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Yirendai Ltd. (YRD) Q4 2018 Earnings Conference Call Transcript

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Yirendai Ltd.  (NYSE: YRD)
Q4 2018 Earnings Conference Call
March 25, 2019, 7:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to Yirendai Fourth Quarter and Full-Year 2018 Earnings Conference Call. At this time, all participants are in 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 the 25th of March 2019.

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

Lydia Yu -- Investor Relations

Thank you and welcome to Yirendai's fourth quarter and full-year 2018 earnings conference call. Today's call features are presentation by the Founder, Chairman and CEO of CreditEase and Chairman of Yirendai, Mr. Ning Tang; our CEO Ms. Yihan Fang; our CFO Mr. Dennis Cong; Mr. Quan Zhou our Board of Director and Ms. Jia Liu our VP of Finance will join the presenters in the Q&A session.

Before beginning, we would like to remind you that discussions during the 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 risk and 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 in Yirendai's filing with the US Securities and Exchange Commission. Yirendai does not undertake any obligations to update any forward-looking statements except as required under applicable law. During this call, we will be referring to several non-GAAP financial measures as supplemental measure 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 financial information prepared and presented in accordance of US GAAP. For information about these non-GAAP measures and reconciliations to GAAP measures, please refer to our earnings press release.

With that, I'll turn the call over to our Chairman, Ning for opening remarks.

Ning Tang -- Chairman-CreditEase

Thank you. Dear investors and friends, thank you all for joining Yirendai earnings conference call today. Yirendai was the first listed Fintech Company from China on the New York Stock Exchange in December 2015 and I thank all of you for your continued support and attention in the past years. I believe Yirendai has demonstrated it's industry leading position in serving its customers. To further strengthen the Company's market leadership and provide better customer service to our investors and the borrowers. I'm excited to announce the business realignment plan between Yirendai and certain part of CreditEase business operations, which mainly include online wealth management, target team, the mass affluent, unsecured and a secured consumer lending, financial leasing and small business lending. You can find more details in our realignment press release, that was published today.

I believe this business realignment is very strategic for both Yirendai and CreditEase, through which we will be able to form the leading fintech platform that provides both wealth management and consumer lending products and services to millions of individual investors and the borrowers in China. The combined online wealth management operation will strive to become the high quality one stop destination for mass affluent investors, seeking asset allocation based wealth management services. While the combined lending operation will be able to provide diversified credit product portfolio to consumers with unsecured consumer loans, auto loans and home equity loans and to small businesses with supply chain financing and leasing. I will personally assume the CEO position of the combined operation, working with the management team upon closing. And I believe this strategic realignment will help us provide better service to a enlarged customer base at scale, leveraging Yirendai and the CreditEase management team, product and business operation expertise, technology know-how and the risk management capabilities. We look forward to presenting the combined business operation by the time of closing of the realignment. And I thank you again for your continued support.

With that, I will pass the call to Yihan, to talk about Yirendai Q4 2018 business results.

Yihan Fang -- Chief Executive Officer

Thanks, Ning and thank you all for joining us today. In the fourth quarter of 2018, we achieved solid performance as our credit business resumed steady growth and our online wealth management business continued to show strong momentum. During the quarter, our loan origination volume increased by 28% from the previous quarter to RMB8.4 billion. This brings our cumulative loan origination volume to approximately RMB113 billion and outstanding loan balance of performing loans to RMB41 billion. In addition, we have elevated the overall credit quality of our individual borrowers through implementing more stringent risk policies which have shown improving credit performance for recent loan originations. Furthermore, we have strengthened our cooperation with our parent company, CreditEase through its online and offline network, through which 40% of our borrowers were referred by CreditEase, contributing to approximately 52% of loan origination volume.

Our platform investors on the other hand have continued to show a strong interest and confidence in our attractive loan assets and lumpy to be wealth management products. In the fourth quarter of 2018, we facilitated 145,000 investors with total investment amount of RMB7.8 billion. Investors with AUM of about RMB100,000 exceeded 33% of total existing investors of our platform. We strive to develop Yi Ren wealth into a leading online wealth management platform to provide comprehensive products and services to the growing mass affluent population in China. And we believe the announced strategic business realignment will further strengthen the effort.

By acquiring CreditEase, other online wealth management platform, the combined business will be much, much stronger in terms of brand, team, client base and product and service capabilities. In 2018, we will grow client base, our platform while reducing customer acquisition cost through brand marketing, optimization of channels and operations. We'll also expand our products and services offering by providing well selected products of different asset class that are suitable to our mass affluent clients, launching multimedia investor education lessons, building out investment tools such as online financial advisory and child education planning and upgrading customer service levels.

On the regulatory front, the P2P compliance and inspection process is still going on. The Beijing Internet Finance Association completed their on site inspection in December last year. We have also submitted all requested data and related documents to National Internet Finance Association for their review. Next step is for the local finance bureau and officers to come back to their on site inspections. We're readily prepared for the ongoing regulatory inspection process, but believe that Yirendai will be one of the few platforms to operate in compliance exceedingly in the future.

With that, I'll turn the call over to our CFO, Dennis to discuss about this quarter's operating results.

Dennis Cong -- Chief Financial Officer

Thanks, Yihan. Hello, everyone. I will provide the financial update of our business. First regarding the transaction, as disclosed in our press release, Yirendai had signed a definite agreement after receiving approval from our Independent Audit Committee, as well as our Board of Director to acquire certain business operation from CreditEase. The total consideration of the transaction will be of RMB107 million newly issued ordinary shares of Yirendai and RMB889 million in cash and may be adjusted in accordance with the pre-agreed mechanism at the closing of the transaction.

It is estimated that the unaudited US GAAP net revenue of the target business were RMB6.6 billion or USD962.3 million in 2018. The online wealth management business had RMB8.6 billion of total assets under management as of December 31, 2018 and an active investor base of close to 0.2 million in 2018. It is estimated that in 2018, the lending business has referred RMB15.9 billion sales of loans to Yirendai and it facilitated RMB23.2 billion of loans on its own platform. This is a significant acquisition for us and that we're very excited as we believe that it will create many synergies and significant shareholder value.

CreditEase has a diversified portfolio of loan products, customer base and customer acquisition channels that will be complementary to Yirendai business and combining the operation will not only optimize our online offline service to our customer base, but it will also drive stronger, longer-term growth and present cost saving opportunities. Out of this transaction, we will become one of the largest FinTech platform in China, further reinforcing our leading position in the industry and will be best positioned to serve our credit and wealth management clients.

Over the past few months, the industry has continued to undergo rapid transformation due to a tightening regulatory environment, especially after the release of Circular 175, which has increased industry consolidation. According to data released by wangdaizhijia.com, as of February 2019, the top 20 platforms contribute close to 60% of total industry transaction volume, as compared to 35% over a year ago. Post the transaction, we believe we'll be able to better capture this market opportunity through offering a wider range of credit product and service, including consumption, auto and home equity loans to meet all customer demands. On the credit side, loan origination started to recover in the fourth quarter, increasing 28% quarter-over-quarter RMB8.4 billion, as we continue to proactively control the growth rate with conservative risk policy.

Early delinquencies for new vintages had remained largely stable and have shown improving trends. However, due to our relatively longer -- long tenure, charge-offs for the 2017 and 2018 vintages continued to be impacted by the loans generated in the second half 2017 and first half 2018. To ensure adequate investor protection, we have increased the borrower contribution to our credit assurance program to about 13% of the loan contract amount this quarter.

Risk management will continue to be a top priority and our risk management initiative for 2019 include upgrading our risk scoring grade, implementing early delinquent collection, as well as connecting to PBOC records for loans, facilitate with our institutional funding partners to increase the cost of defaulting. Our Institutional partnerships were pleased to note that we have made significant progress. Our line of credit from Xinwang bank has been increased from RMB1 billion to RMB1.5 billion effective as of January 2019.

In addition, we have also received approximately RMB10 billion line of fundings from selected joint stock and CD commercial banks at a competitive funding rate. We remain committed to diversifying our funding base and we expect to increase the portion of loans funded by institution partners through the 2019. For our financial update, I will focus on key items of our business operation and financial performance and you can refer the detailed financial results to our earning release and IR deck that is now online.

Total net revenue was up 13% quarter-over-quarter to RMB1.3 billion during the quarter, with a corresponding net revenue take rate of 13.1% as compared to 13.9% last quarter due to higher contribution to our credit assurance program. Please note that our net revenue take rate is calculated net of provision expenses for better comparability.

On the balance sheet side, as of December 31st, 2018, our cash and cash equivalents were RMB2 billion, balance of held to maturity investments were RMB316 million and balance of available for sale investments were RMB832 million. As of December 31st, 2018, our usable cash increased from RMB2 billion in September 2018 to RMB3.2 billion.

We would also like to highlight that our operating cash flow has increased from net cash use of RMB138 million to net cash generated of RMB1 billion due to our efforts in cash management putting us in a solid cash position. The share repurchases program that we announced last June is still effective. We remain committed to driving shareholder value and we will deploy the buyback program when our blackout period ends at management discretion. Regarding 2019 outlook, we'll not be giving out any guidance given we're in the process of closing the transaction and we plan to report consolidated financial results of the combined business when the deal close.

That concludes my remark. I'd now like to turn the call back to operator for Q&A.

Questions and Answers:

Operator

Certainly. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) We have our first question from the line of John Cai from Morgan Stanley. Please go ahead.

John Cai -- Morgan Stanley -- Analyst

Hi, good evening, management. Thank you for taking my questions. So I have two questions. The first one is on the business realignment with CreditEase. So is there any more details like the cost income ratio of the target business, the profit and the operational levels like what they are doing at the moment. So how many branches or if any are there and what would the price imply on like price to book basis. I saw that this total AUM of around RMB8.6 billion, so just wonder how you think about the multiple there.

The second question is on cash or capital management, as mentioned by Dennis I think previously, we have a very strong improvement on the cash flow. Just wonder what's driving that besides our profit. So I see some balance sheet items that has been changing quarter-on-quarter such as the loan at fair value contracts and prepay expense. So just wonder what's driving our cash improvement and what's our take on the operating cash flow looking forward? And if cash further increase what's our plan on that, do we assume a dividend? Thank you very much.

Dennis Cong -- Chief Financial Officer

Okay. Thanks, John. In terms of the target operation you can think about it has two part, one is the improve the finance operation from CreditEase that we have talked about, including unsecured consumer loans, auto loans, home equity loans and some of the small business, supply chain financing and leasing operation.

And I think we're still in the process of closing the transaction and we have not completed the audit financial statement yet. So, at this moment, we are only enabled to share the operating metrics that we have highlighted in our press release, as well as the last section of our IR deck, apologize as it came out a bit of late before the call. So, if we just look at the 2018 business operation scale, in terms of the lending side of business, the target business has originated more than RMB23 billion loans on its own platform and also I referred close to RMB16 billion to Yirendai. And you can consider also think about the Yirendai business operations in scale at the comparison that has originated close to RMB23 billion online through it's own platform, of course, the other RMB16 billion which we referred from CreditEase operation.

And in terms of the online wealth management, a part of the operation that we'll be combining with Yi Ren (inaudible), it's also similar in nature, but more focused on the mass affluent investor base. The total AUM as we mentioned is RMB6 billion and close to 230,000 active investors. So, from a revenue perspective, we also mentioned that at the end audit US GAAP net revenue for the target business is RMB6.6 billion, compared with the current reported unaudit net revenue for Yirendai for the full-year 2018 is about RMB5.6 billion.

So, that will give you some level of comparison in terms of business operation skill, as well as the financial metrics. And you know, we will report the earnings in all those -- when the audited financial statement is ready, when the time of closing of the transaction. And in terms of the cash position and balance sheet, I will refer that to Yihan to give a highlight.

Yihan Fang -- Chief Executive Officer

Sure. So, in terms of the increase on our cash position, it's mainly due to two reasons. One is, because we changed the product mix and we increased the upfront fee portion to reduce the uncertainty of the cash collection in the future. And second as we optimize the -- our cashing operation and reduce the cash in transaction and that's why you see a reduce in the -- on the balance of prepaid expense and other assets. And of course with repayment of the loans at fair value we also collect back the cash. So in the future, we're going to maintain the cash position on a healthy level. And with the increase of cash position, we're more of investing into operation and also in the new wealth management business.

Dennis Cong -- Chief Financial Officer

Yeah, and also maybe for me to add a bit more in terms of business synergy between the two combined business operation, I think from the lending side you're going to see a much wider customer segmentation as more diversified product portfolio and combined with multi-channel customer sourcing acquisition that will be complementary to Yirendai's online customer acquisition capabilities. And then from the online wealth management business part, I think the overlapping between the two platform from the customer segmentation perspective was small and then the combination of the two operation will unify the resource, technology capability for Yirendai to focus on the online wealth management business for 2019. And maybe Yihan can add some more on that front.

Yihan Fang -- Chief Executive Officer

Yeah, as I've communicated in my previous remarks, the realignments combining CreditEase online wealth management platform is a win win situation because we can really find a synergy between the parties and there is a one stop platform for mass affluent, as well as like new mid-class population in China, which is an even bigger market opportunity. And in terms of the team and product and service capability, it's all great upgrade from my point of view.

John Cai -- Morgan Stanley -- Analyst

Yeah. Thank you very much. So I just have a small follow-up. So in terms of the on targeted business, is it P2P opposite under any growth constrained like the Yirendai because of the regulatory requirement that balance need to decline? Thank you.

Dennis Cong -- Chief Financial Officer

Yes, it's also operating as a peer-to-peer business model. Of course, right now, as you all know, there's a gap on the individual investor funding for the loan balance. However, as we mentioned, the significant progress we have made in terms of working with the banks, institutional fundings will definitely help us to combine the multi-channel, multi- sources of asset sourcing capability with the institutional funding that continue to drive our growth.

And in particular, as you may know, the multi-channel online and offline combination usually gives a better stable asset quality, while the Yirendai online and Yi Ren wealth has always generated very strong demand in terms of very competitive funding cost. So, we believe the combination of the two operation will really give us a lot of synergy and momentum for our business going forward.

John Cai -- Morgan Stanley -- Analyst

Thank you very much.

Operator

We have our next question from the line of Jacky Zuo from Deutsche Bank. Please go ahead.

Jacky Zuo -- Deutsche Bank -- Analyst

Hi, management. Thank you for giving me the question -- the chance to ask questions. So, first one is also related to the -- our new business realignment. Can you give us some color on the loan product mix of the combining, lending business from CreditEase? So, how much percentage is from retail and secured auto, home equity and how much is from the SME. And what is the roughly APR level and so on the asset quality, how much is that kind of trend recently? And what's the difference in terms of the individual loss compared with our existing asset quality? And the second also related to that is what is the near-term cost synergies, if we have seen about this transaction? And my last question is about the SME lending, so given that the top priority from regulators this year is to encourage SME lending. So any initiatives or any plan to promote our SME lending given our combined business going forward? Thank you.

Dennis Cong -- Chief Financial Officer

Okay. So in terms of product mix of the target business, majority of the business are unsecured consumer loans, with certain percentage of the loans are under secured, it's a small percentage which we lent out to people who have car and home. So basically secured by the ownership of the car and home ownership. This is a small percentage. And then we also have online small business lending business operation, that's also about 5 percentage to 7 percentage of our 2018 operation.

So you can think about more than 80% is consumer individual unsecured consumer lending and the rest of them are some a few percentage of secured loans, which we believe has huge room for growth, especially when we connect with the bank institutional fundings. And the same thing with the small business lending, as you may know, is key focus from the financial institutions for the year of 2019.

We have been approached by multiple institutional partners to look to work together, to lend through on these channels and that the assets in terms of the assets. From APR and risk performance as well, I think by this time we closed the transaction, we'll be able to report in detail the combined financial performance, as well as the historical performance of the target business. However, in a general you can think about there -- have a similar wrench of the risk and then the somewhat higher revenue opportunity.

So when you consider the risk adjusted revenue opportunity, I think the type of businesses that actually have shown reasonably a better performance from either historical, as well as recent industry trend. So I would leave that for the performance and when we report our first quarter 2019, you'll be able to see them in detail. In terms of cost synergies, we see significant benefits as we mentioned, one is that from funding cost perspective, Yirendai has always enjoyed competitive funding costs and then from the asset quality perspective, the amount of channel, online offline combination has demonstrated the ability to provide a sturdy, stable asset performance, that's actually in demand from both retail as well as institution. And also will be able to fully leverage our online offline operation to better serve our customer. As you may consider -- can imagine, when we have a large registered applicant sales from the online channels and some of them may drop at the middle of the application because they were not sure what to do and we could have our telemarketing guys or potentially with our outplaying sales agents to help them out to complete application and then finish the process. And also we believe with the offline operation that would also help us in terms of building the customer relationship, providing closer contact with customer and in turn increase the customer stickiness and help the collection process for the greater side of the business.

Jacky Zuo -- Deutsche Bank -- Analyst

That's helpful. Thank you.

Operator

We have our next question from the line of Alex Ye from UBS. Please go ahead.

Alex Ye -- UBS -- Analyst

Among the RMB6 billion of net revenue, what's the percentage contribution from our online wealth management business? And do we expect this online wealth management platform from both Yirendai and the credit business to further expand into a bigger portion of our revenue contribution in the near-term? And my second question is about our funding partners. So we have made some progress in terms of sourcing additional bank funding. So you have mentioned we have got RMB10 billion of credit lend from China's top banks, so just to confirm if this number is correct. And what -- how much have we deployed this credit line so far? And could you please give us some breakdown about the loan volume facilitated in Q4, which contributed by the institutional funding. And also what's the comparative figures for the last quarter? Thank you.

Dennis Cong -- Chief Financial Officer

Sure. So, in terms of the revenue from investor side, that's usually the way we look at the wealth management business from our business operation perspective. Of course, these revenue with service fees we generate from those fee income or P2P loan type of product as well as some other product we start to selling. It's just purity looking at the service fee from investor site, on the target side it's close to 10% compared with -- that's from the wealth management or investor side of the business.

We expect to ramp up the online wealth management business particular with a focus on cross-selling norm P2P loans for the 2019. I think that's very strategic for us to provide multi-asset class of wealth management product to our investor. The initial revenue may not grow as fast as the sales volume or AUM, but we believe longer-term as you build a strong larger base of AUM, the repeat revenue will become -- generate much more profit going forward.

So, in terms of the bank line, yes, it is RMB10 billion. So, maybe i.e. a line of funding from the bank, we have -- we're in the early process of working with the bank, establishing the product, connecting the system. So, it's still early in terms of the number of loans we deploy through the bank fundings, it is still a small percentage, single percentage of our loans that now go through the bank funding.

So for this, I would also want to highlight a bit, I think from either the research community or the capital market perspective, people have always been very focused on the ability of a platform, sourcing institution of fundings. However, from our platform, Yi Ren wealth has always enjoyed a very strong brand and reputation among the retail investors. We have very competitive funding cost from the high quality sticky individual investors. And then grow the wealth management business with mass affluent customer base has always been strategic for us.

So particularly in the later part of last year and early part of this year, we actually see a very strong demand from institutional partners coming to our platform, asking for assets. We are actually in -- under supply our asset situation, so we have to allocate between our individual investors strong demand versus the strategic nature institutional partner banking fundings. So we -- but we also understand from the risk diversification perspective, we need to have a multi-channels of fundings, but at this moment, our retail investors funding are as competitive if not more compared with institution. But as we mentioned, we're building multiple lines of institutional fundings and we're establishing these very strategic relationships, so we believe that will be a very healthy funding going forward in 2019 in terms of the ability of sourcing fundings from both retail, as well as institution.

Operator

(Operator Instructions) We have our next question from the line of Anderson Cha from BNP Paribas. Please go ahead.

Anderson Cha -- BNP Paribas -- Analyst

Hi, this is Anderson from BNP Paribas. Thank you very much for the opportunity for asking questions. My first question is with regards to 2019 guidance, do you have any specific guidance for loan origination volume and also institutional investors target given that you mentioned the voluntary strong demand from institutional investors. And second question is with regards to your the business realignment, I just saw that you're issuing new shares and also you're paying RMB889 million cash. So how do you fund that acquisition? And also, do you have any time line of this transaction? Thank you.

Dennis Cong -- Chief Financial Officer

Sure. As we mentioned, we're in the process of closing the transaction. So we will not be able to give out the full-year 2019 guidance. And in terms of the institutional funding, we mentioned that we have at least RMB10 billion actually not -- right now it's more than RMB10 billion, close to somewhere between RMB10 billion to RMB15 billion line-up banking lines already available that will be for us to use through the year. So it's actually a matter of truth between retail and institution for us to best optimize our business operation, as well as to maintain the strategic relationships with both our retail customer, as well as our institutional partners. So in terms of the consideration, in terms of number of shares, as well as the cash, so the number of shares will be new share issued. So you can consider the transaction will be financed by the number of new shares issued from Yirendai, as well as the RMB889 million cash from our operation to finance the transaction. And then we expect the closing to be in mid of this year as we complete some of the pre-request closing condition that we're looking forward to have the combined business and report our business operation to all of you.

Operator

We have our next question from the line of Matthew Larson from National Securities. Please go ahead.

Matthew Lewton Larson -- National Securities -- Analyst

Okay. Hi, good morning, thanks for taking my call. I'm calling more from the point of view of a fairly large investor in this space. And if there wasn't a peer to peer lending or payday lending via online and mobile, which is really the area you're in, and many of your competitors, whether it's Qudian, PPDAI or Lexington (ph) and what have you, where would the consumer in the PRC get loans? I've always understood it is hard to get them from banks and that credit card usage is not as widely around as it is here in United States.

Dennis Cong -- Chief Financial Officer

I think you can think about in this way, the number of credit providers in China, you have, of course, the Bank and then you have the consumer -- licensed consumer finance companies, and then you have Fintech platforms like us. So usually the bank are limited by the lending risk that they are restricted. As you may know, that all of the banks have their own NPL threshold and then the lending rate usually are capped around 18%. And then for the consumer finance, licensed consumer finance companies, you have them -- several of them, that they also have certain risk and price spectrum.

And then in China given it's large population, a lot of underdeveloped credit system, there are so many borrowers who do not have enough access from the traditional financial institutions. And then Fintech platform like us and our peers are really innovating by working through online collecting data, do the -- make a very sophisticated credit underwriting to provide the fundings for the under served population in China. So, in this way, you can think about you have mostly bank institutions and then you have Fintech platforms that they have different customer segmentation as well as the capability. Of course, I think Fintech platform are also leveraging the online customer acquisition, online data collection and credit underwriting, they are providing faster service, more user friendly service to the consumer base in China.

Matthew Lewton Larson -- National Securities -- Analyst

I guess that's my point is that for the young consumer particularly in China, your industry seems to be very important. People need credit if they want to buy things and the Government has been regulating your business, because perhaps it was kind of a wild west environment. And the amount of lenders both peer-to-peer and say payday have a loan operations have been reduced dramatically from several thousand or a few hundred I guess is what I read. But in the meantime, the surviving firms like yourself, who've been in the business for a number of years that are well capitalized presumably would pick up market share once the caps on the loans are lifted.

And in the meantime, you're developing a tremendous database on the consumer habits of everybody you work with. So, this is why I don't really understand why the stock values of all the companies are at such low levels based on the fact, you don't take a lot of credit risk. And that even that your -- your charge offs are pretty minimal, 1.5% or something, which are a fraction of what you would see with credit card companies here in the United States, who also charge high interest rates, but -- so do you have an explanation that at some point the Government in the PRC should -- will probably become less restrictive once they've cleaned up in their mind, the whole industry leaving stronger players there, so that they don't have to worry about people losing -- whatever happened last summer when there were people rioting in the streets because they lost all their money because certain operator just closed down. So that when that lifts, which could be a year from now or two, I mean, wouldn't it seem that an investor would do them self well to buy in at multiples that are extremely low now versus where you would have bought into -- I mean, your own stock is down 80% repeat sake. Every -- all the analyst likes your stock when it was $50, and nobody really likes it down at $10, does that ever resonate with you, that's what I don't understand as an investor, usually buy when there's kind of blood in the streets and when everybody likes something, you get a little nervous. So that's my comment on the whole thing. It sounds like your business is pretty sound and that your growth prospects are just capped by governmental regulations that at some point might be lifted.

Dennis Cong -- Chief Financial Officer

Thanks, Matthew, we of course so agree with you that there is a huge market opportunity for the leading platform in China, as you stated that it sits here in the upside from here. And we have multiple business going on. And then in particular this business realignment is really getting us set ready for the upcoming opportunities as all the things are -- get cleared up. So clearly we're very excited and we have a great expectation of our business and the future. In terms of capital market, I think probably lot for us to comment, we are a long-term business operator. We look at business for long term, as our chairman says, the finance is a marathon without ending. So we look for very long-terms and we believe that smart investor will realize the value when they see the truth. So I guess we'll leave at that.

Matthew Lewton Larson -- National Securities -- Analyst

All right, well, thanks for your insight, appreciate it. Thanks for taking my call.

Dennis Cong -- Chief Financial Officer

Sure. Thanks.

Operator

We have our next question from the line of Stephanie Kwan from Citibank. Please go ahead.

Stephanie Kwan -- Citibank -- Analyst

Hi, thanks for taking my question. So I'd like to first ask about the loan growth outlook. So, I'm just looking at the January and February data that's disclosed on the FA as I've said. So you see the first two months of this year, the loan volume looks a bit muted, that is down about 50% year-over-year. So I'm wondering what is the reason for that? And since you just mentioned, actually the funding supply is pretty ample from both retail investors and the institutional funding partners. So does that mean maybe asset quality is due the key constraint for loan growth to better pick up from here and the fact that you previously have been tightening on the credit approval. So I guess the question is when do you see asset quality like stabilising and then you can further like stream these loan growth.

And second is about -- also further about the transaction. So I'm wondering, what is the difference between the offline -- the wealth management business for the targeted company and Yirendai? And if I look at the revenue for the target business, is that mainly coming from through the lending business? And I'm just looking at the (inaudible) for the targeted business and since higher than Yirendai for 2018. So I'm wondering like what's the reasons for the difference here is because of the asset quality or maybe the loan pricing. Thank you.

Dennis Cong -- Chief Financial Officer

Yeah, thanks, Stephanie. In terms of our business, as we mentioned, the top priority is for us to make stable credit performance risk performance is top priority for us. I think if you look back in Q3, we have controlled the risk really tight. And then as you have seen, we're gradually recovering our loan origination volume in Q4. And also that if you look at our early delinquency data, it's already showing improving sign.

So from our own operation perspective, we have first tightened the risk policy back in Q3 and now as we have seen a sturdy improving asset quality from the new originations, we're slowly opening up in terms of our loan origination volume. So of course we're still under a controlled growth mode, we're not in a rush. The reason being that, as you all know from the Circular 175, there will be continued process of some of the platforms leading the business and there's a potential impact in the industry credit performance. So we'll be very, very risk conscious in terms of growing our business. So, and -- of course, as we continue to observe improving credit performance and overall recurring credit environment and you will expect our business to recover to the level that we will feel comfortable with.

So, in terms of the transaction, the part of business that we acquire is online. And then as you may know from the news or the website, CreditEase also have a large loss mentioned operation that's mainly driven by financial advisors, that's targeting high net worth customers. So, basically with the investment asset of RMB30 million and above the business that Yi Ren Wealth, as well as the business we acquire are more targeting the mass affluent, which we define as the investor with AUM from RMB500,000 to RMB6 million or RMB2 (ph) million, that how we separate business operation.

And then in terms of the revenue take rate, it's a bit of oversimplified, if you just take the revenue divided by the loan volume. As you know, that there's about half of the sales of the volume is actually referred to Yirendai. So, the target business was only collecting the commission, which will artificially increase the revenue take rate, if you're just using the simple math. And so I think as we mentioned, by the time we close the transaction, close the historical financials, you will see much more clear in terms of the revenue take rate, the costs, the probability. And as I have mentioned in previous answer, that the customer base is somewhat wider and then the product is actually quite similar unsecured consumer loans. And then from the risk return perspective, it actually shows reasonably -- reasonably good probability from our -- the historical performance of target in 2018.

Stephanie Kwan -- Citibank -- Analyst

Okay, thank you.

Operator

(Operator Instructions) We have our next question from the line of May Yan from UBS. Please go ahead.

May Yan -- UBS -- Analyst

Yes, hi. Thanks for giving me this opportunity to ask question. Just want to follow-up the target company versus the -- our Yirendai. So, if the two companies business are similar and previously there were like business referred from the parent to Yirendai, so how was the decision made? What business would be referred or introduced to Yirendai versus they may stay at CreditEase or stay at the parent company. That's first question. And I guess previously also asked what was the -- sorry, what was the time line to finish the transaction? Thank you.

Dennis Cong -- Chief Financial Officer

Sure, yeah. Thanks, May. Yeah, historically, the CreditEase lending operation, we have a non-compete agreement. For Yirendai, we target the customer who has credit card and salary income. So when the CreditEase lending operation sees customer fulfilling that profile, they actually obligate to refer to us. So historically we have always had the referral program between the CreditEase inclusive finance as well as Yirendai operation, that actually contribute to close to 40% or close to 40% or 50% of our business origination volume. I'm not sure if that's what you're asking on the referral side.

And then in terms of the time line for the closing, we're expecting to close the transaction, meet up this year when the audit financial statements are available and such several other preconditions met that we expect to close the transaction soon. And at the same time we believe that the synergy will be great, the operation level, we already see and expect significant step-up in terms of our business operation efficiencies going forward.

May Yan -- UBS -- Analyst

Okay, yeah, thanks for answering the question. I guess it's just for us, there's very limited data given the target, so how should we evaluate or how should we think about it, whether it's a favor for Yirendai or is it something more favor for the parent?

Dennis Cong -- Chief Financial Officer

I think from the business operation perspective, you can consider the majority of the business has a business model that's similar to Yirendai. And then I think from the business operation skill and capacity, as well as the revenue number that we provided, I think it should give you a good sense of how the two businesses compare. And then in terms of the transaction, the valuation was actually done based on the historical performance of the target, as well as the potential business operation and probability. This was actually confirmed by a independent third party advisor and then was approved fully by our audit committee and independent board members, that we believe it's a very fair transaction for both side.

May Yan -- UBS -- Analyst

Okay. Thank you.

Operator

Ladies and gentlemen, that does conclude the conference for today. Thank you for participating. You may all disconnect now. Thank you.

Dennis Cong -- Chief Financial Officer

Thank you.

Duration: 58 minutes

Call participants:

Lydia Yu -- Investor Relations

Ning Tang -- Chairman-CreditEase

Yihan Fang -- Chief Executive Officer

Dennis Cong -- Chief Financial Officer

John Cai -- Morgan Stanley -- Analyst

Jacky Zuo -- Deutsche Bank -- Analyst

Alex Ye -- UBS -- Analyst

Anderson Cha -- BNP Paribas -- Analyst

Matthew Lewton Larson -- National Securities -- Analyst

Stephanie Kwan -- Citibank -- Analyst

May Yan -- UBS -- Analyst

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