years working experience at CreditEase. 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 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 part, we will focus on high quality asset growth near-term and streamline our online and offline operations to better serve our customers with improved customer acquisition and operational efficiencies, and get ready for the upcoming regulatory registration process.

We are also making proactive strategic initiatives to expand our business and further strengthen our market leadership position. I'm excited to announce that we have signed a preliminary memorandum of understanding for the acquisition of a leading supply chain financing platform, DaoKouDai Technology Ltd., 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 ZBO Fintech after our strategic investment. ZBO Fintech is a B2B2C Auto Fintech company incubated by the insurance, leading insurance company, PICC. The joint venture will provide creditech underwriting solution services for both ZBO Fintech as well as various financial institutions, which we believe will further strengthen our business cooperation with PICC.

At Yiren Wealth, as part of our strategic transformation, we have started providing multiple non-P2P investment products on our Yiren Wealth platform, including bank, wealth management products, mutual funds and insurance products. We believe with our deep wealth management expertise developed through the years, serving our CreditEase high net worth and ultra-high net worth clients, we are well-positioned to provide the customer-centric, cost effective asset allocation based wealth management services to China's large mass affluent investor base.

Finally, on regulation, we have successfully completed the Beijing Local Financial Bureau Onsite inspection at Yirendai in May and have been submitting our operational data to the National Internet Finance Association as required on a monthly basis. From our interactions and dialogues with government and regulators, we expect a potential trial registration for the online lending industry to begin by the end of the year. We're also in process of increasing our registered capital by RMB500 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.

Dennis Cong -- Chief Financial Officer

Thanks Ning. Hello everyone. First let me provide our financial operational highlight which reflect the combined financial results of Yirendai and the business we assumed from CreditEase. On the credit business side, we continue to focus on the quality of our asset growth and operate at a conservative 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 P2P leading platform going through consolidation.

Total loan origination for the quarter was RMB11 billion, with about 38.8% of loan volume came from repeat customers in Q1 2019. About 96% of its loan sales are unsecured consumer loans and the rest are secured loans and SME lending product. The accumulated number of borrowers we have served reached more than 4 million as of March 31, 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're 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 focused to being more customer focused 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 tenure, size and pricing to better meet the needs of our customer.

On institutional funding, we're continuing to make progress in terms of funding source diversification, and to-date we have already secured a total of RMB19 billion from selected national joint stock and CD commercial banks. We're in the process of ramping up institutional funding for our credit business and expect institutional funding to become a meaningful percentage of our funding source toward second half 2019, which could bring us the access to PBOC credit report system that could also improve our risk performance.

Next on to our Wealth Management business, over the past few years we have accumulated a large and loyal investor base. As of March 31, 2019, we have served close to 2.2 million investors cumulatively. Total number of active investors in the fourth quarter of 2019 was more than 770,000, with total AUM for Yiren Wealth at RMB43.3 billion. Average AUM per investor reached RMB141,000 which is a strong evidence of our high quality investor base. AUM of non-P2P products were RMB457.7 million in the first quarter of 2019, which includes money market funds, mutual funds and insurance, demonstrate the early traction of our non-P2P wealth management business progress.

Now I would like to update the closure of our business realignment transaction. The final consideration paid to CreditEase is 31 million ADR shares and RMB2.89 billion in cash. We have revised down the share portion of the transaction from previous 53 million ADR and increased the cash portion of the transaction to better utilize our cash position and minimize the shareholder dilution for our Yirendai (ph) existing investors. The bulk of the cash payment is contingent on the monthly total loan volume originated by the acquired target operation reaching certain preset targets for the next six quarters.

For our financial update, I'll focus on key terms of our business operations and financial performance, and you can refer the detailed financial result through our earnings release. Just a reminder that due to the closure of our business realignment deal, the financials we're presenting and discussing today are all on a consolidated basis.

Total net revenue declined 47% year-over-year to RMB2 billion during the quarter due to decrease of the loan volume. Net 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 insurance program at 14% to ensure our investors will be fully protected.

On the balance sheet side, as of March 31, 2019, our cash and cash equivalent were RMB2.5 billion. The balance of held-to-maturity investments were RMB313 million and the balance of available-for-sale investments were RMB1.2 billion. As of March 31, 2019, our usable cash increased from RMB3.4 billion in December 2008 (ph) to RMB3.7 billion.

I would like to also provide an update on our share buyback program that was approved by our Board last year for total value of $20 million. To-date we have bought back over 360,000 shares equivalent to a total value of close to $6 million.

That concludes my update on the financial results. And I will now pass the call to Huan, our Board of Director to give a brief update on our risk.

Huan Chen -- Board of Director

Thanks Dennis. On credit performance and risk management, we noted an improvement in credit quality, in new loan origination with 15 to 29 days delinquent ratio further decreasing to 1.9% as of March 31, 2019, compared with 1% as of December 31, 2018, and 1.1% as of September 30, 2018. In spite of a challenging economic and credit environment the policy risk performance remained within our expectations in the near term.

In the first half of 2019, we successfully implemented a new enhanced credit scoring to improve our risk management capability. In the second half of 2019, we will continue to adjust our risk policies and enhance our customer channels to maintain risk at a reasonable level.

This concludes our prepared remarks. We are ready for Q&A.

Questions and Answers:


Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) Your first question comes from the line of John Cai from Morgan Stanley. Please ask your question.

John Cai -- Morgan Stanley -- Analyst

Hi. good morning. Thank you. Thanks managements for taking my questions. So I have a few questions on the combined business. So I haven't looked into the details for now, but since the EPA's integrated, based on my comparison with the restated number for 2018 and previous reported numbers. So just wonder if the management can share the more details on the valuation for the acquired business.

Has that changed because it seems the shift between mix and -- the mix between the cash payment and the share payment has some change there, but I'm not sure if the total consideration has changed. So that's the first part. And the second part is I asked in the first quarter the revenue has declined and also the OpEx has declined. So just wonder on, first of all on the loan writing (ph) what do we see the trend for this year, can we see some rebound? And then on the OpEx side, so I'll just wonder what caused the decline -- of the significant decline of the OpEx on a year-on-year basis. And how do we see the cost-income ratio of the combined business going forward.

And the final question is on the regulations. So is there anything more we need to do on the regulations and also how many loan balance do we need to cut for the PDP for the rest of the year. Thank you very much.

Ning Tang -- Executive Chairman of the Board of the company

This is Ning. On regulation front, we are going through the inspection process and I mean the whole country and recently the regulators held a meeting to discuss next steps regarding the marketplace lending industry. And we expect that many lower quality companies will have to exit the market. The leading strong companies will have the opportunity to become fully regulated and that process will likely begin in Q4.

Okay, maybe next Wei can talk a little bit about the business trend for the rest of the year (inaudible).

Wei Wang -- Chief Executive Officer

(Foreign Language)

Lydia Yu -- Investor Relations

So John, I'll briefly translate that into English. So normally and each year February is our lowest season due to the Chinese New Year holiday. And going into the second half of the year and going to December that should be the peak for our loan volume. And for this year in considerations of regulations and depending on when the P2P online registration will start, we expect this latter half of the year to resume our monthly loan growth of about 30%.

Dennis Cong -- Chief Financial Officer

Yes. So, I think what Wei means that first half was flattish due to our risk control mode. But both from seasonality perspective, as also 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 price of the shares as we announced the deal in March, the total consideration did not change for the acquisition. However if you consider the current stock price then it's somewhat changed.

In terms of the EPS accretiveness, yes, indeed if we look at the consolidated combined 2019 numbers versus the Yirendai 2018 stand-alone numbers and look at the total shares outstanding, we do see the EPS accretive by about 10% to 15% roughly.

In terms of the margin structure, actually we see the margins are reasonably similar between the 2018 versus the first quarter 2019. The customer acquisition, sales marketing cost are bit higher, but the operating lines are a bit lower given the nature of our new combined business of online to offline operation, especially when the total business volume were at a measured level that the utilization or the capacity is not up to speed (ph), but as we have mentioned we're ready, we're in the process of ramping up our business and we would expect more productive sales force and channels and we should see more leverage coming out from the sales marketing side.

So John, does that answer all your question?

John Cai -- Morgan Stanley -- Analyst

Yes, it's very helpful. So if I can add two follow up questions on the funding side. So I just want to clarify, I think we have granted loan balance of RMB63 billon. And then -- and AUM of Yiren Wealth is RMB47 billion and some P2P product, I'm not sure if that's credit, but so I just wonder what's the funding mix for the RMB63 billion credit loan. And then, maybe RMB47 billion is the Yiren Wealth that you have or what's the (inaudible) and then how much of that is from institutional funding? Thank you.

Ning Tang -- Executive Chairman of the Board of the company

Yes. Actually, right now even we have already achieved RMB19 billion line of credit from the bank financial institutions, which is very significant if you compare with our current loan volume growth and balance. But at the current level, the fortune of the institution are still not very big, single-digit percentage, but we're in the process of ramping up.

In terms of the gap between the RMB63 billion and RMB47 billion, we do have outside investor channels that's taking part of those fundings. Some of them are actually from the historical business, remains a balance from the business we have acquired.

John Cai -- Morgan Stanley -- Analyst

Okay, thank you very much.

(Operator Instructions) Your next question comes from the line of May Yan. Please answer your question.

May Yan -- UBS. -- Analyst

Yes, hi. Thank you for the opportunity to ask questions. It's May Yan from UBS. Can you explain a bit on the rationale for doing this transaction -- acquisition of DaoKouDai technology and also the incubation of ZBO Fintech etc., and how do you expect those to contribute to your business going forward?

Ning Tang -- Executive Chairman of the Board of the company

I'll take the lead and Dennis and other colleagues can jump in as well. Actually, regarding the acquisition of DaoKouDai that company is a very high-quality marketplace lending platform serving medium to small-sized enterprise customers and enjoys a very good reputation in the industry. And its funding party is the Tsinghua University, the leading school of finance, Tsinghua University. They have a Fintech lab incubating leading business models in Fintech marketplace, lending being one of them.

And we've been strategic partners, I mean CreditEase and Tsinghua University School of Finance for many years, and we understand each other very well and have shared vision how to serve China's small business community, which is a very key government growth agenda. So is the national priority. And we believe jointly we can do a much better job in that space. And also we can better draw upon that resources, yes, from Tsinghua University School of Finance. So that's the rationale for the acquisition of DaoKouDai.

Regarding the strategic investment and joint venture with the ZBO, we actively look for acquisition channels and high-quality data for our lending business and working together with leading insurance company like PICC, will give us a such a opportunity to broaden our borrower acquisition channels and also the data affiliated with that can help us better assess borrower credit worthiness. So yeah, this is the rationale for that joint venture as such.

Dennis you have anything to add?

Dennis Cong -- Chief Financial Officer

Yes, maybe just a little bit on the scale, in terms of DaoKouDai, of course we're in the early preliminary discussion. Their business size is about RMB3 billion or so in terms of loan origination volume, and then the balance of the loans is about RMB1 billion. That's the scale of DaoKouDai.

And then in terms of ZBO Fintech JV is just the starting point. You're probably not going to see near-term meaningful impact on our business, but as Ning has mentioned, this would significantly expand our business collaboration with PICC. And all of you know that we already have a very strong working relationship with PICC on certain products. But this is more significant for us in terms of collaboration and potentially expanding PICC's own business operation as well, which has a significant potential market opportunity.

May Yan -- UBS. -- Analyst

Thanks for answering my questions. And just to follow up, so with the combined entity now, what percentage of your credit loans are SMEs versus consumer loans. And how -- what percentage is online versus offline?

Dennis Cong -- Chief Financial Officer

Yes, as we mentioned close to 96% of our loans are consumer loans. So the SME right now is still a very small percentage. But we do have certain unique products and unique online channels for supply chain as well as online version, small business lending that's very unique and data-driven event.

In terms of the channels, yes, actually we used to have, as we mentioned, we used to have more distinct online/offline customer acquisition process. But as we are going through the integration, actually the lines between online and offline has been blurred. We're collecting customer lists from the online channels and then we're utilizing both online direct conversion as well as telemarketing conversion as with offline conversions. So that line is becoming blurred. 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.

May Yan -- UBS. -- Analyst

Okay, thank you.

Dennis Cong -- Chief Financial Officer



Next question is a follow-up question from John Cai. Please ask your question.

John Cai -- Morgan Stanley -- Analyst

Hi. Thank you for taking my questions again. So I have another look at the numbers for 2018. So basically the combined versus the previous Yirendai. And then there's take rate improve. So I'm just using the revenue divided by the loan facilitation. So the take rate has increased. And so then the acquired business has a take rate, and I guess, can the management explain what's driving that? So from maybe introduce more about the products of the offline business in terms of the loan tenure or the credit loss et cetera. So just wonder what makes the offline business reporting the higher take rates here?

And also on the OpEx side it seems the majority of the offline business is also sales and marketing expense. So just wonder is that as -- so it seems very scalable, right? So when we have stable originations the sales and marketing expense will go down. So just wondering if that's a proper understanding or do we have actually larger fixed cost base. So it seems to me is mostly sales and marketing and variable, similar to your online business. Thank you very much.

Wei Wang -- Chief Executive Officer

(Foreign Language).

Lydia Yu -- Investor Relations

Okay. Let me first briefly translate what she said, John. So customers require offline versus online have different attributes and therefore risk pricing will be different based on their different characteristics. But overall the difference in pricing between offline and online is small.

Huan Chen -- Board of Director

Yes. And I also adding one is because we acquired the business. So also have the whole country's network -- servicing network. So we have good branding in many cities and we have higher negotiating powers over the customers, and which give us a good advantage on pricing. And so which let us enjoy the higher take rates of our product. And for products features actually it's similar to previous year product on the (inaudible). It is also mostly two and three years product and because we having a better chance in hand to improve our risk measurement processing, so that we can have a face to face chat with the borrowers so we can have -- with our new acquired business we can have a higher average check size and less similar balance with the old business.

Ning Tang -- Executive Chairman of the Board of the company

Yes. So I think the offline product it has a bit of wider price range, but as Huan mentioned that with the in-person service network it helps us servicing the client, when directly managing the upfront risk as well as follow-up collection process. Actually the profitability of the business actually tend to be better. You probably can see that from the consolidated results as well as the risk curves.

John Cai -- Morgan Stanley -- Analyst

Yes. So on the sales and marketing, just wonder for the offline, so it's sounds basically that -- so using the full consolidated amount divided by the previous data, so it seems like last year we have RMB4 billion sales and marketing for the offline business. So just wonder how many of that is fixed and how many of that is variable. Just want to see how scalable is the offline business. Thank you.

Ning Tang -- Executive Chairman of the Board of the company

Yes. I'll try to answer this. If you think about the offline sales network, probably around 15% is rental related. You can think about certain as fixed. The remaining 40%, at the current level, 40% is -- you can call it base salary, the other 40% is coming from the sales commission. So that's the split you can -- looking at rates right now, close to 60% is fixed and then 40% is volume driven.

As the productivity goes up for both sales as well as the offline stores, as we integrate more technology from Yirendai enable customer conversion process, we would expect the variable portion to increase and that you should see certain efficiency coming out from the business volume ramping up in the second half.

John Cai -- Morgan Stanley -- Analyst

Sure, so -- sorry maybe a final question on the AUM for the non-P2P products. And that is going to be like RMB457 (ph) million there. What's the economics of the price or how many percentage we can take as revenue out of that? Thank you.

Ning Tang -- Executive Chairman of the Board of the company

Xiao, do you want to answer the question? It's OK. I think right now majority of the product we're selling through on our online platform are third party financial products. We're taking ranging between 0.3% to 0.5% on an annual basis on these sales volumes. Even though the revenue is not significant, but it's actually on AUM basis and it's a cross-sell for us. So, it's upside in terms of our revenue opportunity and also this is really helping us to build a more holistic customer (inaudible) than service and it's significant for us to get the business going forward as we see that more sticky and then investor invest more of their investible assets onto our platform.

John Cai -- Morgan Stanley -- Analyst

Thank you very much.


There is no more question at this time. (Operator Instructions) Your next question comes from the line of Daphne Poon. Please ask your question.

Daphne Poon -- Citigroup Inc -- Analyst

Hi, management team. This is Daphne from Citi. So I have a follow-up about the take rate. So can you actually help to share the difference in terms of like the APR and also the credit cost for the acquired business versus the original Yirendai business.

And second is on the AUM number, so you mentioned earlier that AUM for Yiren Wealth is RMB47 billion. But I also see in the Q1 result that the number on the AUM of investment which is now RMB67 billion. So can you explain what's the difference between that? And also in terms of the strategy between the wealth management business and P2P business, so, which you see as the key core driver in the next -- rest of the year and in the longer term. And what is the percentage of this wealth management business contribution in terms of revenue that you will be targeting there? So that's all my question. Thank you.

Dennis Cong -- Chief Financial Officer

First I'll talk a bit about our wealth management business strategy. Yeah basically we are moving from single product to comprehensive wealth management based on asset allocation. So an investor, and mass affluent middle class investor, now can access a full suite of products on our wealth management platform. At the beginning, well when we listed the Company there was only one investment opportunity, which was P2P lending. But we purposefully targeted this mass affluent investor base, not focusing on long tail because we had the vision, we had the idea that eventually what this investor community people need is not single investment product opportunity. It's actually wealth management, advisory work.

So our vision is that we have already built this captive investor base, mass affluent investors with a much higher per investor AUM than 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, banks investment products, so on.

So in the future, an investor's portfolio should follow actually the asset allocation strategy. Very soon, we're going to announce our asset allocation strategy to this 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 solutions, like mutual fund solutions for their pension, retirement planning, for their kid's education planning, so on, and how much going to insurance for their basic protection.

This represents a RMB100 trillion opportunity. 20 million more mass affluent investors in China and we have the lead in this opportunity, because one, through marketplace lending business development we have already built this investor base, although in the past it's mainly a funding source for the borrowers side of business, but now is becoming a wealth manager.

Two, CreditEase has a wealth management business targeting high networth, ultra-high networth investors, is highly recognized as a leading wealth management business ranked by the Asian Banker and Asia Money as the best non-bank wealth manager. So we've accumulated a lot of knowledge. We've built 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 networth in that we now is serving mass affluent investors more standard products like mutual funds, like bank investment products, 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 we're going to cross-sell to this existing customer base and in the future, we expect that bank investment products, fund solutions for long-term investment like pension, like kids education, like objective-based investment as well as insurance, all being like the high growth areas within our wealth management business.

Of course, we're going to continue building our P2P lending, fixed income part of the business. That's also a key like asset class for client portfolio construction and asset allocation.

Okay. Let me talk a little bit about on the take rate and the APR in terms of Yirendai and the acquired business. So if you look at IR deck we actually show the unique economic comparison between Yirendai stand-alone business of 2018 versus the consol combined 2018 number as well the 2019 Q1 numbers.

You can think -- you can look at the revenue take rate after the consolidation, it's about two percentage points higher than historical Yirendai average. So if you remember the Yirendai loan pricing is ranging somewhere between high-20s to mid-30s APR range, you can think about that because our biz -- the combined business is about two or three percentage higher if you think of it that way. In terms of the prior performance of the acquired assets, if you look at our vintage curves or the table that we showed on the earlier vintages, if you remember the number for the 2015, 2016, you will probably clearly see a drop -- decrease in terms of the vintage charge-offs.

So that probably give you a pretty good direction in terms of the asset performance in general. And then, Daphne, I want to clarify, so that your question -- the next question is regarding the discrepancy between the AUM of investment which is RMB67 billion versus the remaining principal of performing loans which is RMB63 billion. That's your question, right?

Daphne Poon -- Citigroup Inc -- Analyst

No. Actually I'm referring to the -- so, you first mentioned the AUM of Yiren Wealth which is RMB47 billion. And then there is another number, it's called AUM of investment, which is RMB67 billion. So what's the difference between that?

Ning Tang -- Executive Chairman of the Board of the company

Yes. We still have some third-party channels of individual investors providing a funding source for our loan business. So that's what's the difference between that committed individual AUM versus the overall AUM, yeah.

Daphne Poon -- Citigroup Inc -- Analyst

Okay. Actually, I just want to follow up on the wealth management business strategy. So it seems to me that this wealth management or further distribution business is actually facing very keen competition from banks or some brokers. And I guess one of your close peer, Lutex {ph) they are also going into the similar direction, transitioning from a P2P to more comprehensive wealth manager. So can you highlight to us a few points in terms of what you see as your key competitive advantage compared with this peer?

Ning Tang -- Executive Chairman of the Board of the company

Sure. And I'll start and Xiao please, yeah, add to it. And actually, if you look at China, the wealth management industry is very early stage. Yes, in that 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 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 RMB-only to global portfolio construction, including QD type of products, express type of products like Hong Kong Shanghai Express so on, yes. Moving from short-term speculation to long-term investment, long-term holding, from single product-centric to portfolio-construction asset allocation.

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 distribution kind of business. But what investors really need is a trusted advisor, trusted guide helping them construct a portfolio first leading 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 which investor segment you serve. We are not in the business of serving long tail, small, small investors. These investors don't have asset allocation, wealth management technique. They want to buy some simple investment products. So we are talking about really wealthy people but not that wealthy. But these people, having like $100,000 to $1 million. They have just enough money to think about wealth management, goal-based investment, long-term holding or pension, retirement planning and so on. And they don't have good help from wealth managers.

So this is our positioning. This is our edge because we've been focusing on attracting this segment of investors. If you compare our per investor AUM, that's much higher than industry norm. Yes. Dennis mentioned it's over RMB140,000. Industry average is well below RMB50,000. Some leading players have about this RMB50,000 per investor AUM, 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 built trust with us after many years of working with us. So it's not a new relationship. It's a trusted relationship, already many years long. And now we serve them with other things they also need. So is a very kind of like a low acquisition cost, high trust kind of ballgame. So that's very different from like just going out acquiring like new customers, yeah.

And another point is that CreditEase has a leading position in serving high networth, ultra-high networth investors. In order to get there, we need to be very good at investment, like asset allocation expertize, we need to be really global, yeah, because investors look for a global portfolio not just that China products, RMB products.

And that we are also like a very technology oriented. Yes, we work with our mass affluent investors digitally, yeah compared with like other players in the market. They still do this face to face like our branch level kind of acquisition, or yes, not very technology savvy. I think these are the differentiation points, yeah, I see for our wealth management business.

Daphne Poon -- Citigroup Inc -- Analyst

That's all. Very clear. Thank you.


There's no more question at this time. (Operator Instructions) Since there is no more question, I will hand back the conference over to our speaker today. Please continue.

Lydia Yu -- Investor Relations

Thanks everyone for joining the call. This concludes our first quarter conference call. Thank you.

Ning Tang -- Executive Chairman of the Board of the company

Thank you.

Dennis Cong -- Chief Financial Officer



Ladies and gentlemen, this does conclude our conference for today. Thank you for participating. You may all disconnect.

Duration: 60 minutes

Call participants:

Lydia Yu -- Investor Relations

Ning Tang -- Executive Chairman of the Board of the company

Dennis Cong -- Chief Financial Officer

Huan Chen -- Board of Director

Wei Wang -- Chief Executive Officer

John Cai -- Morgan Stanley -- Analyst

May Yan -- UBS. -- Analyst

Daphne Poon -- Citigroup Inc -- Analyst

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