Q2 2021 CNFinance Holdings Ltd Earnings Call
Good day and welcome to the Cm finance, the second quarter and first half of 2021 financial results conference call.
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Please note. This event is being recorded I would now like to turn the conference over to MS. Jeong Jae. Please go ahead.
Yeah.
Good Mommy hungry for me and welcome Chris Yes, second quarter conference onto one first financial results conference call in today's call.
All of us could die or walk us through the operating results followed by the financial result.
Our watch separately on the chemical market Department, notably after that we will have a Q&A session.
Before we start I'd like to remind you that this conference call contains forward looking statements within the meaning of section 21 of the Securities Exchange Act.
<unk> 34, as amended and as defined in the U S classes of therapies designation.
1995.
These forward looking statements can be identified by terminology such as real big banks participate in the chair and board.
Plans beliefs estimates targets going forward outlook and similar format.
Such statements are based upon management's current expectation and current market and operating conditions.
It relates to ease back that involves alone or a low risks uncertainty and other factors.
But I did a coca Cola and many of which are beyond the company's control, which may cause the company's actual results performance or achievements to differ materially from those in the Philippines.
For information regarding this and other risks.
Turnkey all factors, including income is following the U S Securities and Exchange Commission.
That's not uncommon any obligation to update any forward looking statements as a result.
Sure.
Events or otherwise except that the required under law.
Now please welcome our CEO Mr di.
So yes, okay.
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Oh, well gentlemen.
Thank you operator, and thank you everyone for joining us in our conference call on today's call, we will introduce the company's financial and operational results.
Quarter and the first half of 'twenty, if only one followed by a Q&A session.
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Following a good first quarter the loan facilitation volume increased in second quarter.
After adding another RMB three 8 billion of originated loans in the second quarter the.
Total loan facilitation reached RMB six 6 billion in the first half of 2020 one.
Representing an increase of 100% and 113% respectively for the same period of last year.
And that income in the second quarter and the first half of the year was RMB.
Two 5 million and RMB 115 million respectively.
Both increased significantly comparing to a net profit of country 5 million and a net loss of RMB $40.5 million in the same periods exactly yet.
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All results and second quarter, but also in their first six months of tons probably want.
The loan facilitation volume even reached a new high since the inception of the collaboration model. The reason of Arthur says up threefold.
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The huge demand for home equity loans in the second quarter as China's GDP grew seven 9%. So why the business operations of over 80 million ran through micro and small enterprises in China led to a huge demand for working capital.
However, amnesties in China, a user has got hurt with small scale and stable cash flow.
These characters of MSE made them difficult to meet the long approval criteria had banks.
Their demand for working capital cannot be satisfied by paying them out by traditional financial institutions.
In this market environment, we call ourselves the last my Korea to build and that were offering exclusive inclusive financial system in China.
In the past two years, we have older loan services to over 40000 MSE in China.
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On the other hand home equity loan is still one of the best interest bearing assets in the market.
We witnessed us.
Transition increase off property price in major cities.
Second half of 'twenty time.
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It depends on what we call.
Since the inception of collaboration model, we have built a national worldwide consistent.
The steep wrenches and for TCR T.
By collaborating with over 2007 colors across China.
With this network, we are able to establish a wide market coverage and sort of MSE owners financing needs in a timely manner.
In the first half off time to time, we won we facilitated loans with a total amount of RMB six points. This experience representing a year on year growth of 118% from RMB three point O three.
3.05 billion.
This growth is back on a fast track.
G Museum handle the pay down of certain jobs.
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For a long time, so it's useful.
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She's been a cohort in the extreme haven't yet in sheet.
The collaboration model has been well recognized by the market and so we kept refining operation in the past two years two securities that have come on to Iot to our platform, we have been optimizing our sofas provided by.
So as you go.
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First we have been consistently adding talent to our professional management team.
Also offer training programs for ourself partners to help them to help their team member gang deep understanding of the product and risk control criteria of the trust company colors.
So that they could first MSE owners sufficiently.
Yes.
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With all that you should always be able to you know future propulsion jump you're going for the green.
And do you know what else has changed since you have to take both the channels people see the order entry than they used to get here.
Cause you any one single women when you put two horses and some that would argue that you're talking about.
Second optimize their data processing and storage of all our all my system to make them more efficient and less about two users.
Surf MSE owners in time and costs our own calls at the same time.
The drastic increase in loan origination volume was the proof to the Quebec capacity and efficiency of our own process system.
Based on our internal assessments.
Our current system is capable to support an annual capability.
RMB 33.
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We delivered strong results in the past two quarters, but at the same time. We also noted some challenges to offer triple including.
The Fujian Guangxi the Yahoo.
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People are switching to something else.
Sobbing Crusher, we are highly dependent on trust companies and founding partner since the beginning of 2021 regulation entre culminate long product, whereas tightened.
As a result.
Companies reduce our founding quarter.
We also suffer from a subsequent rise of financing costs.
Do not expect this regulation to loosen up in the rest of 2021 and therefore a loan origination.
Possibly be affected.
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We haven't you didn't handle it well.
We have noticed the uncertainties of property price and liquidity due to the government policies in controlling property prices and impacts from the COVID-19 pandemic.
In 2020, one the government actively initiate measures to control property price increase.
Including announcing suggested prices two second hand poverty in multiple cities, Israel and tightened mortgages juices wrote down property transactions.
Management believes that such uncertainties real negatively affect the loan origination volumes and NPL disposal.
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Hence what are their fire losses as opposed to kind of ease how more from Wuhan Chengdu, China, you know through most of the time.
And also for kind of forgotten Golfie Goldfield, Jim Cutler who's involved.
And that is why.
Under the collaboration model just tell us their risks however, due to the business structure agreed upon with things like trust companies, we at a holder of subordinated units.
Plans as a result, we have to consolidate the assets on our financial statements. We seemed like a company with heavy asset where I'll reference is thrown there Richard from interest spread.
The balance the balance you cannot represent our true business model, which is in fact, a NASA lites loan operations platform.
In the meantime, the look of the balance sheet is also country when we reach out to new farming colors.
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In order to consistently grow our business and sort of MSE owners in a changing market. We plan to further refine the current platform model and introduce a new satellite office platform by taking the following measures.
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Transferring Oss and risks to any investor preferences in high risk and high return as that back by property. Our company, we will focus on online and offline automation and post low manganese sulphate.
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Collaborating with different type of funding partners to serve them as the owners with different clubs a rating.
Other than strengthening our collaboration with Trump combination, we have proactively reached out to rigorous financial institution.
We hope by introducing more diversified long products M.
M. A c's could enjoy the benefits of a more affordable long.
We have signed collaboration agreement with commercial banks, including Everbright Bank.
Blue Ocean Bank, and wash out bank with a possibility to issue a b S.
We believe that creating a broadened from endo channel will help us bring back.
The vacation of our long products and offer more choices to MSE owners.
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But as you know 40 cheaper than before food Ginger sense, you've got hundreds of junk equals we mean something she called Fisher wishes of food or shelter.
We will continue to improve our service to MSE owners first.
There is an hour so based on that we're a national wide.
The current network has 15th wrenches gawker across four four tier cities penetrating into markets and discovering the financing needs of MSE owners.
Other than that really.
Albertite, Panama G development to improve the loan measurement system capability in storing data and to increase the efficiency in overall process to satisfying the financial needs of MSE owners.
Also with the goal to reduce the operating cost of our company.
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Official guidance was involved because of a consortium of hard you know what how did you did.
Tissue Vishal ratios that you won't see GTT Benji I wish all of you know.
To achieve our mission of make finance more human and follow the government policy of developing and inclusive finance system.
The average advantage gained from yourself dedicated work in the industry.
Bill our service platform that is asset light turnover high and scale Raj.
We will proactively work with funding partners to push out diversified loan product consistently provide MSE owners with affordable accessible and efficient financial services.
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Good.
I felt like you know guidance yet for.
For sanctioning body functions user and you keep saying yes.
Well I mean, you have to realize your chesney torture whole fruit and Chrysler she's our fingers Seattle.
And that today, we announced our CFO Mr. Li Ning will step down from CFO position in November I want to take the time to thank Mr. Li yourself how work.
Mr. Li has served as the company's CFO since 2010 in the past 11 years. He made significant contribution in leading financier of finance to become a leading home equity loans are basically provider in China.
And put dedicated work in transformation from a privately held company into an NYSE listed company.
On behalf all of US here in C and finance I would like to thank Mr. Li Ning for his leadership.
Dedication and professionalism I wish him best of luck with his future endeavors.
We have already commenced the search for new CFO.
Sandra will jump off against Droga wellness witnesses onboard these genes so.
But you know with having just hoping for R&R Union Jersey, it'll he's somebody in a car was on par with that I'd like to hand, the call over to Mr. Bailey.
<unk> profit after capital market Department, who will walk you through the second quarter and first half financials.
Thanks, Jay and thanks, again to everyone joining us today.
I mean, where are you for our second quarter and first half of 2020 one financials.
We believe our year over year comparison, it's a faster way to review our performance.
Unless otherwise stated.
Or percentage changes I'm going to give will be on GAAP basis.
Also unless otherwise stated or NIM, but I'm going to give will be in RMB.
We will go through the figures for the second quarter on currently it's only one first.
Followed by that for the first half.
The GAAP.
2014, 27 to one.
Total outstanding loan principal increased to one 6 billion combined some path to a night points there won't be any army asked off December busy first 20, Turkey.
Total loan origination volume was $3.8 billion increased 103% from $1.19 in the same period of 2020.
Interest in financial services, we are alone.
449 million pets light decrease.
Little 2%, primarily due to the combined effect of Hey.
English of allergy Lady outstanding loan principal.
And b lower interest rates on loans facilitated complained that the route regulation each of my read of them Yeah via regulation authority.
Interest expense was 195 email compared to 187 million.
Due to the increase in the plains opposed to acquiring from the company.
Collaboration cost for sales partners increased to 100 and sell a million for second quarter of 2021.
Compared to one 4 million in the second quarter of 'twenty Firstly.
Primarily due to the high outstanding loan balance.
Oregon needs under the new collaboration model.
Provisions for credit losses was 15 million.
Secret, though they went to 4% from 15th that wasn't me may only be in the same period of 2020.
The decrease was mainly attributable to the combined with Alt a.
The increase in outstanding loan principal under the perpetual model that was guaranteed by credit risk mitigation position.
By the first partner.
B lower probability the floods under the current expected credit loss model.
Which take into account a more positive outlook for the Chinese phenomena in the second quarter also have the authority ones.
Some have to die and the same type of Chinese 'twenty under the impact of COVID-19 pandemic.
And C.
The company received a recovery in the core to us it touched on loans that are 180 days past due to net realizable value.
Total operating expenses were 87 mainland adequate they'll sort of 4%.
We want them to a 14 million in the same period last year.
Income tax expense was 8 million a decrease of 46% for them beyond the 16 million in the same period outside of Turkey. This is partly due to the decrease in the amount of capital income.
And.
Net income was six people fly me and in this quarter.
Florida and increased 115, 9% from 25 million in the same family alternative strategy.
Now we are moving on to our financials to the first half of 'twenty one.
Total of origin nation, one of them was six point that one thing compared to three one being in the same period last year.
Interest and financing so it sees all knows what was 871 million.
A decrease of 7%.
Due to the compliant yourself off Hey increase of average daily outstanding loan principal and see lower interest rates are low so they take.
To comply with the rules and regulations issued by rather one kiosk the regulation authority.
Interest expenses was.
351 billion million DAU.
Pat.
I'm glad to $388 million in the same theory of plenty plenty probably due to the decrease in plenty suppose all borrowings under the guarantee and we purchased.
Collaboration cost for sales partners increased to 200.
<unk> for the first half so this other one compared to 119 aiming that in the same sort of thought he thought he finally atrophy of quotes in English.
Loan balance under the collaboration model.
The provision for credit losses was the recovery.
Recovery of 3 million why it there was the position of 277 million in the same peer LTV Turkey.
However, due to the result.
Okay.
The increase in outstanding loan principal under the collaboration model.
That was guaranteed by the but the cost of risk mitigation position put out by the summer and the lower part of the team.
All this work under the current expected credit loss model, which takes into account more of a more positive outlook for the Chinese economic and this year have somehow we got involved.
And last year.
The same theory.
The impact of COVID-19 pandemic.
And see somebody we see recovery in.
In the first half 'twenty one.
Of course change down below a 180 days lost due to net to net realizable value.
Total operating expenses was where.
102 million a decrease of 16%.
Some path to 215 million in the same period of last year.
Income tax expense was.
It's 13.8 million and.
An increase from 1 million in the same theory, Australia, Turkey, partly due to the fact that we record that income income before income tax expense.
For the first half turning to one as compared to a loss before income tax expenses.
The same theory all Turkey.
Net income was 151 million compared to a loss of RMB 41 million in the same period.
2020.
As of June 13th so if anybody wants to come.
We have cash and cash equivalents of 1.6, feeling somehow weak 2 billion on.
At December 31st Turkey, Turkey.
The actual delinquency rates for loans originated by the company decreased two nine.
I think 18 nine.
15000 cars at once right.
Two.
6% as of.
December the first Chinese company.
The actual empty alloy for loan originations by the come only decreased two eight.
Eight six as of June 13th when he says the one well in the $1 seven as of December 31st 2013.
Yeah.
We will now like to open up.
Of course, what's your name.
Operator, please begin.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Yeah.
And our first question will come from William Grade goes that ski of Greenwich Global. Please go ahead.
Hi, congratulations on the big loan origination volume number or are you.
Seeing a continuation or do you expect to see a continuation in that number or growth.
And also do you have the availability of funds to support that level of demand.
Hi, Bill could you repeat your first question again, we're trying to have a bad connection just now.
Yeah, I just said you had huge loan origination volume growth do you see that continuing is that demand is going to continue.
Do you have the access to the capital to support that demand.
Okay.
Yeah.
Uh huh.
This one is on the streets, you or would you assume a.
They are and even though we didn't really have any material trends.
Traditionally I don't sure Shlomo.
There's already aware lifeway Daiichi.
I will take your questions.
Certainly, we'll make anti F C O N E.
I don't think these 1000 Xinhua, so east outweighed T agile come in the future will somehow sometimes huh.
Like so you just mentioned in his remarks as China's economy grows.
Our highest bid we are continually continuing religious sian do you feel that demand from the MSE owners for capital.
Well, Matt as I said the changes in pack in la.
One one zone, but I just don't want it all eating.
They see at home quite soon.
So a tier two or does she chose beeping sound quake.
And we had a very established.
Sales network and our system is capable to support our loan facilitation.
So you can't that woman junk up.
Please standby, though by email.
So like I, just like to see you just mentioned in his.
Remarks too.
Our system is capable to support.
Annually loan facilitation of 30 to 50 billion RMB.
Okay.
Yeah.
Well, there's always a huge show has always see Sheila and we believe the huge demand from the MSE owners will continue and carry through.
Well, let's see or that between them and so you'll have something to supplement.
Junior and Jim Bob.
General shouldn't that increase.
For US you know junior.
Siobhan here Ashish will have to have options.
This year, so far are enhancing huge demand for capital from them as the owners and we think the batesville carried through to the remainder of the year.
So that's the other child right. So you may want to offer you shouldn't broken through.
Unless you know won't forgetting junk yard Jamba Jamaica.
She undrawn.
So Jim Gouin schedule.
The main challenge to US right now is that we are like.
We are highly dependent on the trust companies to alpha to support our capital our findings and but they are facing tightened regulations. So that our quarter was kind of brought down from <unk> Trust company.
So they're going to you know remains high for this year.
Patrick would you change shown at the general shown but could you at all be forgiven.
I mean, you know somebody here.
And we have taken many measures to to reduce the effect of tightened Trust company found but we will see that should be to.
To be of our assistant manager until Q.
For the fourth quarter for the first quarter from in 'twenty to 'twenty two.
Well before me so that's my answer to your question.
Okay.
You mentioned signing up the commercial banks.
Which seems like a great.
Great.
Thanks for you guys in the platform and getting that access to capital from that channel.
How much availability do you have I mean are these trials or is it a good amount of capital you're going to have and what's the rate on that.
Oh.
Our NIM going off at all.
I'd encourage all of US all the technologies were being in sort of holiday messaging a little chunk.
After the Christian I don't honestly I just don't.
But you don't you Mr. Treasury of hydro that is intriguing.
What do I need you.
$100 a door.
Oh, you, Josh Hunk, Benjamin cheaper and cheaper.
Oh gosh.
D well they have the potential for a second.
Hi.
You've got a boyfriend and send them more time to work either no sunshine in Yokohama.
So we have already signed cooperation agreements with the three commercial banks.
Josh or bombed out in your house, so one being the arrow Bryan back yard for more than one.
One being the washout bank how are you Josh you hung on that.
And there's a a smaller one comparing.
Comparing to the last two mentioned Blue Ocean Bank.
There was a shining.
See what I call about a woman who shall.
So each year with a family.
The.
Main advantage that brought up by a collaborate collaboration with commercial banks is that we can cover.
MSE owners with a different credit ratings.
Well, Jamie I guess, how are you on.
And then she Fujian, China, and then maybe hershey's gold because it is a feature more of what we know.
So the agreement deal is signed right now we're just.
Trying to see if we are compatible in our collaborations and trying to see how the system is going.
So yeah, that's my answer to your question.
Okay. So there hasn't been any.
Large scaled lending from the banks, yet, it's just more of a test run.
Sure. So I just wasn't I don't believe will happen without hydro for shooting.
Yes, you're correct.
Okay.
And last question is on previous calls you've talked about class a class B class C loan products, you were gonna roll out with different rate structures can you provide an update on those.
A bunch of gender.
On the Internet should all go one of which is Ah.
Jeff will between them, but sometimes the type of stuff.
Well no.
Up until a busy summer leasing minimally.
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You can see on the women you know.
On the <unk> com all of our Cheyenne ontogeny too.
Two for you for sure.
Quote unquote for the Florida family.
Of course, you can probably towards the ultra Gina.
So I'll just keep on that.
They are cyclical.
Do you have like a B C D Copeland.
Plus as well.
Sure.
Good luck to them okay.
You mentioned, one that means that you don't have a forecast on box.
Every corner.
Either component.
Uh huh.
Okay got it.
Do you want me to go through the Hawkeye the BDC the coconut Grove.
Sure.
And you May talk one.
Mortality is Jenny.
He's a bond fund.
She.
So that's our initial ambition when he said we are trying to collaborate with our commercial banks is that they want to you know just cover.
Customers with different readings with different credit ratings. So when they were solely collaborating with trust companies.
Or we could cover was mainly so in our internal.
In our.
Internal classification, the type B type C customers, but based on our past experiences we don't really see that they have too high a risk so by clever by collaborating with the commercial banks are we are trying to cover the so called type customers, but.
However, we are not sure at this moment, if they are really going to be.
A higher quality than the customers that are serving now because cause right now in China. The credit system credit rating system is a fully established so we really have a we are not really fully sure of violet type customer.
Customers are going to be by their customers than <unk> customers.
Well they have Jim issues are.
A couple of them at least she performed 500 or above 500 bar <unk>.
She didn't go full.
The border crossing.
Well, we're hoping right now is that we could offer long products.
With our interest with annual interest rate from 10% to 18%. So now we can cover more customers more borrowers.
Mhm, that's my answer to your question.
Okay perfect. Thank you guys very much.
Yeah, you bet.
Thank you. Thank you for your question.
Once again, if you would like to ask a question. Please press Star then one.
Yeah.
Yeah.
Yeah.
Okay.
Yeah.
Yeah.
The next question comes from Neil gag none of gag non securities. Please go ahead.
Yes good.
Good afternoon.
Can you give us your review on this quarter, how did you do live up to your expectations.
And what base because it's set.
For your expectations for the second half thank you.
I'm in the minority.
You trigger further digital Hello from my Vantage oncology, who was a million realized he argued with legacy are neutral to use a much it's worth more to you Dr. Dr. Shao Lee with.
Total.
Okay.
So gena.
One thing you don't see that shouldn't wondering how Ms useful for him often first of all we are seeing sufficient a huge demand for our for the for the whole year.
And she has done for you that kind of woman she has on Cheapens huh.
Our fee.
Uh huh.
Harvey.
So from from based on our internal record the AR application every month is a well over.
RMB 2 billion.
Well, there should be an NGO mines with a doctor the freeze or you.
Hum.
Richard all the for CIT facilitate around RMB 1 billion every month.
This is a 500 to figure out what went on in pharma and food. So there is a 50% GAAP and between the demand and supply.
During the Chongqing and Youre right well job.
C G.
Tissue.
Jesus Gingiva factor.
And Archie end of summer and yet some of these had the.
200, <unk> you can see good sushi sound balance sheet.
And since last year, we have a we have seen a consistently increase of property price in China.
It's only a handful.
101 for you as an example.
The increase was even over 30% in some and some major cities in China.
A sit down or usual Nancy woman, the chevron and the huge one of them.
So are those two those two factors lead us to believe that there is going to be huge demand in the remaining of the year in the second half of the year.
One P J.
$1 for downhole.
But there are two considerations.
Angelus for switching Queen.
Clean this up.
First of all as to our secure enough secure access to enough funding.
Darren it's hung Ching and.
I live in person in La County.
The families had to.
The telephone please look at Georgetown.
And the second thing is that starting from this June we have seen a tightened regulations on the property price as well.
Don't want to go.
Jesus in the three that you shipped from food.
Trends for that one.
As usual so we tend to be more conservative when doing businesses in those cities where on the property prices.
For there to be too high.
Marshall why don't you that Union bank somewhat man.
And truthfully in the U a.
You bet he found that will be all.
And therefore, I don't see anything that you've.
She is at all argued on mobile I don't want to go home.
But after all we are still very confident to reach our goal from the beginning of the year to lie ridge.
RMB 10 billion in outstanding loan principal by the end of the year actually we have already reached that goal at the end of the second quarter will be a nice jump sort of account for the call.
So we are we are working on refining our business.
But at this moment that's our.
Priority.
Chip.
Thank you for your question.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Jim Jaye for any closing remarks.
Yes.
This will conclude the conference call today, if you have any further questions. Please reach out at China.
China Dot com bust, yes. Thank you.
The conference has now concluded.
Attending today's presentation and you may now disconnect.
[music].