Q2 2021 FinVolution Group Earnings Call
Okay.
Hello, Ladies and gentlemen, thank you for participating in our second quarter 2021 earnings conference call first Involution group.
At this time all participants are in a listen only mode.
After management's prepared remarks, there'll be a question and answer session.
Today's conference call is being recorded.
I will now turn the call over to your host Jimmy Tan head of Investor Relations for the company Jimmy Please go ahead.
Hello, everyone and welcome to our second quarter 2021 earnings conference call. The company results were issued via Newswire services earlier today and I put it online you can download the earnings release and sign up for the company. He made by visiting the IRR section of our website at IR docs can be grouped dot com Mr. Feng Zhang.
Our Chief Executive Officer, and the Jaguar and Shea, our Chief Financial Officer will start the call with their prepared remarks, and conclude with a Q&A session. During this call we will be referring to several non-GAAP financial measures to review and assess our operating performance.
Non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U S. GAAP for information about these non-GAAP measures and be conciliation to GAAP measures. Please refer to our earnings press release before we continue. Please note that today's discussion will contain forward look.
Statements made under the Safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 90, 95 forward looking statements involve inherent risks and uncertainties as such the company results may be materially different from the abuse expressed today further information regarding these and other risks and uncertainties are included in the company filings with the.
The U S Securities and exchange commentary Commission the company does not assume any obligation to update any forward looking statements, except as required under applicable law. Finally, we post a slide presentation on our IR website, providing details of our results for the quarter I will now turn the call over to our CEO. Mr. Feng Zhang. Please go ahead Sir.
Thanks, Amy Hello, everyone and thank you so much for joining us today.
We continue to provide value for both us as an institutional partners in different aspects leveraging our cutting edge technology, we have been providing value for users across multiple segments, such as consumer finance small business owners and different types of financial institutions.
Through our platform users are able to enjoy the convenience of finance at their fingertips accessing credit lines in a timely and efficient manner on the other hand, our institutional partners are able to access and evaluate quality borrowers with efficiency.
Along with the value Crazy, we are thrilled to be reporting another set of record breaking the operational and financial results in the second quarter as.
We harnessed, our technological capabilities effectively to acquire new better new and a better quality borrowers and the concentrate increase our acquisition channels.
Our total number of new.
Call. It all out our total number of new borrowers acquired globally. Once again crossed the 1 billion Mark to a new record high of one point or one 8 million, an increase of over 500% year over year and 18% quarter over quarter.
More specifically number of new borrowers acquired in China reached 812000, representing an increase of over 380% year over year and 31% sequentially.
The number of new borrowers according to international markets, which are 371000, approximately 13 fold increase compared to the same quarter last year.
Another clear indication that we are assuming high quality growth is that our total transaction volume for the quarter reached a new record high 2333.334 billion RMB.
A 153% of jump year over year, and a sequential increase of 25%.
Specific credit transaction volume in China climbed 148% year over year, and 25% quarter over quarter to $32.5 billion RMB, while transaction volume for international markets grew exponentially by 1780% year over year, and a 23% sequentially too.
940 million RMB.
Simultaneously, our outstanding loan balance for the expanded to $39.4 billion RMB, representing year over year growth of 87% and 21% sequentially increase.
In order to better support the healthy growth of our facilitation operation.
We have been making concepts into investments in acquiring new better quality borrowers through an array of online and offline Shadows, we have diversified our online channels.
And have also established an offline team of over 600 employees covering around 80% of China's provinces in the second quarter. Our offline channels contributed around 10% of total new can transaction volume offline acquisition is not only an alternative channel, but also validate our technologies can.
Can be seamlessly integrated in different scenarios to enhance efficiency going forward, we intend to expand the offline team to be on 1000 employees yeah. So.
Since 2020, we made our services available to small business owners in China aiming to capitalize on the significant opportunity presented by this group's underserved needs for operational phones in the second quarter growth momentum for our small business owner sentiment remained robust with transaction volume increasing 41.
Sequentially to $6.2 billion RMB, notably the total number of small business owners served in the quarter exceeded a 400.
408000, compared to just the 220000 in total for the full year 2020, we believe serving the needs of small business owners is in line with national policies and to play a part in meeting the needs of these settlements of the society going forward, we will maintain our strategic focus on serving this segment.
This portion of our business to account for around 20% of total transaction volume in the second half of 2020.2021.
In line with regulatory directions, we pre Emptively continued to lower our borrowing rate in the second quarter to a 26, 2% for our borrowers and more recently in August the rate was further reduced to a 25, 4%. We're also pleased to share that this recent.
Percentage of transaction volume with borrowing rates at or below <unk> 24 per cent has risen to around 60%.
We plan to continue acquiring better quality borrowers expanding new funding sources.
Across regions and enhancing operation operational efficiency to provide a more attractive rates and terms for all borrowers while maintaining a healthy healthy take rate and operating margin.
On the international front with our state of Art technologies, and Swift execution. We have continued delivering strong performances in particular, we successfully launched a pilot testing operation you cannot which demonstrated encouraging growth prospects mikes Ciphony. This marks the fourth country in our global reach.
In addition to our international presence, Indonesia, Philippines and Singapore.
We're very pleased with the accelerating pace in broadening our global footprint and thrilled that our recent entry in banana is already demonstrating great potential with positive feedbacks.
We attribute our success in building out our first mover advantages in emerging market to our fundamental capabilities talented and efficient team with global perspective proprietary technologies operational expertise and deep rooted corporate value.
Our technology to support us in successfully navigating our business transition in China and also plays a crucial role in our expansion across different international markets. We're confident in our global road map and remain firmly committed to our mission to make financial services more accessible and inclusive of our borrowers around the world.
Going forward, we will continue to advance our technological capabilities and solidify our operations in these countries.
While working with our local partners to explore new opportunities that will enable us to diversify our business models.
Our technologies operational expertise and in depth understanding of our institutional partners. We are able to provide diversified our products and solutions for them in multiple scenarios in particular through operation through cooperation with eight different institutional partners. We increased the portion of capital light model.
One from two 3% in the previous quarter. It was 30% in this quarter all of these as humans are further testament to the solid trust and the confidence that our funding partners have infill evolution as we remain committed to building credibility and a strong corporate reputation amid ever evolving market dynamics.
Supported by our enhanced credit management model built on targeting higher quality borrowers our delinquencies have shown improvement.
Have shown further improvements across the multiple risk metrics for example, our day one delinquency rate remains stable at five 4% in August compared with seven 5% in the same period last year, we expect vintage delinquency rates to continue improving to a level below two 3% in the second quarter, while our nine.
90 day, plus delinquency ratio, we should a historical low of 1.0 or 1% from seven point of one 3% in the same period last year, our loan collection recovery rate also surprised at around 91%.
As we look ahead, our primary objectives for 2021 and beyond to continue pursuing high quality growth in China, leveraging technologies to strengthen our first mover advantage in the international market and diversify our business models continue empowering financial institutions through these.
Business as a service solutions and empower a variety of businesses globally through our <unk> capabilities to create long term value for all stakeholders.
During the past several years, we have encountered and overcome many difficult challenges such as exiting the PDP business shifting our funding sources moving towards better quality borrowers and a minimal we have the technological knowhow capabilities and the resources to deliver better results and achieve.
In this rapidly evolving environment, our dynamic business model and operating strengths, coupled with our strategic investments in multiple sectors will drive our success with a sustained and sustainable growth sustainable return for all our stakeholders in the long term.
Last but not least I would also like to report our progress on corporate social responsibility during the past several years, we have consistently fulfilled our duties as a responsible corporate citizen for example, during the recent product in China, including on we have the nature to RMB 10 million as posted disaster.
Aid and activated our local employees to distribute food surprise for those in need together with our institutional partners a low interest loan program for small business owners has also been introduced.
Our third annual ESG report was also published recently and for those who are interested.
Yeah.
Do you have any more information do visits to our website for a copy.
In summary, leveraging our technologies and the Digitization capabilities create long term value for our stakeholders. We are confident in our ability to maintain our position as the leading financial as a leading fintech platform in China, while capturing tremendous growth opportunities had globally with that I will now turn the call over to China issue.
<unk>, who will discuss our financial results for the quarter.
Thanks, Paul and Hello, everyone.
With continued improvement across multiple operations metrics in the second quarter, we delivered a non-GAAP operating income of <unk>.
Several hundred and 26 million B E, an increase of 26% year over year, and a sequential increase of 8%.
Further validating the viability of our business model, our robust balance sheet with 4.9 billion M. B E.
Cash and short term investments a couple.
Coupled with our strong technology capabilities positions us well to explore opportunities both in domestic and international markets.
Now turning to the financial results for the second quarter in the interest of time I will not walk through each item library that on this call.
Please refer to our news release for more details.
Net revenue increased by 32% to two points.
Well the second floor of a tiny tiny.
While $1.8 billion and be in the same period of 2020.
Primarily due to increase in transaction volume and partially offset by a decrease in current income as a result of improved asset quality.
Loan facilitation service fees increased by 135% to 915.2 million RMB for the second quarter of <unk> 21 for a 400 to 5 million RMB in the same period of 2020.
Primarily due to the increase in transaction volume.
It was partially offset by the decrease in average day rate of transaction fees.
Post facilitation service fees increased by 19, 6% to 300 million M. B for the second quarter at 10, 21, well, one country and 15.3 million and be in the same period of 10.20.
Primarily due to the increase in outstanding loans.
So we used to buy the company and does it really impact of deferred to transaction fees.
Guy Ritchie income was 600, and the 16.6 million M. B for the second quarter of 2021 compared to 800, and the 21 million and be in the same period of 2020 as a result of improved asset quality.
Net interest income decreased by 7% to 309 million M. B for the second quarter of 2021 for our country and 33 million and be in the same period of 2020.
Mainly due to the reduction in outstanding loan balance of consolidated trusts, partially offset by the higher transaction volume in the international market.
Other revenue increased by 16, 1% to one country and 78 million for the second quarter of 2020 one.
19, 8 million M D Anderson period of net 2020.
Mainly due to increased customer referral fees to other third party platforms.
Non-GAAP adjusted operating income, which excludes share based compensation expenses before tax was stable country and 20 states many of them being for the second quarter of 2020 one.
Representing an increase of 26% from 576 million be in the same period of 2020.
And then of course, it was 600 and a 20 minute M. B for the second quarter of 2020 one.
Representing an increase of 37% compared to 400, and the 15.4 million M. B in the same period of time and attention.
We have a well capitalized balance sheet and our leverage ratio remains low.
Leverage ratio across our business. It was only three eight times and our strong liquidity position consisting of $4.9 billion and be of cash and short term investments at the edge.
At the end of June 2020 one.
Positions us well in the inventory environment and it gives us it gives us significant flexibility.
With the COVID-19, recent resurgence in China and other regions around the award the company will continue to close the NIM oriented the situation of the pandemic and remain vigilant in its business operations.
As such the company holds a cautious view I'll ask operations and anticipate steady growth yeah. Its transaction volume for the third quarter over 2021 which is expected to be in the range of 35 billion RMB 237 billion RMB.
With that I will conclude my prepared remarks, we will now open the call to questions. Operator. Please continue.
Thank you.
We'll now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the key.
Is it any time your question has been addressed and you would like to withdraw your question. Please press Star then two.
With the benefit of all participants on today's call. If you wish to ask if you wish to ask your question to the management in Chinese we ask that you. Please kindly repeat your question in English at this time, we will pause momentarily to assemble our roster.
And our first question comes from Thomas Chong with Jefferies. Please go ahead.
Okay.
Hi management. Thanks for taking my question congratulations on the strong results. So first I have two questions here. So first could you. Please share some updates about the regulatory environment and how much of our lives already do you have an APR below 24% and how should we think about your trend in a P aren't going forward.
And my second question is what about our ocular ongoing origination volume in the second half in 2022. Thank you.
Okay.
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Okay, Let me do the translate from especially from our understanding the cap on IRR of 24% you said window guidance from the CBR Archie for consumer finance companies. It is not evenly implemented across the country as they are different time lines for different institutions.
For example, some determine that the outstanding loan balance of all loans above 24% will be reduced to zero by the end of next June whereas for some institutions that are followed the guidelines that there'll be no new originations above 24% by the end of next June.
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This is actually something we've been our expectation and we had been pre emptively, reducing interest rate for our borrowers for example in the call earlier, our CEO Mr. Feng Zhang has mentioned that.
In the first quarter.
Our borrowing rate was $26 two and in the second quarter.
Borrowing rate was reduced to 26 point.
Due to 26.2, I mean, the first quarter was $26 eight and it has been further reduced to $25 fall in August and also the proportion of loans facilitated at or below 24% has reached 60% in August.
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Okay. We are we have been making preparations and we I believe we are close to shifting.
Our loans to under 24%.
And based on our static assumptions stress test, we believe the impact will be around 0.5%, 1% and our take rate will be reduced to around three 5% from the current level of four 4% in the second quarter when the cap has been fully implemented.
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Years ago, a county that has a question they take upon too. So he tell that waste does it take for that Humana Cajun <unk>.
Like I said.
And do know that this is based on a static assumption and.
We are confident to further improve our funding cost delinquency rates and operating efficiency going forward and all of these were actually helps to mitigate improvement in our take rate going forward.
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The other night, you said one month any chance that you can ship it on changing Chinese shipping. So you usually I'll get a call deal well moving away.
Yeah. So lucida you could change all well machine then go.
Yeah.
The guidance actually what I'm going to beat our.
Our guidance for that ship.
We believe there's a grace period involved over here and based on this assumption we are very confident in achieving our full year guidance that we have given out at the beginning of the year and we are competing in.
Beating the upper end of the guidance that we have given out which is a 120 billion.
Yeah.
Okay.
Okay.
As a reminder, if you have a question. Please press star then one to be joined into the queue.
The next question comes from Alex Easy UBS. Please go ahead.
Hi management, Thanks for taking my questions I have a few questions first one on also on the mantra and.
The impact from the plants continue so.
After you have you implemented a lower price recent neat August so how how does that affect your take rate so far and how is the outlook for the next year and then second question is on your South started marketing trend. So I saw that you guys continue to.
Go up quite substantially and outpace your ballroom gross.
I'm wondering can you share more color on what's the.
Driver behind your sales marketing trend and.
When could we start to expect some profit on a stabilized trend on in terms of the year.
Marketing as a percentage of your own volume and then searched for third question is about your overseas market strategy.
I encourage you to stay for the progress on that front and it continues he currently account for around 30% of your total loan volume. So I'm wondering if you could share with us if you have any like.
We are targeting a loan volume contribution from overseas market like in the next two to three years.
Yeah.
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Why that one was that in packaging into the paper that we've mentioned.
Tom would you definitely want to pursue because with Hudson has introduced a woman that hurdle for that timeline that you continue to grow.
Okay. This question is do related to the earlier question of.
Interest rate cap at 24% are currently around 4% and based on the.
Stress test, we believe our take rate would be reduced by 0.5%, 1% to around three 5% and export it ASP.
I saw the pace of reduction we will still need to discuss with our partners in order to get the right pace for this reduction.
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Well, then that will add materially to the ER setting out for me a question like that.
She's a woman typhoons, yes, that's English so if we don't get ahead of it wont yet.
So when they shouldn't that decided to go with a P. S. One matches it.
So, let's see how it goes out to go to work well that would actually Covid also kind of what we.
With actual he had created a P S attention.
Okay. Although there are challenges in particular in the future I would also like to update that we have achieved significant progress in our a b S reputation and in the future. We believe the EPS will diversify our funding sources.
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Shelby setup Cortina should you wish you didn't sell cordis is about.
Now Jose Wuxi, the twice suggestible machines at a couple of days.
So you can now almost a totally pinpoint that actually slow back down because suggests.
Okay in the second quarter, our customer acquisition cost was around 400 cities in China was about 470 in the second quarter versus 450 in the first quarter and Paul our Cps and Internet for the international market. It was around 230 RMB in the second quarter.
Oh, yes, we like to look at I think six years ICT bypass a day, John J P well.
Nina when we usually target uses as its about all that.
You get the whole what's you know omidria, that's heavily I should say now about autonomous ships.
And in the future. We believe this trend will be stable in China, we expect our customer acquisition cost to be in the range of 400 to 450 for the international market, which would be around the range of 200 plus RMB.
No we have to say definitely can actually address a woman say oh, well because she doesn't mean that he thinks that now.
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That's important I shouldn't say all of them at the center of the Choppiness like I said that battle introduced it at that.
The other initiatives that you can sell dealer cordozar, let's look like something that like I said the bathroom tissue.
Do you think that that will actually help country. So question guidance.
Two questions how do you think that all our definition.
I would also like to update on my different customer acquisition kind of for example, our AUM.
We shouldn't be China's consists about 60%, 70% of new customer acquisition, our exports has about 15% and our offline customer acquisition.
Acquisition team has been making very fast progress.
Consists of about 10% of our new customer acquisition today.
So what is that what you're going to weigh on Linda golf would you what would you want.
Well, let's say, Oh, Gee do well months anything to change on that.
Judy I see maybe the whole funding.
Well I mean, that's the things out of Athens office.
I was just.
No woman, yes, as deep cyclical would you typically hear that yes. It has slowly since it is a game.
In the second quarter, our loan origination for our international markets with about $940 million on a quarter.
One quarter growth. It has increased by about 24% and we have also penetrated and began operations in our four countries Vietnam.
That's been the tone that you gotta each choices to Omidria will catalyze it.
India.
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If it's union tenure and crashing into adult Ah shall.
Shall be juniors debate I think sundar.
Double digits. The Sushi, then maybe Jonathan.
There has been some risk.
The result of the COVID-19 in the Southeast Asia recently.
And we believe we are still confident were able to achieve above four times group compared with last year, which is about 4 billion RMB of loan volume in southeast Asia market.
Todd.
Yeah.
So this is something I would just add that.
Southeastern Asian market.
I mean in terms of total population size is roughly half off of mainland China.
But it's.
In terms of.
GDP growth.
And.
Market is at an early stage.
So our business. There is also at a early stage compared to what we are in mainland China. So we if you look at a three to five years horizon are we definitely expect our growth rates.
Southeast Asia markets to be faster than the domestic market.
So it's hard.
To predict.
Because it also depends on how much growth we get in the domestic market, which does have uncertainties given the regulatory environment, but we would certainly hope that within five to five three to five years, our international business kind of accounted for maybe in the range of 20% is 20% ish.
For our total transaction volume.
Yes.
Yes.
As a reminder, if you have a question please.
Please press Star then one to be joined into the queue.
Star then one to be joined into the queue.
Okay.
Yeah.
Yeah.
Okay.
Yeah.
Yeah.
Okay.
Once again, if you have a question. Please press star then one to rejoin the queue.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
And the next question is from Eric Lu with China Renaissance. Please go ahead.
Hi, Nitro and forgive me the chance to ask questions and congrats for the great performance in the second call. There. So I guess I got two question. The first question, it's about overseas explanation.
So we know the company has expanded.
For countries in Asia. So can you. Please provide more color about that won't be pretty small, though each country. For example, the phone itself I think quality and nature and the second question, it's about the catcher light.
Loan facilitation model, so calculus quite some color about my future applying about puny.
Capital Light model.
Thanks.
Yeah.
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Dental imaging work.
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Further to the take rate showed a tablet or since that backwards is Dol pathogen shot Johnny good negotiation.
The unit economics for our international business is actually very different from our business in China in terms of pricing in terms of risk.
Performance and we can give.
For the international market the take rate is around 10% to 12%.
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So you're all mushy tend to always see shouldn't double months out how do you go to Google has to show our NIM can do of course, you've seen that cohort.
She doesn't quite a bit.
We have actually achieved a breakeven point for our international business, but at the moment, our parity if not in turning a profit, but instead our focus on our core.
Having more customers to have a faster growth.
My mother.
But when he just a capital light model.
Do you find that you don't have a material downturn.
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You got it between.
Ginger women's and got their own Cheetah print Linda took a change I'll talk about that.
Now I'll jump in a couple of doses that passengers does that now.
I think the chunky chunky too.
So you can fit into that if it's Angela.
Our CEO has actually mentioned that we have become.
We can progress.
Our capital light progress from two 3% in the previous quarter to 30% in this quarter.
And contribute about four points.
3 billion RMB.
The whole woman digitally so that usually men hour meeting.
So by Chico.
Katy I'll, let you on the Eagle Ford because what was it.
Now do you want that one, Ohio Luka tell magical papillary.
And for the quarter, we have worked with eight different institutions under the capital light capital light model and in our potential pipeline. We have another six more institutional partners willing to work with us on the capital light model.
The only thing that I look forward to go through them all saw Google and listened magic.
Telephone can't do that I think most of that to be the one that Susan.
Susan.
That's helpful to us.
To go to a particular bathroom to eat torrejon negotiations.
If you compare to a capital light model to the capital model and that's a 1% additional cost involved.
Yeah.
The whole junior woman to Egypt.
To go through them or sell them when it gets to call High school and your interests as well when that's is situated.
Obviously, you've got engines, which where you can deal.
So I'm looking to the whole issue towards you go that's what you're going to Sue you.
You heard how do they go to the table when she.
It took a while may choose to call.
So you almost once you sell bui the typewriter.
So are you with that.
She is a woman Seth.
The leverage ratio on the east has about superficial deal, which I think the street.
And for the rest of the year, our focus on our capital light model is actually on the quality of the.
Cooperation model of the capital light model, meaning that we will continue to work with more partners on this model and as you know our leverage ratio is supposed to be relatively low at three eight times Hershey.
The next question is from Hans Van with CLSA. Please go ahead.
Thank you management for giving me this opportunity to ask questions.
I have two question one is thought of regulation and the other one is about asset quality.
No not regulation wise.
I think some other callers asked about the eight Sean I want to ask about the loan facilitation in terms of breaking up the link between the fintech level at the bank.
Right, So think about a.
Yes, they do.
There was a regulation Oscar they think like type of patent data.
Through the license credit, scoring company first who can in turn pass data Tonight. So based on this regulation, how do we plan to be compliant and what are the impacts on our business, especially on the take rates are.
And what are the potential sort of you know a change in it.
And a model that's number one.
Number two is on AD quality, we noted that.
Our according the trend what's break it so just wondering looking at the most of the rigs in two mouse what are the trends there do we expect continuous improvement in our delinquency ratios. Thank you.
Yeah, well, that's what I have to deal with.
Yeah, No I think you're gonna juices.
Congratulations Linda.
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Anyway, I'm interested in the yard so you're going to see sharp PRT Gunther.
The Regulator's view on data collection is actually based on minimum require standard.
The whole Tuesday, quite a well known.
Also just as soon as they told him to sequential.
She says Gee ayelet.
She is a woman.
So you can literally get your top that's when Jay when I kind of when you got to listen to the film portfolio. You've got you could you see do you think that's all I'm awake tissue thinking telecom.
And our company has been working along in this direction and based on that possibly abuse right. We believe we have fulfill their requirements. Our app has actually received <unk> certification and App information Suchocki certification from the China National Computer virus Emergency response Center.
The other change you know well more high Tech you triangulate, that's usually a woman who can change India, Toledo pesticides Fujita suit us well.
Well this is the ethical sushi and xiaomi.
See toyotas luxury shops yoga into two people quit and shadow AUM of statistical phone call. Okay.
I would also like to stress that our core capabilities actually based on the day that utilization and not based on the amount of data collected and Pos.
The regulations.
Section of the minimum required standard.
Not actually affect us a lot.
But there was an agile to your dungeness fishing, a little easier to see England at how big a silhouette schwalbach hallucinations don't want us to not at all I care about our scope it doesn't shoot.
No. That's what I think most of that was on that.
You would put a pin up with I would have emphysema So U S.
Uh huh.
Switching the challenges together challenges to that Fintech equal Chattanooga.
You hit it will take you there you go.
Hi.
And based on our understanding on breaking up the leading all credit related activities to be supervised under license regulatory bodies. This means that such activities needs to go through a licensed institutions and credit Bureau agency is actually one of the China's.
That's interesting to find out what monopoly techy ER cigarettes.
That's all the TV Chanel Mcquay chocolate chip cookie.
This is Michelle on your behalf.
I'll stop now we'll Monaco.
I just need to keep adding cash to income.
You'll see in the literature that seems I know well, though you shouldn't that she did hassle, that's essentially shut down the eagle.
Tempting income.
She is actually shipped literally ginger.
And going forward, we will strengthen our cooperation with the credit Bureau agency and we have been working with by half since 2018, and we have been developing products together with vaccines.
But the other that Oh, that's just a way of Chita J J watt assiduous about patients who choose to send out without saying, what a scope and a issue.
So on the gooseneck.
Just as a new Shanghai, which unifies all well Neil you can show that ties all those old anti trop no.
All machines I know you since Angel will I see logical tuition should you show Glenda farmed out to the pilot.
She put out here with a question.
As mentioned earlier, all credit related activities needs to be supervised and pay a license regulatory bodies and we also exploring the possibilities of using our current licenses such as our micro lending license and financial guarantee license to process the data.
But he said that he was the one we are way beyond the two times or so.
E G.
Got it got it.
And we are also actively exploring the possibilities of participating in a stake in one of their credit Bureau agencies.
It's one that I saw what you the tons into the system to ensure you get hooked up in the high teens to us.
Yeah.
Look we think that you feel that you've got to mature.
Two almost chiquita.
And then he who show income, which hasn't hydraulics taking shape.
In conclusion, we treat the indirect data transfer when you change the protocol of the process and will.
At some cost, but the cost is not going to be material and it doesn't impact the outcome of the business and the risk assessment results.
Oh man that just they just switch look all you Gotta, Yeah, Oh, Queensland told me.
As you can at all when it gets with all they know who they are culturally on that six would you like to take.
If we can't push.
As soon as possible.
As data management becomes more standardized and transparent we believe we have the opportunity to secure higher embedded Iraq quality sources to further improve our operation efficiency.
Nicaraguan kinase equates to a free tier one high quality trend right.
Woodlands hygiene it also table.
Judy arches aegis it he can.
Official holidays, they'll put it out there since that you are not.
Not all Shadow AUM I.
Single digit according to article Fuji Penises, I think total audience that essentially you're right.
And throughout the year, our asset quality has been improving.
Progressively in the second quarter, we expect our vintage delinquency to be around two 3%.
Before we let you all know with your the Oh, well English you in any bulge on the Eagle shaping up.
So you've got the deal from me on that.
So the team gather consumable that you don't watch that China continues to go to AUM, Linda I think if we can juggle.
I have to admit.
In general.
So of course, you Dinos just said its adult woman a twentyish massage engineer he didn't get a shot at that and if we don't ship to them for me do you guys see.
So that's it for me it all Mr Fisher like Michigan.
And in that in.
In the future we have the computer confidence to maintain our delinquencies at December as you know lowering the pricing, which will help to improve the risk level like what we have experienced from our Q2 P transition.
Oh I see.
As a reminder, if you have a question. Please press star then one to be joined into the queue.
Once again Thats Star then one to be joined into the question queue.
Yes.
Yeah.
Yeah.
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Yes.
The next question comes from.
Henry Liang that's called Dragon. Please go ahead.
Good congrats on the very strong without just two very quick questions to follow up on the first one is he will provide some more color on the breakdown for your international business right.
But the patient volume or different countries and the second thing is like.
I know that we just talk about like the past off your profitability on the 24% just like you do have a concrete guidance on earnings.
Earnings estimate like how much earnings downside upside well, we have next year when everything is on the 24%.
Yes.
So I think that's all about.
Just so you guys give us the Nicaragua E O Goldman Yeah.
Yeah.
So it just says contact at a woman knockdown in the Philippines without a phone call.
That guidance.
Oh yeah.
Come on one thought as we got back into the office.
Lee do you sense is the <unk> cause of shell Hello, Lee now well Mcgalley's, Pennsylvania.
<unk> seen kind of like handbags, absolutely adult summa safety.
Yes.
Okay. Thanks, Harry this is a phone yeah. Just quickly are you know in terms of.
Country International market country breakdown, our Indonesia market accounts for about three quarters of our volume profit.
And Yunnan.
In total our comparable the rough and vanilla is a just a study.
Early stage.
No you know in terms of the profit impact for the price a regulatory change shift I would just do it I think that we can just do a quick math.
As we mentioned in the currency our average is about 75, 4% and do we have.
The loans are there.
Associated by Us.
Outstanding is about 440 billion.
So if you do the math 40 billion times.
Let's say like if we would reduce to 24%.
That's a drop off roughly one 5% so that's $6 billion that's right.
600 million.
Pre tax profit impact now in gravity, we may maintain some of our.
Volumes at a rate below 24%, so the impact in maybe a little bit more than that but again, that's the <unk>.
Static version.
As a as we mentioned no in reality, what do we think will happen is.
We will continue to drive down our <unk>.
Our our loss rate and we.
There's a great there there's big opportunity.
Not really.
The market will have.
Much more limited to assets and apply for this sector.
Lots of players they operate between 24% and 36% in fact very close to a 36% is going to be very very difficult for them to adjust their business to kind of 4% to below 24% without <unk>.
You either will not be able to do that or they will do that but with a huge impact on your volume. So the asset supply for this for this sector is going to be very limited and with that I think the.
Good opportunity for us to further improve.
Our funding cost.
The better negotiating power with our funding partners without Easter.
Institutional partners and then lastly, as we increase our business volume the size of our business.
Fixed cost component, which is a big chunk of our total cost as we especially have researched heavy company, we spend a lot of it.
Like human capital cost.
<unk> is going to be.
The efficiency is going to be higher than the.
Fixed cost is going to be a smaller percentage of our total.
So with all of these improved improvement opportunity ahead of US we actually think we can debate that.
The profit impact to a significantly smaller and.
Smaller impact than the number I just indicated.
I hope that helps.
Yeah, so basically under that math it looks like we will still have a very material growth.
Hold constant we will still have a material growth of earnings at 'twenty 'twenty two from like last year from last year's level.
But this year it feels like almost 24, but yeah. So so next year versus last year.
Material World.
Well, we certainly hope so, but I think people may have different understanding of the material.
So.
Yeah, I do think that.
Cap, 24% Pac happy is going to have some impact in the short term.
In terms of profitability, but I.
I think the key message here is our you know from all of these aspects. So we believe the impact is going to be fairly manageable.
For the short term and we think if we look at the medium to long term, it's going to be a good thing for the for you know for the industry and for our company.
But I'll, let call. It just one very quick follow up on the international business have we like being considering U S. As a potential area of to answer it.
And like how strong Saar has been doing bolt on that business on the share price are in.
In that market are we lie on there any future.
Plan of answering that and share some of the economy there.
Yeah, I think we've we haven't been like and are paying some attention but.
As of now we don't have we don't have.
Concrete plan to enter U S market I think we mostly are focusing on developing ward.
Yeah, I'm going to stand upstart has a.
Hi valuation.
But.
It is still something were trying to figure out.
But I think when we look at Nike.
Medium to long term, we are pretty happy with that.
The mainland market and the developing world, particularly southeast Asian market, We think it's big enough for us to play for the years to come.
Yes.
Thank you. Thank you.
Yeah.
Yeah.
As a reminder, if you have a question. Please press star then one to be joined into the queue.
The next question comes from Harry Lu with China Securities. Please go ahead.
Thank you.
Once again, we're going to learn about what LNG sure you wont breaking.
Breaking ground you shoot you answered thank you.
Jim Watkins.
Im sure that you don't go down it's really funny.
E equals <unk>.
So why don't we didn't even do that.
Sure.
Whether there'd be any further changes to the regulatory policies on user privacy is battery user data data collection and what kind of response.
Company would do to ensure that the business is not affected.
Yeah.
Yeah.
The NIM Costanzo watches are you guys also truly heat cooled and <unk>.
And I'm.
What's your thought there.
So seeing a PR chine angle for a duration.
Issue, but you have to hold off on the genius.
Since this is hogwash.
That's one single factor on the NIM kind of on that you saw it shouldn't be too changes a year ago. Hudson you went out of your peer one even though she's doing manga ethical.
Single family.
Oh goodness.
Quad with a suite of quality, let's see if AUM.
Sure.
Sure.
Okay last Friday, there was the.
Introduction paper on the scope.
Of personal data protection and also on.
The consultation paper on.
Cross border data transfer.
No.
The data that you said was you just acquired Youll Chihuahua diseases don't need, albeit.
So you called out what that or what are the only a T J.
Do you Yahoo go astray sharpie all that John.
It's just when they used to that.
Drinking.
Whole woman that particular cohort.
Romania, I should say cheap here.
Sure.
Shoot.
Josh I will implement upon father.
Androgen shoe huh.
A woman I'm sure you can still find me shoot.
Thank you God.
Okay.
But from the data protection front, there hasn't been much in just the focus is always on the minimum required standards and we have also received the apps the karate certification and App information Security certification laboratory rating from China National Computer virus, you mentioned the response center.
Nah thing to me was you should oh listen to quality.
Okay.
Goldman Sachs well, neither so just I'm gonna Tsuji, Natasha Chiller projects would you do with that.
Sure.
Oh, Hi, why is it so I wonder when you.
Do you still find that I don't need to sustain.
She had a Swedish authority hobo on cross border data transfer and we have maintained all the information collected in China to be mean in China, whereas all the information collected.
The national markets remain in their respective countries.
Doug I don't want you to tell how should you go.
No no hold me to.
Let's see if I'm gonna. He also now to find out what we bought Segal.
You didn't go sequentially.
This regulation is still relatively new activity and we will continue to closely monitor developments.
Development of GAAP regulations.
Yeah.
Thank you.
Okay.
Yeah.
Yes.
As a reminder, if you have a question. Please press star then one can be joined into the queue.
Once again Thats Star then one could you be joined into the queue.
As there are no further questions now I would like to turn the conference back over to the company for any closing remarks.
Thank you once again for joining us today do have further questions breakthrough for you to contact our IR team at nicely Goodnight.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.