Q2 2021 Lufax Holding Ltd Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the <unk> Holdings L. P second quarter 2021 earnings call.
At this time all participants are in a listen only mode.
After the managements prepared remarks, we will have a Q&A session. Please note. This event is being recorded now.
Now I'd like to hand, the conference over to your Speaker host today is <unk> Chen the Companys head of Board office and capital market. Please go ahead Sir.
Thank you very much Hello, everyone and welcome to our second quarter 2021 on earnings conference call on our quarterly financial and operating results were released by our Newswire services earlier today on the currently available on line.
Today, you will hear from our chairman Mr kick off on gross profit call with Amgen on update on our treatment share our thoughts on recent regulatory developments on industry dynamics and provide our clients with future business.
Our co CEO and Mr. Greg <unk> will then provide a review of our progress on details of our development in the quarter.
Afterwards, our CFO, Mr Jamestown, where Albert a closer look into our financials before we open the call for questions.
In addition, Mr White.
Proceed on.
Mr. David Choice CFO of our retail credit facilitation business will also be available during the question 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 and we will be making forward looking statements. Please also note that we will discuss non <unk> measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under the international financial reporting standard in our earnings release and filings with the SEC with that.
I'm now pleased to turn over the call to Mr. Chairman of Loopnet.
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On that front, yes, Hello, everyone. Thank you for joining our 2021 on second quarter earnings call I will start with some general updates on our achievements in the first half then share our thoughts on recent regulatory developments on industry dynamics before providing our clients with future business.
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<unk> update in the first half generally speaking, although Chinese day ACI stock prices have seen increased volatility recently due to changes in macro policies on market conditions on.
<unk> fact, we managed to deliver improvements in our operating performance regulatory compliance and corporate governance in the first half.
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She's the CFO first we achieved high quality growth in our core business for the first half hour total income increased by 17% year over year on net profit increased by 33% year over year later on the call, Greg and sales to elaborate more.
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We responded to regulatory calls by phasing out our peer to peer product smoothed and compliant manner in the second quarter, we substantially completed the run off legacy peer to peer products and further strengthen our regulatory compliance.
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Third we continue to enhance our corporate governance by restructuring our board of directors and establishing communities in key focus areas, including risk management consumer protection and ESG. We're also been actively at 19.7 establishment of our DSD system.
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Court on May 24, 2021 Tower company announced U S 300 million of share repurchase as of June 32021, we have substantially completed share repurchase.
Our senior management purchase U S $5 million worth of share using their personal funds.
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Wireless there are still on uncertainties in the market our stable profitability strong operating cash flow abundant cash reserve and the actions we took to pivot our business based on hours understand your regulatory requirements, all give us strong confidence about our future prospects.
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As such I am pleased to announce a new share repurchase program of USD $700 million over the next 12 months, bringing our total park program for U S $1 billion.
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On the function. In addition, we are actively evaluating other options to return shareholder value going forward.
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Since our Q1 earnings announcement, the Chinese government has continuously heightened supervision a technology platform company. These include the direct share of borrowing information by online loan facilitators and co lenders with financial institutions.
<unk> on all in cost ceiling of <unk> 24 per cent for consumer loans and publishing the draft version of the amended cyber security real measures for public consultation.
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New fact is always being closed on constant dialogues with regulators to fully aggressive the latest evolution trend retention and requirements.
On mixture relevant authorities are fully aware of our business model on development in key areas.
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I'm pleased to reported so far we have maintained open communication lines with all levels of regulators with satisfactory frequency and results.
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<unk> outlet channel. Despite recent influx of new regulations and policy integrations, our business has not been materially affected. Moreover, our business motor operating results have remained resilient.
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I will address a number of questions that attracted recent attention.
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First of all thanks to share on borrower data by loan facilitators on co lenders directly with financial institutions.
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<unk> has been utilizing its licensed guarantee company to come back with retail credit facilitation business and performed credit assessment authorized by our partner banks in full compliance with the banking sector financial institution on a financial Guaranty company business cooperation tide moving.
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<unk> seen some high quality Samsung thinking from cutting machines in the meantime, we have we will have constructive dialogue with the regulatory authorities to seek their feedback on guidance. We are also prudently exploring the viability of applying for credit scoring license or cooperating with third party credit scoring company.
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The end of 2020 true there should be sufficient time for both regulatory authorities and market participants to test new models and make adjustments.
Based on currently available information, we believe by the corporate with third party credit, scoring companies will not materially impact our business model our profitability.
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At the end of July some media reported that the regulatory authorities would require financial institutions, including consumer finance companies and banks to implement an all in cost, leaving a 24% from personal lending.
From our perspective, we think that this new requirement has crystallized the direction of loan pricing.
Eliminated potential uncertainties.
<unk> September 2020, we have been preemptively implementing an all in cost assuming a 24% for all new loans on new loans, we facilitate.
Going forward, we will continue to fall on regulatory direction leveraged technology to Gordon small and micro business owner's access to cost effective financing and maintain our own profitability.
Moving our operating efficiency.
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Since July on regulatory authorities have been come back from spec orders on several internet platforms caught on.
With cyber security review measures demonstrating the nation's heightened attention to cyber security and data safety.
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Frankly, I saw operating platform to ensure regulatory compliance of our data processing business operations. We are comfortably come back to a degree from seminar them perform the internal reviews move back to achieve these nationally accredited ISO $2.7001 certification for information security management and the level III registration certificate from the Ministry of public.
Security of China going forward, we will continue to strictly adhere to the policy requirement on the regulatory compliant in all key aspects of our operations such as network equipment and service procurement critical data reviews and many others.
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In recent years, a number of internet platforms than traditional financial institutions have jumped into the flurry of serving small and micro business financing needs.
On platforms have started a copy at the overall business model that we pioneered.
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<unk> <unk> over the past 16 years, we have built a highly effective offline sales and service team a comprehensive management system on our proven risk management model stress test the stress tested over multiple market cycles.
Combination of service and high barrier to entry on precludes peer replication within a short period of time at the same time, increasing competition automotive we have to work harder on Youtube.
We should compliance with prudent advance our technology and solidify our industry leadership.
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Based on our analysis of the regulatory intentions on industry dynamics, we believe competitive focus will gradually shift from volume growth to quality growth.
Consequently, we are continuing to uphold the 43 principles to keep our operations fully compliant to create value to society and to advance our technology.
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First we shall keep our operations improve regulatory compliance on strict policy adherence as on.
The organization with financial DMA, we have always prioritized regulatory requirement and operated compliant manner based on our principles are preemptive diagnosis and swift operational adjustments for timely optimal results. We plan to continue enhancing our communications with regulatory authorities. So that we can keep a close half on a reported rigorously.
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Second, which I'll keep creating value to the society by providing quality financial services to small and micro business owners as well as the middle class.
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As of a true 32021, <unk> had cumulatively provided credit facilitation services to more than $15.5 million followers with an outstanding loan balance of more than 600 billion RMB.
Over the past 5 years, we have effectively satisfy more micro business owners financing by facilitating nearly $2.3 trillion RMB worth of loans.
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Recently, we lost special assistant clients was small and micro companies, mainly aimed at supporting companies in labor intensive industries, such as retail hospitality and hospitality restaurants on manufacturing, creating a significant number of new employment opportunities.
For smart micro agricultural businesses, we are working with the China Women's development from basin to distribute our farmers assistance on to rural female entrepreneurs uncooperative leaders as a result of this work we are making meaningful contributions to the economy of rural areas.
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Shelley Chase until we can force the confusion going forward <unk> will provide more products and services catering to the needs of small and micro business owners leveraged technology to reach customers more effectively simplify loans molecular patient process.
Group efficiency in reviewing and approving online low applications fulfilled our commitment to financial inclusion and support the nation's economic development agenda.
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<unk> will continue to provide a variety of financial product optimized product matrix composition enhance customer experience improve service quality and efficiency and contributes to our clients' wealth preservation and growth goals.
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The adherence to our principles OTO integration multi service offering and customized solution, we have continuously advance our technology and big data artificial intelligence and others.
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She is on the Q4 charges on the retail credit facilitation, we have launched on AI powered Scotland solution named tune in wealth management, we are promoting on intelligent customer service solutions aimed at improving user experience on the solution demonstrate our ability to enhance our financial services efficiency by leveraging technology.
Thank you.
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In conclusion, although our low to high theres not without challenges. We are confident that we will be able to lay our own unique path to long term sustainable success by maintaining operational compliant generating social value and continuing technology advancement.
Greg a careful capital because I think the teams from Clos with that I will now turn the call over to Greg who will share our business updates per quarter.
Thank you chairman.
Although the regulatory environment continues to transform and some uncertainties remain on our business performance is sound and let me get straight into the key figures, noting that all numbers are in RMB and all comparisons are on a year on year basis, unless otherwise stated.
Gross profits in the first half reached $9.7 billion up 33, 4% versus a year ago.
Our second quarter profit was $4.7 billion up 53, 2% versus a year ago on <unk>.
Second quarter revenues of $14.8 billion grew 17, 3% versus last year.
This quarter total operating expenses of $7.1 billion decreased by 1.7% for the same period as a result, our net margin reached 31, 9%.
7.5 percentage point improvement over the second quarter last year, driven by ongoing improvements in operations and technology. We are confident that profit growth levels seen in the first half will be say sustained throughout the balance of this year.
On the back of this solid performance. It is important to note our strong balance sheet and cash position as of June 30 of this year. Our net assets grew to $91.1 billion of which approximately 42 billion liquid assets maturing in 90 days or less our net cash flow has increased by $9.6 billion in the last 12 months this strong position on.
Allows us to do several things.
First it provides us with a resilient ability to meet any new capital requirements may come from regulatory changes. We believe that is lending facilitation all platforms, regardless of business model or customer segment will ultimately be required to pay our 20% to 30% of related credit risks with a capital leverage of no more than 10 times a day.
Portion of shared risk in the second quarter, excluding the consumer finance subsidiary LIBOR credit risks on 16% of all new loans facilitated earnings have more than sufficient capital to increase levels if needed.
Second our strong profitability provides multiple avenues to generate value for shareholders. Today, we announced that we will extend our corporate buyback program initiating a new plan to repurchase use dollars $700 million of shares over the next 12 months, we continue to explore other avenues to return more value to shareholders over time.
Third our resources allow us to continue to invest in and enhance our unique business model for the sake of general understanding I'd like to highlight 3 aspects of our business model on the developments currently underway.
First is our unique <unk> sales force business model, which allows us to unlock the unmet borrowing needs the China's small and micro business owners in the second quarter, excluding the consumer finance subsidiary, a 77, 6% of new loans facilitated with the small business auto segment, we continue to find that our direct sales force of more than 58.
<unk> thousand 600 professionals is the key to meeting with small business owners and building the required levels of trust serve the larger and long term lending needs and be able to match an array of unsecured and secured products to their diverse business and industry purposes in.
In the second quarter, new loans sales reached $152.7 billion growing 11, 1% versus a year ago in line with prior guidance.
During the quarter, new loan sales from other channel slowed down a little however, the increased loan volume from our own direct sales team has offset the weakness from other channels, thus demonstrating the resilience and flexibility of our direct sales team as well as the strength of our <unk> business model.
Furthermore, with continued technology upgrades, we have greatly improved the productivity and efficiency of our direct sales team in the second quarter 6 slide 6.5% of new loans facilitated we're in a new secured auto lending product demonstrating the ability of our ultra direct sales to capitalize on changing market conditions and customer relationships the productivity.
<unk> of our direct sales force increased 10% over the last 12 months, we continued to invest in new risk data industry insights and technology tools to further enable our unique ultra low sales force to tap this hard to reach segment, which we believe to not be efficiently serve to a pure online model.
Our second unique aspects of our business model is how we deploy our licenses. This has become an increasingly important factor in the tightening environment to satisfy both regulatory and funding partner needs all new loans that we facilitate the day either flow through our guarantee companies or a consumer finance license guarantee companies with operations.
All over the nation, except Tibet means in Yunnan provinces allow us to share credit and process data flows without more than net 65 national and local funding partners under well established legal frameworks. The deployment of these licenses together with successful tapping the ABS and interbank AVM market has helped the ongoing optimization of funding.
Costs through the first half of this year. We are now actively exploring new collaborations to meet expected credit rating license futures requirements will come into the effects by the end of next year.
The third unique aspect of our business model as we seek to serve our customers across a full range of financial services, not just lending while our wealth management platform is a smaller contributor to total company revenues today come from the China wealth management market is witnessing a substantial new growth as customers and providers are adjusting to full implementation of the new <unk>.
Asset management regulation, and a new framework for cross border investing between China's got a day in Hong Kong.
Domestic wealth or insurance, serving primarily the affluent and emerging affluent continues to grow with client assets of $421.1 billion as of June 32021, expanding 12, 4% versus a year ago and extending by 28, 8% if excluding legacy from TD.
The assets, which have now been substantially runoff.
That's 1 in Hong Kong is currently entering new partnerships in preparation for the rollout of greater Bay policies in the third quarter of this year, we will merge our online client interface for all borrowers and investors to deepen services to all customers across small business owner lending consumer finance wealth management and protection and pension insurance.
Company analysis suggests many of our small business owners are middle class in emerging affluent customers and a notable portion of our web customers are small business owners.
With a rapidly changing operating environment, we believe our capital strength and unique business model combined with our deep financial credit experience and commitment to compliance will allow us to remain resilient in before turning it over to James to go through the detailed operating and financial performance and second half guidance I would like to highlight 1 final figure.
We have continued to make progress in bringing down ATI to our borrowers with the second quarter ETR for the overall portfolio, reaching 24% versus 26, 7% a year ago. This reduction has been executed without negatively impacting our net margins in the medium term, we will seek to lower API.
The keep our net margin steady by driving down relevant operating credit insurance and funding expenses I'll now turn over the call to changed on our CFO.
I will now.
A closer look into our second quarter operations on the financing was up before I begin with net income amounted to 1 that all of them based on.
All comparisons are on a year over year basis, unless otherwise stated.
Our second quarter subsequently, 1 without characterized by strong business growth.
On the operations improvements and expanding profit margin.
Our total income increased by 17, 6% to focus on day 1.
While our core business income excluding investment income grew by 19, 1%.
Our net profit increased by 53, 2% to $4.7 day.
Exceeding our earlier guidance of $2.7 to $3.90 day.
Our net margin reached 39% in the second quarter.
7.5 percentage point improvement from the second quarter of growth in 'twenty.
Worldwide, our continued growth and profitability.
These factors.
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We further optimize the geely.
Amit our retail credit from syndication.
As we've reduced our all in cost.
Our low balance APR declined by 2.7 percentage points to 24% in the second quarter of 2021 from 2006, 7% in the second growth.
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1 hour quickly based on low volume improve.
Improve to non from 70% from 9.5%.
Our net margin also expanded over the same period.
This achievement is a result of initially.
We continue to increase our number of banking partners and diversify our funding sources.
Which has allowed us to obtain cheaper funding from partners with better asset quality.
Second.
Credit issued a statement on our loan portfolio is.
Also during the day.
I wanted to true partners.
Net credit and customer.
Quality into completion to lower their pricing and then we adopt a greater portion of the credit risk.
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Decreased significantly because we have changed the way we charged on our customers.
We see significant efficiency gains in our sales and marketing as well.
Operations.
As a result, we are confident that even if we our API further interest.
For the future.
We're able to maintain the stability, particularly in net margin in retail credit facilitation.
Second we maintained a strong pace of low volume growth coupled with this mix improvement.
On the retail credit side, we grew our new low sales by 11, 1% to work on $62.7 billion. During the second quarter of 2021 in line with our previous guidance of 145.
55 getting.
At the same time, we continue to focus on serving small business owners.
Moving to risk profile of our volume.
The second quarter, excluding <unk>.
It will finally subsidiary 77, 6% of new loans facility.
Good with multiple owners.
From 72, 6% for the full period of 2020.
High quality volume, if I'm SD Wan for diesel powered by our own internal application system.
Currently 63, 7% of the new general unsecured loans facilitated in the second quarter compared to 59, 4% from same period of 2013.
On a revenue per site.
Our total assets increased by 12, 4% to $441.1 billion as of June 32001.
Our updated guidance target of 12, 41% growth.
$420 million.
So on asset contribution from mass affluent customers who index.
More than 70000 per increased to 82% as of June 32021 up from 76, 3% as of March 31.2021.
Third we continue to make progress in executing our plan for a more sustainable here.
<unk> business model.
Low where we did accounted for 16% of new low facility in the second quarter up.
Up from 4.4% in the same period of 2020.
New loan facility with guarantee from cleaning on P&C accounts for 76, 3% of new loans facility in the second quarter down from 89, 1% a year ago.
Our funding Partners' board the risk for 4.8% of new loans facility in the second quarter.
As of June 30 are typically 1 our outstanding balance of growth facilitate with guarantee from third party credit enhancement on it had decreased to 84, 3% from 94, 3% a year ago.
All of the applications operating metrics exclude dose of our consumer finance subsidiary.
At the same time, we continue to sharpen our focus on improving our asset quality.
In the second quarter, our fee to increase slowly or low facility was 4.4% price.
With 45% a year ago.
The 30 day past due delinquency rate for all facility with further improved to 1.9% as of June 32021 from 2% as of March 31 from me.
The 90 day.
Delinquency rate for the total facility stabilized at a low 1% as of June 30 of 2021 on par with 1% as of March 31.2021.
On the affirmation operating metrics exclude both of our consumer finance subsidiary and convincing products.
Represent roughly 1% of the total loans.
For which.
Substantially complete is a run off of legacy PPG products in our wealth management business.
During the quarter.
Asset from legacy PPG products were reduced to $44 million from 4 billion in the previous quarter.
Effectively completing our business transformation.
Meanwhile, our calculation for the segment was.
<unk> 31, 48, EPS, increasing by 3 on 6 bps from the previous book.
This improvement was primarily driven by our continued development in standard wealth insurance products offset by a decrease in deposit products.
Now, let's take a closer look into our second quarter financials.
During the second quarter, our total income increased by 17, 3% net.
On the core business income.
Net investment income grew by 19, 1%.
On the back of this growth our business and a risk sharing model continuing to evolve the driving a change in the revenue mix of our retail credit facilitation business.
For example, during the quarter.
On the platform service fees decreased by 8.8% to $9.2 billion on net interest income grew 98, 7% to $3.2 billion and our guaranteed income grew by more than 800 per cent to $891 million.
In addition, other income which is directly linked to delivering services to our financial partners increased by 205, 1% to $1.1 billion.
As a result, our retail credits have been taking platform service fees as a percentage of total revenue decreased to 62% from 79, 8%.
In addition, as we continue to utilize consolidated trust plans, which provides lower funding cost even more funding operations. Our net interest income as a percentage of total revenue increased to 21, 8% from 12, 9% a year ago.
Moreover, as we continue to be a more credit risk.
We generated more guarantee income closing our guarantee income as a percentage of total revenues reached 6%.
As compared with <unk>, 7% a year ago.
By expanding our services to our credit enhancement partners in account management collections and other value added services.
Our other income as a percentage of total revenue increased to 7.2% from 2.8% a year ago.
Our investment income decreased by 83, 2% to 37 million in the second quarter from $220 million in the same period of 2020, mainly due to losses from the change in fair value of assets.
On the wealth management clients on our platform transaction and service fees increased by 49, 9% to $407 million in the second quarter from 291 million in the same period of 2020.
This increase was mainly driven by the increase in fees generated from our current products and services.
Now moving on to our expenses.
In the second quarter total expenses grew by 2.6% to $8.5 billion.
However, excluding.
Excluding credit impairment losses financial cost and other losses total expenses actually decreased by 1.7% in the second quarter.
And the story with the steady improvement of our operating efficiencies across most business areas.
Our sales and marketing expenses, which include expenses for borrowers and invest acquisition as well as general sales and marketing decreased by 6.3% to $4.3 billion in the second quarter.
As a result of our efforts to further optimize our sales productivity and sales commissions as well as the higher base in the second quarter of 2020 due to non recurring expenses our.
Our borrower acquisition expense, which are a major component of our total sales and marketing expense decreased by 19, 5% year over year to $2.6 billion.
In addition, our invest the acquisition on vacation expenses also decreased in the second quarter, mostly due to our optimization of Investor acquisition channel costs.
Our general sales and marketing expenses, which are mainly comprised of payroll and related expenses from marketing personnel brand promotion costs consulting fees.
Generally costs as well as other marketing and advertising costs increased by 33, 8% to $1.5 billion in the second quarter from $1.1 billion a year ago.
This year over year increase was largely due to the lower base in the second quarter of 2020, resulting from the social seeking relief during the COVID-19 outbreak in the same period.
Our general and sales of expenses increased by 21 on 1.
1% to $798 million in the second quarter from 669 million a year ago.
This increase was mainly due to the lower base in the second quarter of 2013 and head count expansion in the second quarter of 2021 to support our new business development initiatives, including the amendment of our consumer finance business.
Our operating and servicing expenses decreased by 3.3.
8% to 1.
<unk> 8 billion in the second quarter from $1, 5.3 billion a year ago.
This decrease was primarily due to a decrease in post origination management expenses driven by our improvements in management collection efficiency.
Net partially offset by the increase in a truck plant mentioned expenses.
Resulting from increase in usage of consolidated truck plant.
As we maintain our commitment to investing in technology research and development, our technology analytics expense increased by 18, 6% to $517 million for the second quarter.
Additionally, our credit impairment losses increased by 133, 5% to 1 full day in the second quarter from $597 million a year ago.
This was due to the continued evolution of our business model, which led to increased low related risk exposure and higher upfront credit impairment losses.
It is worth noting that the increase in impairment losses is purely a function of the increase in the proportion of the credit risks borne by us.
Why are the overall credit profile of our borrowers has continued to improve as mentioned earlier.
Our finance costs decreased by 37, 4% to 276 million in the second quarter from.
$441 million a year ago.
Mainly due to the decrease in our balance of convertible bonds, which net to lower borrowing costs and increase in interest expense with value from the increase in deposits.
As a result on foreign exchange rate gains, we booked $301 million in other gains from the second quarter of 2021, Hawaii, our effective tax rate decreased to 36% from 79% a year ago.
Consequently, our net profit increased by 53, 2% to $4.7 billion in the second quarter from $2.1 billion a year ago.
Meanwhile, our basic and diluted earnings per ads were 2 RMB in the 1.9 RMB respectively in the second quarter of 2021.
As of June 32021, we had a cash balance of 39 billion compared to 24 billion as of December 31, 2020 net.
Net cash flow from operating activities was $2 would be on <unk> in the second quarter of 2021.
Now turning to our guidance for the second half and fully of 2021.
For the second half of 2021, we expect our new low facilitated to be in the range of 334 billion.
140 billion in client assets to be in the range of $450 billion to $460 billion.
Meanwhile, as we maintained our growth momentum and to continue to improve our operating efficiency. We expect our total income to be in the range of $31 billion to $31.3 billion. Our net profit to be in the range of $6.6 billion to $6.8 billion in the second.
Half of 2021.
This translates into a year over year net profit growth of 32% to 36% for the second half of 2021, and a 33% to 34% for the full year 2021 each.
This concludes our prepared remarks flow today, operator, we're now ready to take questions.
Okay.
If you wish to ask a question please press star.
1 on Palestine, and my Aunt <unk>.
I still can't see no requests to take price tag team.
In fact on many of the <unk> from Bank of America. Please go ahead.
Thank you very much something we needed the opportunity and congratulations on a solid second quarter without I guess people price.
In terms of the credit book can.
Can you provide the latest number in terms of cash effective APR in second quarter net.
For the new business and also for the total outstanding loan balance and so on the HCR and then the breakdown of funding cost the CGI and <unk>.
Second question is related to what chairman can you talked about.
On.
Information and clarity on license.
Credit on our credit card license.
Can you talk about.
Any progress on application if you are applying for credit for a license.
That takes on on that and also with the new regulation the extraction on.
The usage of credit inflammation is that going to impact how much Paypal credit based on being able to access.
The scope of data that you're able to elaborate on.
And that is that going to impact your credit score.
Thanks very much.
Thanks, Larry I think on your on your first question, what we have just disclosed for the second quarter on the overall portfolio is that the ATR is 24%.
And that's down from 26, 7% a year ago.
Don't disclose the rate for the new loans, but what you can very clearly calculate is in order for us to go from 26, 7% down to 24.
That means that the new loans.
EBIT issuing clearly ones have all been below 24%.
At least a couple of hundred basis points below 24% in order to get that overall average of 24 and so this is something that we've been doing for some time and we'll continue to execute on.
All right.
Okay.
It is positive to disclose this number.
Cash our entrepreneur on.
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Crude by almost 6 per.
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When we bought from.
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So it worthwhile per our FERC on responsible for retail credit facilitation menu, who just answer on top of that I just want to add that we are maintaining a very active dialogue on the credit score on fewer of the PUC order relative to key decision makers within the Bureau.
<unk> there is non material impact to our business model on based on what they've indicated to us theres no need for us to change now.
I think there are key focuses on.
Based on information collected whether you just use it for yourself or do you actually pass it on to external parties on in some cases monetize on that data, we believe that their key focus there.
They are also asking us why our view is what I would like to share our data with critical on our response was book if Theres a cbot requirement on everybody is required to do that we will comply again, they're key focuses on whether we accumulate the data we accumulated on our store is just for self use all will be passed on to clear powders are you on.
Gulfport of course, that's something we will never do.
They also recognize that we run quite a different business model by our currency company.
So so far that's that's it.
Communications with our head, we don't need to make on tenders right now will continue to have those conversations and let the market on if we see on anything otherwise.
Thank you.
Question comes from 9 Yan from UBS. Please go ahead.
Okay. Thank you.
My question.
$2 from pharma.
Teva pay them into that.
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Or challenging to the PV breakeven on the next year or should I think of what your life capital from cash App.
And then any comment on the question on book proposed and I would answer the question in between.
A question on the piece about non rate should it be within 4% by June 'twenty 'twenty tool right.
This is 9 months, what's keeping safe company.
And its very precise that day.
Total borrowing cost should be less than 24% per new loans by 10.2020.
Thank you to an average API 2 day less than 20%, we didn't see as time, meaning that by June 'twenty 'twenty 4.
And then we believe this will become like a standard on the regulation for all.
And this is true for us because it means no impact for us.
I'll share company as of today, hi to HII.
Net net 24% and add on to API is less than 90%. So we're already there.
And then quickly price data less than 24% and as of July.
Sure.
API from Yours is all in net between 1%. So basically we see low impact from this.
New leg in Asia, So a line of ADR expedition.
And the third question on fitness portion.
In August 6 months, our cash portion from yours, we reached final reached 20%.
On the next day, whether we want to further move up to a 5%.
We haven't decided yet.
With our regulator book.
Once the demand on it.
We had to go up to 30% that you can you can do that.
They are easily with time, because our cash component, we have already more than on.
<unk> 2 billion net asset, which is moving up to support 30 plus percent offset to guarantee a portion from yours.
Our on a per asset to start switching from Aon.
Speaking of cash here.
Thank you.
Next question comes from Thomas Chong from Jefferies. Please go ahead.
Hi, Good morning, Thanks management for taking my questions.
Question on rebounding.
Our wealth management strategy.
We have talked a lot about.
Yes.
How about on the sourcing.
I think there'll be able to talk about some of the upgrade in terms of the product features on income.
Moving on integration.
And in terms of the debate.
Can you talk about <unk>.
Interest you think about.
Our long term goal.
And in particular on the program on May <unk> with our automated AI portfolio.
I'll answer on.
Competitive landscape or regulations.
We need to bear in mind.
Okay. Thank you My first question and then on book.
Question about the <unk> outbreak Covid obviously.
Amy.
Any changes in terms of the fundamentals.
Thank you.
Great. Thanks.
On the wealth management business.
We summarize through the first half of this year as of June 30.
On the growth with fluke.
PDP portion was about 28%.
And so this is a business we continue to want to develop as fast as we can.
We continue to see very good progress.
On our affluent customers on our qualified investors across a range of higher end products, including ongoing development for portfolio of services.
On an automated matching.
We are doing here in China, but we're also looking in the Hong Kong as that market starts to evolve as well. So this is an area that we will continue to invest will continue to automate and continue to apply more and more data to.
To make sure that our.
Customers are getting for any good returns, particularly as the market shifts away.
From fixed income from more variable return products.
And this is an area that we continue to.
<unk> invested.
In terms of the Covid impact I would say up to now we've not seen any any impact it's really really too early and very very narrow I know that theres more headlines about it but it really hasnt been anything that we've seen in terms of frontline impact.
Got it thank you.
Thank you. The next question comes from Katherine Lei from J P. Morgan. Please go ahead.
Thank you.
Thank my peers have asked a lot about regulatory risk and then I'm going to have a follow up question on the regulatory ratios well I think I'll give my management team.
I like the way to maintain a stable profit margin is to control cost range.
So first can you help to elaborate slight volume let's.
Let's move on to continue to cut costs. So that the overall tech labor will be more stable.
Questions I have is.
Investors return.
It's already like $1 billion buyback being announced and executed on.
Some of that being excluded from Fox from what has been.
On the balance sheet that we believe is deploy capital for like buyback.
Buyback on maybe the future dividend.
Thank you.
Lastly, I want to speak first about <unk>.
Cost optimization area.
Okay, I think that he will share more detail index on the hotel.
Slides of your loss picks up.
For new loans for Onstream, new loans in the second quarter to share our advocates.
Was less than 20%.
But net margin paid almost on changes at 4% and then licensing kept our components. That's funding cost <unk> on each of impact do you see that boost our fleet numbers, obviously, putting meaning deep cleaning and going forth weekly.
You can further products from mines by about 2% so going forward.
Even with the global HR gross out too.
20% CAGR continents, our merch margin will be protected at around 4% almost on methane that no matter, how low HR growth. It can deliver 4% net margin I'm, not saying that but as long as ever the price is allow 10% GAAP incontinence than module that changed.
And in terms of investment return.
As we noted on our balance sheet and cash position.
On the 91 billion overall net assets $42 billion.
Relative illiquid assets with a 90 day so deep.
Share repurchase the additional 700 billion, taking us to $1 billion still represents a very small portion.
Of our total capabilities.
We will continue to explore other ways to generate returns for investors through on.
And we're exploring those structures and we will certainly undertake them as soon as it makes sense to do so, but we certainly have a lot of room in which to play.
On the physician level net sales on a changing hesitate on screen.
Channel, <unk> County, which youre putting on.
We are changing and we're still on the highest on how regulation, which is a quite a coordinate on laser consistent patient outcomes, Kansas, Colorado is on a challenged from a bank account hopefully a simple bank charter from <unk>.
Thanks for your cash on it that way.
We cannot walk into the Pos hasn't even balance solar could a harsher on product carrizo shallow contango low temperatures here with these potential share back above that has to come from.
<unk> got 1 day.
Mortgage has ceiling and doesn't preclude us from a clinical equivalent physicians need a new shaft or social.
Free from China, or kind of about the channel actual <unk> there may be a flow Mitchell by without any pieces of guidance.
Cash flow free.
Yes.
We could kind of Argentina, and Brazil sales <unk> delivered.
So he'll answer the per trading day.
As Greg mentioned that not only that we have a strong balance sheet and ambition, we have very strong profitability on cash generating capability.
In terms of the question you asked whether it's buyback or dividend.
I can say that we are considering all need to return value to shareholders. Once there's a decision to make we will be making the right announcements.
The 10 billion U S, which is roughly.
7 billion RMB, a buyback is small compared to the cash how do we have on our balance sheet.
And let's not forget about the end of the year.
<unk> generated another 10 billion plus of RMB carpet.
It will go also go into our cash reserves on balance sheet.
Okay.
Thank you.
That does conclude our time for questions I'll now hand back to management for closing remarks.
Okay.
Okay.
Figure can share back ourselves between having a couple of ways from them that can have on hips rather.
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Sales of EMEA or machine sales.
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Fluffy on cyclical ethanol will then give us strength.
So on the interactions with interest.
Are you seeing out external growth from all that fully half curtailed on our clients our team pushout from Carlo medical going on or trigger on some good tactful feet by channel, which is about or shadow on Chris Rocco without price will coming out of him on the fast Act.
Thank you for attending our cost per day.
As mentioned earlier the results are available online and we will be having a number 1 on 1 sessions with the sell side analysts, which we will elaborate more on our messages.
Pleased to have full confidence that we have a wired hard working management team on in the current environment, while global capital markets.
On China on regulations, which caused a lot of volatility recently rest assured not only that the companies have heard that I believe the relevant regulators in China have also heard from market views. Some per hundred telling me that per day, the biggest factors impacting Chinese ADR stock prices number 1 is regulation number cruise industry.
Company specific fundamentals come later rest assured.
The regulators have gross debt.
On the current environment. It is very prudent and as always from our principle to strength in regulatory relationships maintain open communications and make sure. We are in the right side of the future direction. Thank you again for joining the call.
Thank you that does conclude our conference for today. Thank you for participating you may now disconnect.
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