Q3 2020 Lufax Holding Ltd Earnings Call
At this time all participants are in a listen only mode. After the managements prepared remarks, we will have a Q and 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 the Board office and capital markets. Please go ahead Sir.
Thank you operator, Hello, everyone and welcome to our force or any conference call on the come.
Revenue.
Our third quarter 2020 financial and operating results were released by on Newswire services earlier today on the county of valuable on line.
Today, we have missed the gone on co chairman and director of the Executive Committee meets the great Yeah. The CEO.
I missed the wise choice CEO of our hockey of business.
The James joined the CFO on the.
The David choice, the CFO of our hockey of business on the call.
Yeah, we'll first hear from Greg who will start the call. The the review of our progress on details of our development in the quota.
Afterwards, our CFO James will provide a closer look into our financials before we open up the call for questions.
In addition, the additional management team the entire managed to the team will be available during the question and answer session.
Before the continue I would like to refer you to our safe Harbor statement in our earnings press release, which also applies the this call as we will be making forward looking statements.
Please also note that we will discuss non AD price measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under the international financial reporting standard earnings release on filings with the SEC.
With that I'm now pleased to turn over the cost of Greg the of Loopnet.
Thank you and welcome everyone to our first earnings call as the public company. The slide again. Please note that all numbers are in RMB terms and all comparisons vary by the year on year on year over year basis, unless otherwise stated.
We delivered solid results of the third quarter of 2020 with our balance of loans facilitated growing by 41.4% year over year, the 535.8 billion on.
Also the leading indicators for risk performance at our lending portfolio, our portfolio lending platform, regardless of the pre covered ranking the level.
As planned we also continued to make progress of establishing a more sustainable of risk sharing business model with our funding partners during the quarter.
On the wealth management from our client assets grew by 7.8% year over year to 300.
The $3 billion amongst with the current product portion grew by 61.6% year over year to 346 billion.
From a broader perspective, we continue to observe the market concerns the cross 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 on the sort of the more questions on regulation, which we'll be happy to address the today the QNX.
Sure.
On the back of China's economic recovery and adjustments to our product pricing, we maintained growth at our retail kind of facilitation business during the third quarter.
Our outstanding balance of loans facilitated grew by 21.4% of the quarter accompanied by a 16.7% increase in cumulative borrowers.
During the third quarter to 74.1% of new loan facilitated where the spurts to our core segment of small business owners up from 61.3% in the same period of 2019.
We also continue to investing technology as we rolled out on the wider scale, our AI in video growth products, thus, enabling our customers to complete the loan applications by simply talking to the robotic age of over the internet without including any tax.
We also developed technology and other areas, including customer profiling client, forcing the loan underwriting and paying the collector as the result, our customer experience of 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 guideline for loan primary pricing announced in August we adjusted our annual percentage rates or eight yards to ensure the all in cost for the borrowers remained below 24%.
After such adjustment, our new loans totaled $54.8 billion in September representing increase of 20.1% year over year.
Underpinning our September growth with an ongoing shift of our business focus the higher quality borrowers we tend to organically produce larger ticket items in general means.
Meanwhile, our revenue take rate declined from 10.4% a year ago to 9.4% for this quarter the.
Collecting the reduction of avionics.
One of our recent focuses has been to restore our loan portfolio quality to the pre pandemic level by leveraging our strong risk management capabilities.
The leading indicator for our loan quality is our monthly flow rates from current levels to those one to 80 889 days past due or DPG is.
In September for example, this the indicator was 8.5% for general unsecured loans and 0.1% the secured loans, which was in line with our pre pandemic levels. The.
The giving some context the same indicator was 1% for general unsecured loans and 27% of secured loans during the peak COVID-19, the peak of the 19 in February of this year.
In addition, the delinquency rate for general unsecured loans that were more than 30 day past dues and improve the 2.5% as of September thirtyth from 3.3% as of June Thirtyth 2020, while.
While the same metric for secured loans that were more than 30 day past due and improve the 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.
Meanwhile, as planned we continue to make progress of establishing a more balanced the sharing of business model with our funding partners in the period.
As of September Thirtyth, our outstanding balance of flows facilitated with guarantees by third party insurance partners decreased to 91.4% from 95.3% a year ago.
Moreover, the share of loans directly guaranteed by ourselves increased to 4.5% as of September thirtyth from 2.5% a year ago looking.
Looking ahead, we plan to make this initiative of continuing to take on more risk on the platform as the key business focus for the remainder of 2020 at the items.
Now turning to our wealth management platform.
During the quarter, our ongoing transformation in the business segment remained on track as our total number of active investors grew by 8.3% year over year to 13 billion the.
Meanwhile, our total client assets grew by 7.8% year over year to $378.3 billion of.
On switch to the current product courses, excluding legacy products increased by 61.6% year over year to 346 billion.
As of September 32020 legacy products made up to 8.5 percentage of total client assets versus 39% the year price.
During the third quarter, our wealth manager the 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 rate take rate of 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 core focus couple of core focuses remains on the improvement of our product mix with the underpins the quality of the take rates as we continue to improve our customer analysis of insight capabilities. During the quarter. We were also able to not only improve on product and service offerings, but also tailor them each day.
The digital investors conferences.
As a result, our 12 month investors 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 the investments more the 300000 revenue beat on our platform increased to 77.5% as of the quarter and from 73.1% a year ago.
With once again validated our chosen type of focus for the wealth management business.
In summary of during the third quarter, we continue to transition our business model, while proactively adjusting our product prices in sync with market requirements.
By leveraging our strength in data analysis and risk management, we continue to optimize our funding mix reduce our funding costs and improve our credit quality.
Looking ahead, we expect the deliver solid results for the full year of 2020.
The total income to be in the range of Renminbi 51 to 51.5 billion.
The net profit excluding the non recurring charges for the C ran on convertible note restructuring to be of the range of 13 point Q, the 13.4 billion renminbi.
Although the recent changes of the regulatory environment the of not directly affected our operations to date, we remain extremely vigilant.
Sure either new or board meeting regulatory requirements the introduced.
We are prepared to quickly make necessary changes.
And ensure of businesses grow and the compliant sustainable and profitable manner for the long term I will now turn the call over to Jake Doug Our CFO to go through the financial details.
Thank you Greg I will now provide the Trump look into our third quarter financial results the.
Slide the game. Please note that all numbers Hopkins village returns on all comparisons on a year over year basis, unless otherwise stated.
We delivered solid financial the south in the third quarter of 2020.
During the period. However, the income was $13.1 billion.
Up by 10.5% year over year line.
While our net profit was 2.2 billion down by 36.8% year over year.
Excluding moving off charges of 1.3 billion the day due to our Steve on convertible notes of restructuring our.
Our adjusted net profit was 3.5 billion in the third quarter, an increase of 2% year over year.
We achieved the solid financial results during the period in which we were dealing with the residual impact of COVID-19.
Transitioning our business to a more balance the security model.
And adjusting our annual percentage rate on Mdrs to keep the all in cost for all of the borrowers the loan from the 4%.
Our strong performance in spite of these changes is a testament to both the resilience of our the model and also the stability of our earnings.
Now lets take a process of animal 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 plan.
That all towards lower funding costs.
The net income was recognized as net interest income.
The 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 the more credit risk to our guarantee company.
I will guarantee income as the percentage of total income increased to 1.3% during the third quarter from 0.8% a year ago.
And the result, our retail credit for the interest indices contributed to 72% of our from income in the third quarter as compared to 84.6% of adult.
Well the effective our net income growth relative to our underline leading growth more on net loss transitory factors.
Including the impact from borrower early payoff.
The reduction in detailed credit the syndication fees recognized from the gold previously funded by PDP.
The reduced wealth management income due to the run off of net new products.
The temporary Kathleen will subside as the alleviate the early payoff of impact by changing how we charge our borrowers as well as by seeking out our legacy products.
While we sustained our revenue growth.
We also exercise prudence in our expense control.
Although our total expenses increased by 32.6% to 9.5 billion during the third quarter of 2020, our expenses, excluding the nonrecurring charges fall Seamounts convertible note of the structural increased only by 13.7% year over year to income.
The $1 billion.
Our expenses, excluding the credit impairment losses, and the financing costs only increased slightly by 6.6% to $6.9 billion from 6.4 billion during the comparable period.
Our GAAP operating expenses increased by 14.3% to $4.3 billion during the third quarter from 3.8 billion a year ago.
Our borrower acquisition expenses, which are a major component of our sales and marketing expenses.
Leased by 48.9% to 2.8 billion from 2.2 billion during the comparable period.
While the acquisition expenses, namely the possessed the expenses, we incurred in order to facilitate those on our platform and the two candidate credit facilitation fee.
The overall sensitivity to borrower acquisition expenses include both new most of the syndicated during the fourth quarter of 2020 and also on no facilitated in five years growth.
Most of the remaining balance on obligation duration and not the lapse.
During the third quarter, our moral acquisition expenses related to the low facilitated the in 2020 increased by 11%.
Why has the same expenses recognized in this quarter per day to those on prior vintage increased by 38%.
Our index the acquisition and retention expenses decreased by 34.1% to $198 million during the third quarter of 2020 from 261 million in the same period 2019, mostly due to the efficiency improvement.
In our invest the acquisition process.
Our general sales and marketing expenses, which mainly with the Gen marketing staff payroll and related expenses.
The most of the comp.
Consulting service fees.
Moving to them and cost as well as other marketing and advertising costs increased by 1.7%.
0.3, 2 billion during the third quarter from 1.34 billion a year ago.
Our general and administrative expenses decreased by 2.7% to six $642 million during the same quarter from 667 67 million a year ago, mainly due to our ongoing execution of cost optimization initiatives.
Consistent with our loan balance growth our operation on the servicing expenses increased by 5.4% to $1.6 billion. During the third quarter of 2020 from 1.5 billion a year ago, while our outstanding balance of growth facilitated grew by 20.
The 1.4%.
To $535.8 billion as of September Thirtyth Twentytwenty from $441.2 billion as of September 32019.
Moreover, an increase in our loan repayment volume net to an increase in our payment processing expenses the.
During the third quarter, which was partially offset by a reduction in cost.
Due to our utilization of of AI technology to improve the efficiency of the low approval and the collection process.
Our technology and analytics expense decreased by 9.1% to cover the $18 million during the third quarter from $530 million a year zone, mostly due to a decrease in personnel related expenses.
Our credit impairment losses increased by one of the 25.6% to $952 million during the third quarter.
From $422 million during the same period last year.
More specifically credit enhancement losses from the nose to customers on the financing guarantee contracts income.
The increase the to $454 million from a credit of 88 million during the comparable period.
As we started to take on more kind of risks as part of our business model transition.
Credit impairment losses related to accounts and the other receivables and content assets increased to $479 million from $163 million during the comparable period, mostly due to the natural increase in the off balance sheet zone as well as the residual.
Impact of coal the 19.
Our hiring of cost increased to 1.7 billion during the fourth quarter from 290 97 million the year zone.
Mainly driven by the non recurring expense of $1.2 billion for C convertible notes restructuring.
Our net loss.
2.2 billion during the third quarter of 2020 as compared to 3.4 billion. During the same period of 2019.
Our adjusted net profit.
Which excluded the after mentioned restructuring expenses, one 2.5 billion in the third quarter of 2020 as compared to 3.4 billion in the same period of 2019.
Our basic and diluted earnings per EPS were both 1.01 RMB in the third quarter of 2020.
As compared to 1.58 RMB in the same day of 2019.
Our adjusted basic the diluted earnings per share.
Yes, good growth 1.62 revenue to be in the third quarter of 2020 as cash.
Compared to 1.58, the maybe in the same period of 2019.
As of September Thirtyth, Twentytwenty, we had $14.4 billion in cash at bank of compared to $7.4 billion as of December 32018.
Looking ahead into our full year results.
We expect new loan balance to be in the range of five hundreds of $58 billion to $568 million.
Yes, the end client assets to the in the range of $395 billion to 420 billion.
Total income to be in the range of 51 billion to $51.5 billion.
And the adjusted net profit, which exclude the non recurring theme on convertible notes of restructuring expenses to be in the range of $13.2 billion to $13.4 billion.
These more cash reflect our current and preliminary views on the market and operation of conditions, which are subject to change.
This concludes our prepared remarks for today, operator, we're ready to take questions.
Certainly at the time, if you would like to ask the question. Please press Star then of the number one on your telephone keypad. Once again, the the star of the number one on your telephone keypad.
We will pause for just a moment to compile the culinary roster.
Your first question comes from the line of maybe end of from you be on fewer line is open.
Thank you and thanks for taking my question.
The cracking change.
And the congratulations on extending the resulting in very challenging and of the nature of the endpoint.
The interest rate environment and the okay to question.
One ace and continue to new net inflow of fee on the IR are in there on.
The second 80 items.
The second quarter and based on trends in October of two independent and down.
So the new long section on ex the average and if you think of dice advocate and pick and pack and in any of the economic state down of the.
Of the load.
What's the trend for us.
From a funding.
Moving on future cost.
Okay. This is going on.
The question with cash.
The bodies operating and net.
And secondly on the regulation the download night on.
We're committed with the IDR responsibility the CPR to the innovation and the recently passed the criticism of outcome from.
On billing okay.
PMT intuitions Panamax class on.
At the height interest share charge of that kind.
Partnership with net.
True bank on which would be the app. The approach net you try to the banker. Thank you very much.
Great. Thank you base, Greg here, but obviously I'll take your second question first.
I will come back from the details on the first year as we in the for the numbers together for you.
On on the question of.
The regulatory issue.
As you know was highlighted really was the question of whether or not there was any.
On the core bundled sales.
And we've investigated that carefully from a legal perspective, there is actually no third definition of that but the rate of regulators may have of different interpretation and none the less what we've done.
The recent weeks is to adjust the.
That process for the customers have clear choice and so the answer is clearly now on the platform the ability.
Around the bundled sales capacity and customers do have the choice of the writers of shoes, which ensure or guarantee of the day supply.
I think the there is an important sub question the in there and what sort of people may also have which is the world's some highlights around the world.
Our.
South of.
Our understanding really in the in the broader market environment really since post the accord guidelines issued in August that the yes. The current view very much of the funding is coming from financial institutions.
That the acceptable range is 24% of below.
And we think that that's something that is likely to change in the near term and it's something that really has the backed up by the court cases.
In the last couple of months as people have the have gone on at the see if they can actually get the funding reduce further of the interest rate reduced of this the backed up some of our 20% below.
Having said that.
One of the things that we mentioned in the course of the road show the.
Before we will take every opportunity, where we can optimize operating costs and funding costs.
On the past on lower rates the customers, while protecting our net profit margin is the that remains the continued focus of we will we will work on in the future as needed, but again I really don't believe that the 24% number itself was the significant change this year from.
That said I'll turn it back over to.
You want to go Thats on the average let me answer your first question on and then I may on through our supplement about the percentage where.
The force questions about our IR trends.
If you look at our fourth quarter of the hour average HR. The unsecured loans was 26.5% frankly want to know of out.
One of the HR.
However, as to the reduced 5022% of what will happen on September force sensing the testing our new on.
On top of referring to from a number of Dow.
Our current average price on the loans, 22.4%.
And the right. The funding cost are the main how much change it at 6.7% and the CDAI premium increase on loss because now we are increasing on the market flow type of contract price segment, the feedback the metric and our ex from 5%. So those actual numbers plan for your second question first question of fourth quarter.
Okay and the purpose of out of the recent notice by the state how has the IP 10.
The most our growth of our past the accounts, we group income made strength 19, and the I see the Ed.
GAAP basically the point the focus of bonds in the state and as Greg said.
We believe the if not for the sales per megawatt the following the diocese window of guidance related to changes in our case markets from the call. So we'll share our powers to ease of companies from the application.
The second point of about 1% guaranteed debt at the share during our IPO. The show the already have a plan to.
True Gregory decrease our ex the portion from 1% to 20% by the end growth on top of next year and then the table at the opening of number is on a 10%.
So this is not something new for us.
And the lastly, our of on the price against the seeds of future loan that we true may.
Last year on.
The 22% HR and therefore feature on as of today, our price the 70% on alone and also on secured with greatly reduced price outlet at the 4% borrowing speak of borrowing from guys. The Windoor guidance has come from volume.
And then on.
So if you look at the recent put the season and the we clean about more the 4000 court cases and more than 90% of Medicare day use 22% as a standard as the basis.
Nick This is Sean on financial lending institutions the.
Beyond the HIV fuel.
So it's very clear net.
Four percentage to comment on market standard for financials.
It's on lending and there is not any 40% from today about the pricing. So we don't have any plans to further reduce price in the Showtime.
Your next question comes from the line of where the move from Bank of America. Your line is open.
Hi, Thank you very much.
Just wanted to clarify on hit at the instead of the very clearly what's the for the quarter versus September our funding cost in CCI premium and the MTO cash.
The compliance teach repeat that at that the from the question.
Secondly is I think the at Investor day concerned about the Incenting, new as regulation or the regulators talking about tightening the.
And at the on the end the ARX <unk>.
Want to ask the management plan or thoughts on the potential net of MTR, let the net thing and the testing now we are coming back to Hong Kong EBITDA for secondary net in all parts of late.
The primary letting thank you very much.
Okay. The first question on the funding cost on remain on changes from second quarter from force it at 6.7%.
While the us credit.
Each of the premium Hi Fi.
Interest partners decreased from of on 9% balance is 6.5% of network.
And as Joe.
If you exclude cash if you measure of the.
The pure bye.
Yes actually come out of the bank line opinion on balance with the around 8% because it has been very steady the second quarter sort of items and change but on one net patent September we greatly changed outside the market for those new segment net wait and see how the perform differently from two of.
Our EBITDA of behavior of debt from Morningstar.
Okay, well on the and the question of of the recent was charges the Kennedy Bill.
In the US obviously the says.
As expected items.
Youre going back a number of months now.
You look at that Bill itself obviously.
It is laying out of three year period.
If you have the comply with the disclosures of.
What we will dose is that at.
At least the addition of slabs that you've seen in the media from the CSRC is trying to I think proactively the ready to address the so I think of the broader contracts, we do believe the.
The rest of the two will be from having said that there is also we believe the statements. The will of here from our understanding of of the process of with the SEC that is that is looking to.
Great terms of Brown, a co audit process.
So for example, if you're if you're.
Auditing from as the global from it as the China team. It also has the use of national team.
What would happen under this co audits set up is the national use team would have to review the results of the accountable for whatever of working papers.
As on by the China team. So this co audit process of something that we think will also potentially be put forth by the FCC in the near future, but this the reemphasize.
Whatever outcome, whether it's the carry the or any changes that are for the defined by the SEC. We do have a three year period, which gives us more than amplifies the make any other preparation of the terms of other listing options down the road, we don't have any immediate plans.
Revenue from the thing, but obviously I would have some of the flexibility.
Thank you very much.
Your next question comes from the line of the LC Chen from Goldman Sachs. Your line is open.
Good morning class financing change and congratulations on the font color and thank you for taking my questions I.
I have two questions here so is.
With regard to the macro and regulatory environment in kind the country and I will just talk about the payment CDAI assay comment looking forward.
Do you see on the potential risks excellent opportunities because of the facts and could you ask the share in that the more in terms of what's up the fixed.
Cash impact in this environment and changes versus two months ago.
On the second question is really about our customer strategy following up on the timing of customer strategy implemented in September.
In addition to the MPR tranche of just talk about.
On the share with us more on how has the team working out on the self sufficiency found and the trends of the operating Gary. Thank you very much.
Okay, I think on the the regulatory side, although there has been really no specific.
Now spread or no specific requirements issued by anybody here today, what we do understand that the regulators are clearly if you look at.
The traffic come out for the of micro financing.
The season, but the real focus here.
Is on platforms that are cooperating with bank of.
To have more skin in the game at the bear more risk and to have sufficient capital to backup that risk.
That is that is clearly the main focus.
And while that is the clearly stated for the micro finance model, how it would apply to other business models of the market, including our own.
The answer is no clear statement, yet, but as we disclosed when you're going from the IPO process. We are as wide as highlighted the or by the first half of next year you would hope for all of the world that we will be taking 20%.
In in the mix.
Whether that 40%.
Could be changes from people that to the 20% become 30% that's something that we will have the monitor.
On the word to the slightly more from 20% to 40% we have more than adequate capital of the handle that even not even including the recent IPO of.
The rebate.
Taking a little bit of time.
So the regulators the report of a clear view for the industry is the whole across the business models, we understand the regular working very hard on this issue. We also hope the other the b of the answer in the near term of we're also from a recently well prepared for for any of the geology, maybe on the question for regulation of App.
Growth 72 of the back if you comment.
Pete.
On our historical.
The chip Russia.
Bush on that you're right the environment to the switching to soil consisting of reserve hopefully from front to the trail accounts that kind of on have presented on what's kind of yashi combat power on the this year, which had the Russian issue on the achievement on track go on each acumen of three Turner cutback on of our culture.
So this was chemtreat speaking on given I think on regulatory will be a great concern from many analysts and investors as you map of the questions I will now provide a systematic on our view on what we think of the regulatory environment and our responses.
Relative to the Youre going can kind of 4 million weighted price William IBCM of Michelle can clamber from channel fashion on a tour of again.
Our firstly the due to the and you are going to receive the has been your second term of the regulatory direction from.
The antigen from.
Some of that change on the pre drug and the PM.
Two of them are together in the coming.
On the two major tenders.
Peter to the soucie.
On the first is the tightening of the over from environment.
The adjusted share men tightrope on the second is the comprehensive answer growth through to the top level of the regulation.
Kind of hit kind of course she's.
Your converts the coal price.
Tick.
Talking about on.
TMT Anda.
Got to channel in the past, we have seen a lot of tolerance for innovation, which now today the regulators on them a lot more cautious, but we're also in the south of Chen constantly evaluating our accounts that for your flow plant should be the appeared on Q, none of them accounts of the coal tactic index again on 2000 the average.
On our ventures group Jamba housing cash optima, how much of the sort of line.
Before the IPO, our biggest challenge was probably to deal with the four times LCR rules on post IPO today RP. The time just to get a clear view of where the regulators are having on the regulator the current business.
How would you add on there on the south of the of legal finance the curve should pay the algae protein can attend one third share putting up type of the.
Clearly the PM has assumed two data.
Introducing figuring out on.
No doubt the portions of the time of our IPO on for day regular through tenders on the biggest uncertainty the facing our business.
The only from two other cooking Mama kisses by came on accounts, while opportunities the xunlei moving Hal will be on price above the average on choose the path to intermodal and the improved completing the repository of timberland go from status. The Kantar your glass to be the LCR couple of the likely timing on the year on that.
Our two licenses on finance.
Because of the uniqueness in China, while reported by regulators on lease.
We don't necessarily Trust me the CCRC the CDR. The on this aircraft. The we have to take into consideration of the state Council on the government and as regards the the forefront of yard was not originally set out by the tradition of national regulators session of the PRC on the Crts RP, which was on the Supreme Court.
Great deal of mature because new kind of change on the throughout the on how they are getting the material content with the actual switch on or meant the.
On the pickup.
So this is one of the major lenders where accounts being at the various regulatory bodies. Today, Secondly, I want to talk about our sponsor on what we can do of Alex.
On the contract terms on treated according to the FDA had acquainted with the impact of Capex sheet of Amir.
I think the major areas of concern for the regulators on the seven fully area the.
The integrators can grow effects on the company.
The first is over our cost of borrowing the other ship of contract too much out of the secondary but at the time of from the.
The salad on the commodity.
Third is out of our leverage this regarding the strategic use of breeding centers on four is operating with the district of cross across the industry.
Steve will cover income.
In high yield of switching from China, some growth the an outlook on how the switching the story of bulk or how the food channel on home fruitful chunk of yours.
Number five of the lower price of 20 providers that the explaining the from process one of the few the on underwriting on the outsources the others consider commensurate tax on true team does need to the back of.
From the use of proceeds from the loan the for the trigger financed through shelf with two of our core history adjusted to top wholesale platform.
Hopefully the season you today.
The seven of the last point, the consumer protection and this is mainly reflecting the number of complaint on what we're thinking about will come from the.
On the free cash flow per month.
And here is what we're going to the is concerned.
The that.
We'll make our key channel the out year share.
On slide that she's sucrose between 300 trees the frequency.
Contracting on the oxygen out here.
Our first and foremost we need to try to understand the regulators the tension on where the trend for the.
Number two the go turn on treating when the transferred to hold the figures on almost three companies signed up.
Healthy industry across all of the chain ramp of on policies on each of the cohorts.
And.
The one month after the we did our IPO, we have the Beijing has the buyer frequent dialogue with different regulators to try to understand income.
First of all the opportunity through kind of balance insights on shipping line of granting three of free cash and keep the highly recurring line and not only will impact from entering Walter financing of management levels also involve the this process.
Thank you for growth in Orlando to restructure Trued up.
Jim GAAP movement, Shearman shampoo handling the francafrique proppant per year sort of stay warm and tough summary on more students who are on the newly launched last from me on the go to go from the of about charging the.
So we were hoping to get a clear steer from the regulators are why the are how the net especially on the impact to our business model on profitability model.
Trade on the key when the crude cannot get on at our cement, which uses so the chain glass tumor committing to sharpen the front door handles that each of the tolerant getting annual growth oriented or amended one of the issue more sort of come I suppose on does not change by a bunch of from season the.
Cheeky Chalmette surgeons on season quick to tax and the thing such year or maybe some more strength of shamir CIT share that nature of that.
She the Oreo Reight hundred of sort of thing so yes, the dive into the at the end of considering the further from to go that route.
So part of the versus the bodies on you're discussing on what they're going to the Max we have we believe our business model of differ from line and there are certain recognition from the reported revenues reported on that point on slide previously discussing our the are not 100% clear on what exactly because of his next summer.
On rental of the year three this year once the drug Chris we can do the from gives the champions League transacting.
All we can do as the.
Anticipate the future direction on the desktop business model Accordingly before.
The EBITDA.
Fear on channel and the futility of 102 high taxes on the throughout each with the function of median LG. So we've had to go through on the our.
She contacted key channel.
The income the you also lighting channel from the onshore.
Despite not knowing exactly what the future lose maybe.
We are now with the clear of their income and therefore, we will be pre positioning our businesses. Accordingly. So we are prepared on lose the from the health.
On more churn rate the Ormen will ameliorate the drug coated to swing combat the low from increase of showing through China limits of income of filling the math or general kind of hold on the high share financing will answer.
So far we believe we have an interest in line of communication with regulators on with the the economics are.
Our problem.
This is always has to have the moment I will continue to do the communications the standard coming true what net service contract growth were mainly from climate continued achievement of the entities are three sort of wholesale or meant the type of this result traditions Tony.
And third the I want to say our communication to have the market, including on investors. We have a principle of the management will always the open transparent on on us with the type of market.
Favorable number of channel.
Hey, good backup of largest bigger ruble euro safely on T. with the Chelsea on more quickly talk on the strategic Palmer. The How're you went on the generation that converging on on the supply chain Downdip PL happened what share on share convert the interest share control that.
As of yet the.
So this is all we have I have share everything I have with use of great entre on here.
More development rest assured we will be the first and foremost let me now on reducing the regulatory environment discuss the Titan and the changing rapidly before we will remain vigilant the wasn't space.
Okay.
For the second question you one of the comments yes.
Yes, let me answer the question by providing of the numbers so essentially.
Shifting outside the market the from sets in the force, which allow local HR.
And the repurchase our philosophy the at the Cape while new cash.
The net.
The per share up will provide more than the listening from us numbers will sort of despite the have 10 day.
Holidays, our new sales volume was more than 45 billion on in the amounts and in November of the course opted to be on a month, so like TD of Mboe our portfolio of sales.
About 530 billion, the Monday, which is slightly ahead of our targets and as a result, our has caused the increased by about 9% from second quarter for the quarter and why our channel mix on a state.
Remained unchanged at 50% from dedicated 40% line agent and 10% from Telemark Millen line Sofa set of financing cost saves from delivering.
Got it thank you, Tim and cheaper for tickets to the regulatory concerns trucks back line Thats very helpful. I think the came on last Q from inside the business. Thanks.
Thanks again.
Your next question comes from the line of of Benny Wong from HSBC. Your line is open.
Hi, congratulations on the same content and also sometimes from IPO in first quarter of the company. The company My two questions. The happiness, why especially on the credit risk exposure, we understand that.
The management commented the new essentially the increased the credit of this exposure between and the books.
As communicated to the IPO.
From our plan on using.
On that and we reach also step up that the to 30% to the just in line with the decline and the at the core lending in the fact that the Q.
So how do you think of that.
Change impact the take rate.
For the effectiveness and efficiency of this.
Next question. The 0.1, how do you see that impact sentiment the on the net income.
In terms of how the increase in the country's exposure will translate into increased net net.
Initially the question is that if you look at the RBC motives financing downstream R&D on things that the 22% of 80 outflows of range I do on industrial multitude of the quite high on.
And just on that we are.
Lowering the ATM volume to below 24%.
So it seems funny the severity will set the pressure to lower the 80 out the in the near future.
What is the plan that we have been keeping up so.
On how.
How does that impact on us.
Great. Thanks.
[music].
Okay.
Yes, so the.
The purpose of our current exposure I think I want to share the open the number of because we clearly if you look at if the person from number of the outpatient needs aesthetic clear so.
So.
The ARPU for the full percentage volume.
Our cash guaranteed portion on Olivia of 10% growth about one month Useight billion and then Pete on 10 key.
The key got pushed on decreased greatly from about 9% down from 77% and why the the rest of 30% taken by the partner banks advocates of the our mortgage income is fairly clear lights on site and as Greg said.
From top 10, none of our keep 20% said cash portion.
End of first half next couple of years and then when we include this part of the 30%.
We don't know yet we haven't decided yet on it.
On the cash.
Net debt financing on our management Lou on us by.
Yes, Yes, the said force more income from joint lending Dan is take of the 30% for the list, but that's not flow our debt the company Thats for a small company Leach yes.
Moving now, but its a 30% in case so.
30% becomes much of norm and the new standard for these two on sandy none of the U.S.
Smaller on items, while each on slices like the antisense if the headwinds that we believe we have moving up the texture to support the 30% guarantee of because as of today.
If I am I mistaken, we have about 11 billion net net debt on our against the company and that's true organic coffee cost is net of that will increase from 25 billion by the end of next year. So surely we can take of the 30% on credit risk from you on without without having.
And for the second injection so.
So the consequence, and then out how this will affect our take rate is.
No thats much even a lot of the positive perhaps I'll take that because they need to take more credit risk. It always comes with.
The more revenue and then more net margin.
And the second question about the price 22.16%.
10 was again the children's we May 2019, and each of the wrong, our average price as of today, the 70%, we greatly reduced and unsecured let's instead of 4% and then how far the wheel go down.
We don't have any plans to reduce.
Dramatically in the Super on because you are not clear about the seven that any for the personal from today the Bud.
Okay on our plan.
We intend to reduce our high cash from 22% for the balance of 20% within three years time. So our plan remains on changes.
Okay. Thank you and thank you so much of the launches.
Thanks Dana.
Your next question comes from the line of Thomas Chong from Jefferies. Your line is open.
Hi, Good morning, Capex management.
My questions.
A question about the.
Management.
On the comments our cash.
Operating.
And the the trends persist.
Thank you.
Thank you kind of.
I'll just restate. The question is the the everyone can hear was the same as of the of the question was on the wealth management side, our competitive advantage in the portfolio of services that we offer.
I would I think I would.
Outline the answer in two parts of the up until now the in the future of.
Operating to now as.
As you know our portfolio of services in terms of scale are north of.
The 10 billion revenue.
Which makes us one of the largest in the market.
And the way the we've been able to achieve that is by creating a very transparent means online for customers. The understand the benefits the yet from the diversified investment of.
And we have now design of more than 16 different strategies for different risk appetites of different market environments and we have also opened the platform to external provider of securities from the other fund houses were also operating portfolio. So that we can match of the customers. So I think up to now what's the.
A lot of to be successful is understanding our customer segments, well, having strategies that are well positioned against those segments.
Also in terms of our online interface with investors getting the the understand the benefits of doing so and also helping the transition across portfolios as the market environment changes roughly on the portfolios. The we played a role in helping to drive the strategy. The year to date return is an average of about 12.
Percentage and so that sort of steady return together with the customer interface I think has been the key the success up to now.
If we look going forward, what we are doing is.
Continuing on the deepened the design on the tax side to really improve the after investment service as of the customers. The really understand how the portfolio is performing how it's the related to the.
Accommodate different market environments, and how adjustments can be made for them to optimize summaries. The service element in the the quarterly tax revenue environment is something that we are building out very quickly, which I think will maintain a unique position.
In the market.
The other thing of.
From our discussions with regulators in terms of where they want to go through with the advisory business from China.
Good where they're starting to come out more and more as they see the advisory business as the business at the best offered to customers the can maybe of Matt.
2000, renminbi or 100000 revenue be or more and so.
Theres, where diversification really makes a difference for customers the can invest that minimal amount.
So our ability to bring the technology at the given our customer segment, which is in the sort of the middle class and the emerging affluent does a very good match there.
The we enjoy the on other platforms the not the drawer enjoyed of the same extent so our advantage of to now has been designed.
The designing a simple matching the interface the financing customers, while going forward is about deepening the tack on the post investment side as the by creating more portfolios that are increased the data driven against the market environment and then finally, we think that on.
The segment will stand out in the our ability to match the sort of services in the market as a whole.
Yes.
Your next question comes from the line of Richard Ju from Morgan Stanley. Your line is open.
Thank you. Thank you.
Taking the question.
I have a question on the progress on us.
Essentially moving on banks take on this is on their own.
In terms of the currency values.
We do see the teams.
The incentives from Sandy again ask the management has more questions from analysts do we want to know whether there's any progress on.
During the third quarter on any any targets for this year on next year.
And then the spend the second question.
Do we have any guidance for the currently for 2021 ex loans net loss.
So Richard on guidance, we will provide guidance as the whole when we report the full year results, so that will be coming soon.
Your first question.
It was really around it on that last the restated the around the evolution of how much risk. We are taking our stress periods of PSC of taking and how much risk is being directly or by the banks. So maybe why as you could restate the ground the of the trend for September October.
So the.
If I look at.
On to the number because at the moment, but is not the audio us safely force or from a number on the output from the launch.
The risk bearing portion.
Some of the 10% by the facts.
And the seven 7% by PMPM team you remember, we used the above 90% of the sharply decreased down from 17% and the rest of 13% on mostly taken by directly by partner balance so the our future of the.
From some banks and it's very clear so the only increased our risk, taking which up to 20%.
And then insurance company, we reduced down to about 40% and day Y band of taking the Labor Force ahead, we've created a lot of responsibility. So that is our passion and the on for Keith that.
It's all event by the end of first half of next year from yours.
Once again the share in order to.
Sorry go ahead.
Yes, I was thinking on the from I think that the leasing progress already so we continue to make.
By the us on that line. Thank you.
Thank you Richard.
Once again, if you would like to ask a question. Please press star value of the number one on your telephone keypad. Once again, the the star and then the number one on your telephone keypad. Your next question comes from the line of on some from the shell on Sir Your line is open.
Hi, Good morning management. Thank you for taking my question I got a couple of question regarding whilst matching the segments.
The the first thing is that the take rates on.
In the current product, we're actually went up in sort of quarter. So.
Can you elaborate drivers behind this and more particularly the we would like to know the product mix is.
Sure the product mix change that'd be great I'm on the current flux.
Number two is that I think previously.
It maybe the plan for us to apply for a mutual funds.
The investment advisory sort of license just one on and on what the progress of of acquiring the slices.
Number three is about the regulation related on the west matching the segments.
We understand that overall regulatory environments for wealth management.
It's actually quite favorable.
But they are basically the sum.
Right in voice in the media.
Especially kind of can buy one of the CRC. Our Fisher, we're talking about the potential of tightening of online distribution of deposit products.
So as the spot.
For Us I think it's the kind of online deposit products from banks caps for sort of the center of on how are the products such as what was on the fans.
What the impacts for us and the we have any plans to the purpose of change yes. That's one of the questions. Thank you from us.
Great. Thank you so.
So the other.
On the mix actually we have seen a general increase across all products.
But we've also seen a lift from more high end products related to the equity related products across products.
As well so it is it is the combination of the look across the board versus the historical periods, we're comparing against but also at the improvement in the mix of higher end of equity related products going forward. The discovery, 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 the higher we will.
The more efforts of building out of the insurance product line as volume flow continues for take rates over time. The this is something of it's ongoing and we will expect efficacy the have positive EBIT.
As we look forward to the next from us as well.
On the other question of the pilot license and the final license for Advisory services.
Where we believe the regulators are going at the low list is to extend the pilot period.
To extend the pilot participants.
We are we have made our submission of our license of this regard.
No we're hoping the as soon as possible, we'll get more clarity on the ability to obtain the license the actual volume from license for financial Advisory group. The there was additional health of the market that it may be the requirements will be announced by the this year. The probably go later into the first half of next year, but it's something that we are working.
Very hard on track to be ready to obtain.
And then the third question.
On the progress of high through the course from zone I guess is on the legally FX again, yes in the strategy with the data in the.
The process of getting a pilot license are on.
Our line up in the of the list of participants is improving as we continue our communications of demonstrate our capabilities. So that copies of these were so a very hopeful of.
On the on the third question of the price.
Positives in the project distribution.
As of today. The total deposits. The view helps facilitate is probably about the exact by 30% as you look at the total annual average day of 370 billion.
I think it's about 700 customers of the ability of Airbus of about 25%.
Of the of the total revenue.
We.
The pace of will be stricter guidelines coming out of probably in the next couple of weeks as late as of the next month or two price. So over the next couple of weeks to make the more clarity as heavy duty of.
We believe the market will continue to exist.
Platforms are working with the 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 the deposits through online platform of operation, which we take the when you take a longer term view.
Probably a good development of the really make sure that the projects are quite quickly if the banks that have the right with structures at the bear the says I think the again the of the focus of the regulators here is on managing overall macro risks at the sum of risk.
So we do think that this market is it will probably not grow as quickly as it has in the past give.
Given these changes.
But we also anticipation of the are advancing our cooperation with many of the new bank asset manager of companies that are in the market. We do believe that the product sets.
That are in those licenses of those entities of we'll.
The probably service of good replace good alternative.
For the the deposit like products that are out of the market today, so with the combination of baby optimizing our mix of the banks that we cooperate with mitigating requirements on disclosure for for investors in those products as well as continuing as the product mix with the advancement of the makeup of management guidelines, we will be able to continue to optimize.
The mix.
Great. Thank you much.
There are no further questions I'll turn the call back to management for closing comments.
Great well. Thank you I. Thank everybody again for participating on todays call I think one important point that the chairman share busy day is obviously, we would make the environment of what the new information, having where that were from nation as relevant material, we will certainly do.
On the cost because first of make it clear with regard to how.
Any impact of May have on us.
So again, thanks, everybody for the of that.
Okay.
That concludes today's conference call you may now disconnect.
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