Ladies and gentlemen, thank you for standing by, and welcome to the Lufax Holding Ltd Third Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, we will have a Q&A session. Please note this event is being recorded. Now I'd like to hand the conference over to your speaker host today, Mr. Yu Chen , the company's Head of Board Office and Capital Markets. Please go ahead, sir.
Thank you, operator. Hello, everyone, and welcome to our first earnings conference call as a public company. Our third quarter 2020 financial and operating results were released by our newswire services earlier today and are currently available online. Today we have Mr. Ji Guangheng , Co-Chairman and Director of the Executive Committee, Mr. Greg Gibb, CEO, Mr. Y.S. Cho, CEO of our RCF business, Mr. James Zheng, the CFO, and Mr. David Choy, the CFO of our RCF business on the call. You will first hear from Greg, who will start the call with a review of our progress and details of our development in the quarter. Afterwards, our CFO, James, will provide a closer look into our financials before we open up the call for questions. In addition, the entire management team will be available during the questions and answer session.
Before we continue, I would like to refer you to our safe harbor statement in our earnings press release, which also applies to this call, as we'll be making forward-looking statements. Please also note that we will discuss non-IFRS measures today, which are more thoroughly explained and reconcile to the most comparable measures reported under the International Financial Reporting Standards in our earnings release and filings with the SEC. With that, I'm now pleased to turn over the call to Greg, CEO of Lufax.
Thank you. Welcome everyone to our first earnings call as a public company. Before I begin, please note that all numbers are in RMB terms and all comparisons are on a year-on-year or year-over-year basis unless otherwise stated. We delivered solid results for the third quarter of 2020, with our balance of loans facilitated growing by 21.4% year-over-year to RMB 535.8 billion. Also, the leading indicators for risk performance on our lending portfolio or our lending platform returned to their pre-COVID-19 levels. As planned, we also continued to make progress at establishing a more sustainable risk-sharing business model with our funding partners during the quarter. On the wealth management front, our client assets grew by 7.8% year-over-year to RMB 300.3 billion, amongst which the current product portion grew by 61.6% year-over-year to RMB 346 billion.
From a broader perspective, we continue to observe market concerns across the regulatory landscape for fintech companies in China, as well as the tightening of regulatory controls. As such, we remain vigilant and are ready to comply with any new regulatory requirements. I'm sure there'll be more questions on regulation, which we'll be happy to address today in the Q&A session. On the back of China's economic recovery and adjustments to our product pricing, we maintained growth in our retail credit facilitation business during the third quarter. Our outstanding balance of loans facilitated grew by 21.4% in the quarter, accompanied by a 16.7% increase in cumulative borrowers. During the third quarter, 74.1% of new loans facilitated were dispersed to our core segment of small business owners, up from 61.3% in the same period of 2019.
We also continued to invest in technology as we rolled out on a wider scale our AI and video loan products, thus enabling our customers to complete their loan applications by simply talking to a robotic agent over the internet without inputting any text. We also developed technology in other areas, including customer profiling, client sourcing, loan underwriting, and payment collection. As a result, our customer experience and operating efficiency continued to improve, as evidenced by our solid operating results in the quarter. Starting on September 4th of this year, and in line with our interpretation of the court guidelines for loan primary pricing announced in August, we adjusted our annual percentage rates, or APRs, to ensure that all-in costs for new borrowers remained below 24%. After such adjustment, our new loans totaled RMB 54.8 billion in September, representing increase of 20.1% year-over-year.
Underpinning our September growth was an ongoing shift of our business focus to higher quality borrowers who tend to organically produce larger ticket sizes in general. Meanwhile, our revenue take rate declined from 10.4% a year ago to 9.4% for this quarter, reflecting the reduction of APRs. One of our recent focuses has been to restore our loan portfolio quality to its pre-pandemic level by leveraging our strong risk management capabilities. The leading indicator for our loan quality is our monthly flow rate from current loans to those one to 89-day past due, or DPD. In September, for example, this leading indicator was 0.5% for general unsecured loans and 0.1% for secured loans, which was in line with our pre-pandemic levels. To give you some context, this same indicator was 1% for general unsecured loans and 0.7% for secured loans during the peak of COVID-19 in February of this year.
The delinquency rate for general unsecured loans that were more than 30 days past due had improved to 2.5% as of September 30th from 3.3% as of June 30th, 2020. The same metric for secured loans that were more than 30 days past due had improved to 0.9% from 1.4% at comparable times. Importantly, we also saw a similar level of sequential improvement for our loans that were more than 90 days past due. As planned, we continued to make progress in establishing a more balanced risk-sharing business model with our funding partners in the period. As of September 30th, our outstanding balance of loans facilitated with guarantees by third-party insurance partners decreased to 91.4% from 95.3% a year ago. The share of loans directly guaranteed by ourselves increased to 4.5% as of September 30th from 2.5% a year ago.
Looking ahead, we plan to make this initiative of continuing to take on more risk on the platform as a key business focus for the remainder of 2020 and beyond. Now, turning to our wealth management platform. During the quarter, our ongoing transformation in this business segment remained on track as our total number of active investors grew by 8.3% year-over-year to 13 million. Meanwhile, our total client assets grew by 7.8% year-over-year to RMB 378.3 billion, amongst which the current product portions, excluding legacy products, increased by 61.6% year-over-year to RMB 346 billion. As of September 30, 2020, legacy products made up just 8.5% of total client assets versus 39% a year prior. During the third quarter, our wealth management take rate for current products increased by 6.4 basis points year-over-year to 36.6 basis points.
However, when including legacy products, the total take rate for our wealth management platform decreased to 56.6 basis points from 88 basis points in the same period of 2019. One of our management team's core focuses remains on the improvement of our product mix, which underpins the quality of these take rates. As we continued to improve our customer analysis and insight capabilities during the quarter, we were also able to not only improve our product and service offerings, but also tailor them to each individual investor's preferences. As a result, our 12-month investor retention rate remained high at 95.2% as compared with 91.6% in the same period in 2019.
In addition, the contribution of our total client assets from customers with investments of more than RMB 300,000 on our platform increased to 77.5% as of the quarter end from 73.1% a year ago, which once again validated our chosen segment focus for the wealth management business. In summary, during the third quarter, we continued to transition our business model while proactively adjusting our product prices in sync with market requirements. By leveraging our strengths in data analysis and risk management, we've continued to optimize our funding mix, reduce our funding costs, and improve our credit quality. Looking ahead, we expect to deliver solid results for the full year of 2020 with total income to be in the range of RMB 51 billion-RMB 51.5 billion, and net profit, excluding the non-recurring charges for the C- round convertible note restructuring to be in the range of RMB 13.2 billion-RMB 13.4 billion.
Although the recent changes in the regulatory environment have not directly affected our operations to date, we remain extremely vigilant. Should either new or more sweeping regulatory requirements be introduced, we are prepared to quickly make necessary changes and ensure our businesses grow in a compliant, sustainable, and profitable manner for the long term. I will now turn the call over to James Zheng, our CFO, to go through the financial details.
Thank you, Greg. I will now provide a close look into our third quarter financial results. Before I begin, please note that all numbers are in RMB terms and all comparisons are on a year-over-year basis unless otherwise stated. We delivered solid financial results in the third quarter of 2020. During the period, our total income was RMB 13.1 billion, up by 10.5% year-over-year, while our net profit was RMB 2.2 billion, down by 36.8% year-over-year. Excluding one-off charges of RMB 1.3 billion related to our C-r ound convertible notes restructuring, our adjusted net profit was RMB 3.5 billion in the third quarter, an increase of 2% year-over-year.
We achieved these solid financial results during a period in which we were dealing with the residual impact of COVID-19, transitioning our business to a more balanced risk-sharing model, and adjusting our annual percentage rates or APRs to keep the all-in cost for our new borrowers below 24%. Our strong performance in spite of these changes is a testament to both the resilience of our business model and also the stability of our earnings. Now let's take a closer look at our financial metrics for the third quarter. While our total income increased by 10.5% year-over-year, our revenue mix changed with the evolution of our business model.
As we increased the funding from those consolidated trust plans that offered lower funding costs, the related income was recognized as net interest income, which increased to 18.5% of our total income in the third quarter of 2020 from 6.5% during the same period last year. As we gradually took on more credit risks through our guarantee companies, our guarantee income as a percentage total income increased to 1.3% during the third quarter from 0.8% a year ago. As a result, our retail credit facilitation service fees contributed to 72% of our total income in the third quarter as compared to 84.6% a year ago.
What affected our near-term income growth relative to our underlying business growth were a number of transitory factors, including the impact from borrower early payoff, the reduction in retail credit facilitation fees recognized from loans previously funded by P2P, the reduced wealth management income due to the runoff of legacy products. These temporary headwinds will subside as we alleviate the early payoff impact by changing how we charge our borrowers as well as by phasing out our legacy products. While we sustain our revenue growth, we also exercise prudence in our expense control. Although our total expense increased by 32.3% to RMB 9.5 billion during the third quarter of 2020, our expenses excluding the non-recurring charges for our C-r ound convertible notes restructuring increased only by 13.7% year-over-year to RMB 8.1 billion.
Our expenses excluding credit impairment losses and the financing costs only increased slightly by 6.6% to RMB 6.9 billion from RMB 6.4 billion during the comparable period. Our sales marketing expenses increased by 14.3% to RMB 4.2 billion during the third quarter from RMB 3.8 billion a year ago. Our borrower acquisition expenses, which are a major component of our sales marketing expenses, increased by 28.9% to RMB 2.8 billion from RMB 2.2 billion during the comparable period. Borrower acquisition expenses mainly represent the expenses we incur in order to facilitate loans on our platform and to generate credit facilitation fees. Those loans that contributed to borrower acquisition expenses include both new loans facilitated during the third quarter of 2020, and also old loans facilitated in prior years whose remaining balance and obligation duration had not yet lapsed.
During the third quarter, our borrower acquisition expenses related to loans facilitated in 2020 increased by 11%, while the same expenses recognized in this quarter but related to loans of prior vintage increased by 38%. Our investor acquisition and retention expenses decreased by 34.1% to RMB 198 million during the third quarter of 2020 from RMB 261 million in the same period 2019, mostly due to the efficiency improvement in our investor acquisition process. Our general sales and marketing expenses, which mainly represent marketing staff payroll and related expenses, brand promotion costs, consulting service fees, business development costs, as well as other marketing and advertising costs, decreased by 1.7% to RMB 1.32 billion during the third quarter from RMB 1.34 billion a year ago.
Our general and administrative expenses decreased by 2.7% to RMB 642 million during the third quarter from RMB 667 million a year ago, mainly due to our ongoing execution of cost optimization initiatives. Consistent with our loan balance growth, our operation and servicing expenses increased by 5.4% to RMB 1.6 billion during the third quarter of 2020 from RMB 1.5 billion a year ago, while our outstanding balance of loans facilitated grew by 21.4% to RMB 535.8 billion as of September 30th, 2020, from RMB 441.2 billion as of September 30th, 2019. Moreover, an increase in our loan repayment volume led to an increase in our payment processing expenses during the third quarter, which was partially offset by a reduction in cost due to our utilization of AI technology to improve the efficiency of our loan approval and collection process.
Our technology and analytics expense decreased by 9.1% to RMB 482 million during the third quarter from RMB 530 million a year ago, mostly due to a decrease in personnel-related expenses. Our credit impairment losses increased by 125.6% to RMB 952 million during the third quarter from RMB 422 million during the same period last year. More specifically, credit impairment losses from loans to customers and financing guarantee contracts increased to RMB 454 million from a credit of RMB 88 million during the comparable period, as we started to take on more credit risks as part of our business model transition. Credit impairment losses related to accounts and other receivables and contract assets increased to RMB 479 million from RMB 153 million during the comparable periods, mostly due to the natural increase in off-balance-sheet loans, as well as the residual impact of COVID-19.
Our finance costs increased to RMB 1.7 billion during the third quarter from RMB 297 million a year ago, mainly driven by the non-recurring expense of RMB 1.3 billion for C-round convertible notes restructuring. Our debt was RMB 2.2 billion during the third quarter of 2020 as compared to RMB 3.4 billion during the same period of 2019. Our adjusted net profit, which excluded the aforementioned restructuring expense, was RMB 3.5 billion in the third quarter of 2020 as compared to RMB 3.4 billion in the same period of 2019. Our basic and the dilutive earnings per ADS were both RMB 1.01 in the third quarter of 2020 as compared to RMB 1.58 in the same period of 2019. Our adjusted basic and the dilutive earnings per ADS were both RMB 1.62 in the third quarter of 2020 as compared to RMB 1.58 in the same period of 2019.
As of September 30th, 2020, we have RMB 14.4 billion in cash at bank, as compared to RMB 7.4 billion as of September 30th, 2019. Looking ahead into our full year results, we expect new loan sales to be in the range of RMB 558 billion-RMB 568 billion, year-end client assets to be in the range of RMB 395 billion-RMB 420 billion, total income to be in the range of RMB 51 billion-RMB 51.5 billion, and adjusted net profit, which excludes the non-recurring C- round convertible notes restructuring expense to be in the range of RMB 13.2 billion-RMB 13.4 billion. These forecasts reflect our current and preliminary views on the market and operational conditions, which are subject to change. This concludes our prepared remarks for today. Operator, we're ready to take questions.
Certainly. At his time, if you would like to ask a question, please press star then the number one on your telephone keypad. Once again, that is star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of May Yan from UBS. Your line is open.
Thank you. Thank you for taking my question, Greg and James, and congratulations on a steady result in a very challenging regulatory and interest rate environment. Okay. I have two questions. One is, can you let us know the IRR or effective APR in the third quarter and the recent trend in October to November? For the new loans as well as the average, if you can give us a bit of the unit economic breakdown of the loans. What's the trend for funding and CGI cost? Sorry, this is a long question with all these operating data.
Secondly, on the regulation development, what would be your response to the CBIRC recent sort of criticism about bundling of the P&C insurance products plus the high-interest rate charged in your partnership with the Industrial Bank, and what will be the approach that you try to resolve those? Thank you very much.
Great. Thank you, May. Greg here. What I'll do is I'll take your second question first, and then we'll come back to the details on the first here as we pull the numbers together for you. On the question of the regulatory issue, as you know, what was highlighted really was the question of whether or not there was any "bundled sales." We've investigated that carefully. From a legal perspective, there's actually no clear definition of that. The regulators may have a different interpretation. Nonetheless, what we have done in recent weeks is to adjust that process so the customers have clear choice. So that there is clearly now on the platform no issue around the bundled sales question and customers do have the choice or the right to choose which insurer or guarantee that they deploy.
I think that there's an important sub-question in there, which other people may also have, which is there was some highlight around the APR itself. Our understanding really in the broader market environment, really since post the court guidelines issued in August that the current view very much if the funding is coming from financial institutions, that the acceptable rate is 24% or below. We think that's not something that is likely to change in the near term. It's something that really has been backed up by many court cases, in the last couple of months as people have gone to see if they can actually get their funding reduced or their interest rate reduced, and that's been backed up so far at 24% below.
Having said that, one of the things that we mentioned in the course of the roadshow, looking forward, we will take every opportunity where we can optimize operating costs and funding costs, to pass on lower rates to customers while protecting our net profit margin. That remains a continued focus that we will work on in the future as needed. Again, I reiterate, I don't believe that the 24% number itself will see significant change in the near term. With that said, I'll turn it back over to Y.S., you want to go through.
Yeah, absolutely. Let me answer your first question, and then I may want to supplement about the question as well. The first question is about our IRR trends. If you look at our third quarter, our average APR for unsecured loans was at 26.5%. I believe you want to know about, what the APR level actually reduced price now to 24% or below starting from September 4th. If you look at our new loans, in October, referring to October number, our current average price for unsecured loan is 22.4%. Why the funding costs remain almost unchanged at 6.7%, and the CGI premium decreased a lot because now we are switching target markets to a better product to our prime segment. CGI premium is actually now at 6.5%. Those are key numbers to answer your second question.
First question.
First question, sorry. The second question about the recent notice by the State Council CBIRC. It was about our past, the accounts we booked in May 2019. I see that there are basically three points. The first is bundled sales. As Greg said, we believe this is not bundled sales. No matter what, if following CBIRC's window guidance, we already changed our sales process from October. We let our borrowers choose insurance companies from their application. The second point is about 1% guarantee. As we shared during our IPO roadshow, we already have a plan to gradually increase our shared guaranteed portion from 1% to 20% by the end of first half of next year. If you ever look at the October number, it's already 10%. This is not something new for us. Lastly, about the price.
This is secured loan that we booked May last year, with 22% APR. For secured loan, as of today, our price is 17% or lower, and also unsecured, we greatly reduced price down to less than 24% strictly following CBIRC's window guidance starting from September. Also if you look at the recent court decisions, we are monitoring about more than 4,000 court cases and more than 90%. It's very clear they use 24% as a standard, as a basis, to make a decision on financial lending institutions, the APR dispute. It's very clear that 24% is becoming a market standard for financial institutional lending. We haven't got any further instruction from CBIRC about the pricing. We don't have any plan to further reduce price in the short time.
Your next question comes from the line of Winnie Wu from Bank of America. Your line is open.
Hi, thank you very much. Just want to clarify, maybe I didn't get it very clearly. What's the third quarter versus September funding cost, CGI premium and EPO? Sorry, could Y.S. please repeat that? That's the first question. Secondly is, I think there are investors concerned about recent U.S. regulation or regulators talking about tightening the standard on the ADR. Just want to ask the management plan or thought on the potential risk of ADR delisting and the scenario of coming back to Hong Kong, either for a secondary listing or possibly do a primary listing. Thank you very much.
Okay. The first question, the funding costs remain unchanged from second quarter to third quarter. It's at 6.7%, while credit insurance premium charged by insurance partner decreased from about 9% down to 6.5% level. If you look at, if you measure the IPO by the actual amount divided by the billion-loan balance, it's around 8% every quarter. It has been very steady. Second quarter, third quarter, I don't see any change. Knowing that, starting September, we greatly changed our target market. For those new segments, we have to wait and see how they perform differently in terms of our IPO behavior. That we have to monitor.
Okay. On the question of the recent, let's term this the Kennedy bill, in the U.S., obviously this is an expected item going back a number of months now. If you look at that bill itself, obviously, it is laying out a three-year period, in which you would have to comply with the disclosures. What we would note is that, at least the initial response that you've seen in the media from the CSRC, is trying, I think, proactively be ready to address this. I think in the broader context, we do believe that a solution will be found. Having said that, there is also, we believe, some statements that will appear from our understanding of the process with the SEC that is looking to create terms around a co-audit process.
For example, if your auditing firm is a global firm that has a China team, it also has a U.S. national team. What would happen under this co-audit setup is the national U.S. team would have to review the results and be accountable for whatever working papers are done by the China team. This co-audit process is something that we think will also potentially be put forward by the SEC in the near future. Just to reemphasize, in whatever outcome, whether it's the Kennedy bill or any changes that are further defined by the SEC, we do have a three-year period, which gives us more than ample time to make any other preparations in terms of other listing options down the road. We don't have any immediate plans for a different listing, but obviously, we have a fair bit of flexibility there.
Thank you very much.
Your next question comes from the line of Elsie Cheng from Goldman Sachs. Your line is open.
Good morning, Greg, Y.S., and James, congratulations on a solid quarter, and thank you for taking my questions. I have two questions here. First is with regard to the macro and regulatory environment in China currently. I know we just talked about the recent CBIRC comment, looking forward, what do you see are the potential risks as well as opportunities to Lufax? Could you also share a little bit more, in terms of what's your business expansion plan in this environment and the changes versus two months ago? The second question is really about our customer strategy. Following the updated pricing and customer strategy implemented in September, in addition to the APR trend we just talked about, could you also share with us more on how has it been working out on the sales efficiency front, any trends we're observing there? Thank you very much.
Okay. I think on the regulatory side, although there has been really no specific announcement or no specific requirement issued by any regulator today, what we do understand is the regulators are clearly, if you look at the draft that's come out for the microfinance institutions, their real focus here is on platforms that are cooperating with banks, to have more skin in the game, to bear more risk, and to have sufficient capital to back up that risk. That is clearly the main focus. While that has been clearly stated for the microfinance model, how it would apply to other business models in the market, including our own, to be honest, there is no clear statement yet.
As we disclosed when we were going through the IPO process, as Y.S. highlighted, by the first half of next year, we would hope for all new loans that we will be taking 20% in the mix. Whether that 20% could be changed, and some people have asked, could the 20% become 30%? That's something that we will have to monitor. If it were to be slightly more from 20%-30%, we have more than adequate capital to handle that, even including the recent IPO. We think it'll take a little bit of time for the regulators to really form a clear view for the industry as a whole across business models. We understand regulators are working very hard on this issue. We also hope that there'll be an answer in the near term, but we're also reasonably well prepared for any eventuality.
Maybe on this question for regulation, I'll ask Ji, Chairman Ji to also make a few comments.
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This is Chairman Ji speaking. Given, I think that regulatory will be a great concern for many analysts and investors. You may ask further questions. I will now provide a systematic overview of what we think that the regulatory environment is and our responses.
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Firstly, due to the Ant event, we think there has been a sudden turn of the regulatory direction post that Ant event.
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There are two major changes.
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The first is the tightening of the overall regulatory environment.
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The second is a comprehensive and go through to the detail level of the regulation.
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In the past, we have seen a lot of tolerance for innovation, which now today the regulators are a lot more cautious.
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Before the IPO, our biggest challenge was probably to deal with the four times LPR rules. Post IPO, today our biggest challenge is to get a clear view of what the regulations are having and what the regulators are currently thinking about.
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I have no doubt the 4x LPR at the time of our IPO, and today's regulatory changes are the biggest uncertainty we are facing out there.
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Because of the uniqueness in China, when we talking about regulators, usually we don't necessarily just mean the PBOC, the CBIRC, and the CSRC. We have to take into consideration of the State Council and the government. As you can see, the 4x LPR was not a rule set up by the traditional financial regulators such as the PBOC, CBIRC, and CSRC, it was issued by the Supreme Court.
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This is what the major changes we are currently seeing at the various regulatory bodies today. Secondly, I want to talk about our responses and what we are going to do about it.
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We think the major areas of concern for the regulators are in the seven following areas.
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The first is overall cost for borrowing.
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Secondly, whether it is bundle sales.
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Third is our leverage.
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Fourth is operating within districts or across different districts.
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Number five, the role assigned for funding providers that they play in the whole process, whether they do the underwriting or they outsource it to others.
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Sixth, the use of proceeds from the loan they borrow.
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The seventh and last point, the consumer protection, and this is mainly reflecting the number of complaints and what we are doing about those complaints.
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Here is what we are going to do about these concerns.
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First and foremost, we need to try to understand the regulators intention and what they intend to do.
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The one month after we did our IPO, we have been in Beijing having very frequent dialogues with different regulators to try to understand the intent.
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Not only will Lufax management involve, Ping An senior management level was also involved in this process.
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We were hoping to get a clear steer from the regulators where they are heading next, especially any impact to our business model and profitability model.
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So far, the regulatory bodies are still discussing on what they're going to do next. We do believe our business model is different from banks, and there is a recognition from the regulatory bodies on that point. I think they're still discussing. They are not 100% clear on what exactly they're going to do next.
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All we can do is, again, anticipate the future direction and assess our business model accordingly before they pick it up.
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Despite not knowing exactly what the future rules may be, we are now reasonably clear of their intent, and therefore we will be pre-positioning our businesses accordingly so we are prepared when the rules are finally out.
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So far, we believe we have an efficient line of communication with regulators, and we think the feedbacks are friendlier. This is all we can say at the moment, and we'll continue to do these communications.
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Thirdly, I want to say, our communication to the capital markets, including our investors, we have a principle of the management will always be open, transparent, and honest with the capital market.
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This is all we have, and I have shared everything I have with you today. If there are more developments, rest assured, we will be the first and foremost to let you know. We do think the regulatory environment has been tightened, and it's changing rapidly. Therefore, we will remain vigilant in watching the space.
Okay. Y.S., for the second question, do you want to make a comment?
Yeah. Let me answer this question by providing a few numbers. Since we shifted our target market from September 4th with a lot lower APR, then the results turned out to be very positive for our new sales. If I share October and November, recent two months numbers. October, despite we have 10-day holidays, our new sales volume was more than RMB 45 billion a month. In November, we closed at RMB 50 billion a month. YTD of November, our total new sales is about RMB 530 billion, which is surely ahead of our target. As a result, our sales productivity increased by about 9% from second quarter to fourth quarter, and while our channel mix remains unchanged at 50% from direct sales, 40% life agents, and 10% from telemarketing online. Far it's very promising for our sales volume delivery.
Got it. Thank you, Chairman Ji for taking us through the regulatory concerns transparently. That's very helpful. Thank you, Greg and Y.S., too, for the insight on the business. Thanks again.
Your next question comes from the line of Binnie Wong from HSBC. Your line is open.
Hi. Congrats management on the strong quarter and also successful IPO in the first quarter as a public company. There are two questions we have here. One is actually on the credit risk exposure. We understand that management has commented that Lufax will increase the credit risk exposure to 20% level as communicated during the IPO. Is there any plan you think that will need to also step up further to 30% to be just in line with the requirement under the co-lending in the draft regulations? If so, how do you think that will change, impact the take rate for the credit facilitation business? That's question number one. How should we see that will impact, say maybe any magnitude you can give in terms of how the increase in the credit risk exposure will translate into the increase in the take rate?
Second question is that if you look at the recent notice by the CBIRC on saying that the 22% of the APR of loans arranged by Lufax and industrial banks appear to be quite high. Understand that we are lowering the APR of all new loans to below 24%. If the stance from the CBIRC will put further pressure to lower the APR further in the near future, what is the plan that we have been thinking of so far? Again, how does that impact our take rate? Thank you.
Okay. Yeah. The first part about credit exposure. I think I want to share the October number, because if you look at the October number, our position is very clear. Yeah, for October, total trade volume, our self-guaranteed portion already are up to 10%, for October, one month, new sales volume. Then Ping An guarantee, the CGI portion decreased greatly from about 90% down to 77%. While the rest, 13%, are taken by partner banks directly. Our model position is very clear on risk. As Greg said, open to our plan. We want to achieve 20% seld-guaranteed portion by the end of first half next year for new loans. Then whether we need to increase this further to 30%, we don't know yet. We haven't decided yet. If you look at that internal loan management rule announced by [audio distortion].
It says for small loan company joint lending, banks take up to 30% credit risk. That's not for our gurantee company, that's for small company, which we are not using now. If 30%, in case, 30% becomes market norm and the new standard for this joint lending, no matter you use small loan license or insurance license or guarantee license. If that happens, we believe we have more than enough capital to support that 30% guarantee. Because as of today, if I'm not mistaken, we have about RMB 11 billion net assets on our guarantee company. Through organic profit growth, this net asset will increase to RMB 25 billion by the end of next year. Surely we can take up to 30% credit risk for new loans without having any further capital injection. We are confident. How this will affect our take rate?
It will not affect much. It will rather be positive to our take rate, because when you take more credit risk, it always comes with more revenue and then more net margin. The second question about the price, 22.16%. That was again, secured loans we booked May 2019. In secured loan, our average price as of today is 17%, we greatly reduced, and unsecured less than 24%. How far do we want to go down? We don't have any plan to reduce dramatically in the short run because we are not clear about, we haven't got any further instruction from CBIRC. According to our original plan, we plan to reduce our highest APR from 24% further down to 20% within three years' time. Our plan remains unchanged.
Okay, great. Thank you. Thank you so much for the answers. Very clear now.
Your next question comes from the line of Thomas Chong from Jefferies. Your line is open.
Hi. Good morning. Thanks management for taking my questions. I have a question about the wealth management business. Can you comment about our competitive edge in alternative portfolio and the returns versus other providers? Thank you.
Thank you, Thomas. I'll just retake the question so that everyone can hear. It was a bit faint. The question was on the wealth management side, our competitive advantage in the portfolio services that we offer. I think I would outline the answer in two parts, up until now and then in the future. Up until now, as you know, our portfolio services in terms of scale are north of RMB 10 billion, which makes us one of the largest in the market. The way that we've been able to achieve that is by creating a very transparent means online for customers to understand the benefits they get from a diversified investment approach. We have now designed more than 16 different strategies for different risk appetites and different market environments.
We have also opened the platform to external providers, securities firms, and other fund houses who are also offering portfolios so that we can match the customer. I think up to now, what's allowed us to be successful is understanding our customer segments well, having strategies that are well-positioned against those segments, and also, in terms of our online interface with investors, getting them to understand the benefits of doing so, and also helping them transition across portfolios as the market environment changes. Roughly on the portfolios that we played a role in helping design the strategies, the year-to-date return is an average of about 12%. That sort of steady return together with the customer interface, I think, has been the key to success up to now.
If we look going forward, what we are doing is continuing to deepen the design on the tech side to really improve the after-investment service. So that customers can really understand how their portfolio is performing, how it's being reweighted to accommodate different market environments, and how adjustments can be made for them to optimize. So really the service element in a totally tech-driven environment is something that we are building out very quickly, which I think will maintain a unique position in the market. The other thing from our discussions with regulators in terms of where they want to go with the advisory business in China, I think where they're starting to come out more and more is they see the advisory business as a business that's best offered to customers that can maybe invest RMB 50,000 or RMB 100,000 or more.
Because there is where diversification really makes a difference for customers that can invest that minimum amount. Our ability to bring the technology and then given our customer segment, which is indeed sort of the middle class and emerging affluent, there's a very good match there that we enjoy that other platforms may not enjoy to the same extent. Our advantage up to now has been designing it simple, matching the interface at the front end for customers well. Going forward, it's about deepening the tech on the post-investment side. It's about creating more portfolios that are increasingly data-driven against the market environment. Finally, we think that our excitement will stand out in our ability to match these sort of services in the market as a whole.
Your next question comes from the line of Richard Xu from Morgan Stanley. Your line is open.
Thank you. Thank you for taking my question. I have a question on the progress of essentially make banks take risks on their own. I think there's a plan to gradually reduce the P&C insurance guarantees and ask the banks to take more risks directly. Just want to know whether there's any progress during the third quarter, any target for this year and next year? Maybe second question, do we have any guidance currently for 2021 at the moment? Thank you very much.
Richard, on guidance, we will provide guidance as a whole when we report the full-year results. That will be coming soon. I think your first question was really around, and I'll ask Y.S. to restate a bit, around the evolution of how much risk we're taking, how much risk Ping An P&C is taking, and how much risk is being directly borne by the bank. Maybe, Y.S., you can restate around the trend for September, October.
Yeah. If I look at October number, because September number is not that obvious. If we report to October number, the out of total new loans, the risk-bearing portion, sharply 10% by Lufax, and then 77% by Ping An P&C. You remember, it used to be about 90%, so sharply decreased down to 77%. The rest, 13%, are mostly taken directly by partner banks. Our future transition direction is very clear. We want to increase our risk-taking portion up to 20%, and then insurance company will reduce down to about 40%, and then while banks are taking the remaining 40% with credit loss responsibility. That is our direction, and then we want to achieve that, if all event, by the end of first half next year for new loans.
Once again, Sorry, go ahead.
Yeah. Thank you very much. I think that's a decent progress already. Looking forward to more progress on that front. Thank you.
Thank you, Richard.
Once again, if you would like to ask a question, please press star then the number one on your telephone keypad. Once again that is star and then the number one on your telephone keypad. Your next question comes from the line of Hans Fan from CLSA. Your line is open.
Hi, good morning, management. Thank you for taking my question. I got a couple question regarding wealth management segments. The first thing is that the take rates in the current products were actually went up in the third quarter. Can you elaborate drivers behind this? More particularly, we would like to know the product mix. If you can share the product mix change, that'd be great among the current products. Number two is that I think previously, there is a plan for us to apply for a mutual fund investment advisory sort of license. I just want to know what the progress of acquiring this license . Number three is about the regulation related on the wealth management segment. We understand that overall regulatory environment for wealth management is actually quite favorable.
Recently, there are some rising voice in the media, especially highlighted by one of the CBIRC officials talking about the potential tightening of online distribution of deposit products. As for us, I think these kind of online deposit products from banks accounts for 30% of our current products. I just want to understand what the impact is for us, and do we have any plan to prepare for this change? Yeah, that's all my questions. Thank you very much.
Great. Thank you. On the mix, actually, we have seen a general increase across all products. We've also seen a lift from more high-end products related to equity-related products and trust products as well. It is a combination of a lift across the board versus the historical period we're comparing against, but also an improvement in the mix of higher end and equity-related products. Going forward, this is something we will continue to emphasize, and we will continue to emphasize around the portfolio advisory services, which we believe will generate higher fees. I think we mentioned prior, we will make more efforts in building out the insurance product line as well, which will continue to support take rates over time. This is something that's ongoing, and we will expect to continue to have positive evolution as we look forward in the next 12 months as well.
On the question of the pilot license and the final license for advisory services, where we believe the regulators are going at the moment is to extend the pilot period, and to extend the pilot participants. We have made our submission of our license in this regard, and we're hoping that as soon as possible, we'll get more clarity on the ability to obtain that license. The actual long-term license for financial advisory where there was additional hope in the market that the requirements may be announced by the end of this year, will probably go later into the first half of next year. It's something that we are working very hard on to be ready to obtain. The third question.
[Non-English content].
Yeah. Chairman Ji was describing, in the process of getting a pilot license, our lineup in the list of potential participants is improving as we continue our communications and demonstrate our capabilities. That's something that we're still very hopeful of. On the third question of deposits and deposit distribution. As of today, the total deposits that we've helped facilitate is probably about, it's not quite 30%. If you look at the total AUM today of RMB 370 billion, I think it's about RMB 700 billion-RMB 750 billion, thereabout. It's about 25% of the total AUM. We anticipate that there will be stricter guidelines coming out, probably in the next couple of weeks, at latest in the next month or two. Right? Over the next couple of weeks, we may see more clarity coming from the PBOC.
We believe the market will continue to exist in terms of platforms working with banks. We believe that the regulators will probably provide more guidance on what level of pricing the banks can offer. They will also probably provide more guidance on which types of banks are able to continue to increase their deposits through online platform cooperation. Which we think is, if you take a longer term view, probably a good development because it really makes sure that deposits are flowing quickly into banks that have the right risk structures to bear this. I think, again, the focus of the regulators here is on managing overall macro risk and systemic risk. We do think that this market, it'll probably not grow as quickly as it has in the past given these changes.
We also, in anticipation of this, are advancing our cooperation with many of the new bank asset management companies that are in the market. We do believe that the product sets that are in those licenses, in those entities will probably serve as a good replacement alternative for the deposit-like products that are out on the market today. With a combination of maybe optimizing our mix of the banks that we cooperate with, meeting any requirements on disclosure for investors in those products, as well as continuing to shift product mix with the advancement of the bank asset management guidelines, we will be able to continue to optimize the mix.
Great. Thank you very much.
There are no further questions. I turn the call back to management for closing comments.
Great. Well, thank you everybody again for participating in today's call. I think one important point that Chairman Ji made is obviously we remain in an environment where there will be new information coming. Whether that new information is relevant and material, we will certainly do everything possible for us to make it clear with regards to any impact it may have on us. Again, thanks everybody for the attendance.
That concludes today's conference call. You may now disconnect.