Q4 2021 360 DigiTech Inc Earnings Call

[music].

Ladies and gentlemen, thank you for standing by and welcome to the <unk> fourth quarter and full year 2021 earnings Conference call. Please also note today's event is being recorded.

At this time I would like to turn the conference call over to MS. Mandy Dong IR Director. Please go ahead Mindy.

Thank you Hello, everyone and welcome to our fourth quarter and full year 2021 earnings conference call. Our results were issued earlier today and can be found on our IR.

Our website joining me today.

Hi, Sean <unk>, our CEO and director.

Mr Xie Alex.

Our CFO and thereafter.

Our Seattle.

Before we begin the prepared remarks I'd like to remind you of our safe Harbor statement in our earnings press release, which also applies to this call may refer to forward looking statements based on our current plans estimates and projections also this call includes discussion of certain non-GAAP measures.

Please refer to our earnings release for a reconciliation between non-GAAP and the GAAP one.

Unless otherwise stated all figures here.

I will now turn the call over to our CEO Mr. <unk>.

Okay.

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Jarvis.

Thank you <unk>.

You have the data.

Hello, everyone and now we're happy to report another solid quarter that capped off.

Australia.

In 2021 total loan facilitation through our cash flow reached RMB 357 1 billion.

45% year on year.

The midpoint of our raised our full year guidance.

In Q4 total loan facilitation reached RMB $96 9 billion.

Zero, 40% year on year.

Outstanding loan balance reached RMB 142 P M.

44.

<unk> by 54% year on year.

This is overcome multiple challenges related to macro economy uncertainty through rapid outbreak of Kobe.

In fact, Tianjin regulatory environment, rather volatile yet of 2020.

You've heard of growth, while maintaining stable asset quality and further demonstrating the resilience and the flexibility of our business.

Somebody will figure out yes women's shoes.

Now, let me walk you through some updates for Q4.

So again for you yet Glenn.

Thanks, John .

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While the disease similar implements Deutsche on Peanuts, Didnt, England, which is 100 billion.

Should the June how can go at Tiffany.

Regulation remains an area that's got a lot of attention. So let me share some opex yet.

The overarching theme of the government policy for 2022 is a very clear which is to achieve steady economy, well I driving consumption, suggesting more support him.

The vast amount of consumer finance.

Please that the policymakers to introduce additional measures to drive consumption and a support Smes.

China's stage Costar has made the above mentioned products.

At that higher priorities.

For example is in municipal level. What is your plan what are the financial industry report Citi on patrol team support the expansion of Christian will finance industry through proper listening a financing with fixed.

Consumer Finance company.

And the central government level PV LLC has acknowledged the value of Fintech.

<unk> plan for 2022 to 2025.

There are tremendous opportunities for financial institution, and the tech companies to work together and contribute to the digital transformation of financial sector.

In addition, the PV Oc and other national regulators are promoting innovation in fine.

National standardization outline in the 14th by year plan for the financial standardization.

We actively participate in the design related discussion all the night by regulator and contribute our industry knowhow to support efforts.

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David.

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We will begin.

Thank you.

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As of June <unk>.

Hey, Joe.

Okay.

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Yes.

Can we get down into Cmos.

Yes, so the budget.

In Q4, we started to implement rectification maggard accordance with the regulatory requirement.

We have enhanced our corporate governance structure and further focus on our core business.

At a recent briefing <unk> chairman of the IOC stated that the South chip Clark Rectification works have been largely completed.

Overall progress of rectification has been smooth so far.

And I'll call begin to complete the rectification work very well.

<unk> of the regulatory guidelines and our own business needs.

Increased our registered capital of our Microlending subsea diaries.

Two RMB 5 billion.

This enhanced our capabilities to serve users and the managed risk.

Going forward, we will continue our strategy.

Both direct and indirect loans serviced.

On one hand, we offer through our micro lending company directly to Chinese customers and the industry.

The other half will.

We will work with credit agencies and help financial institutions better serve consumers.

We believe that financial regulator will continue to work on the implementation of the previously released the general regulatory principles.

Such as financial services can only be undertaken with proper financial license.

We'll focus on the execution of the rectification plan and the regular monitoring of their progress.

We are entering the late stage of menu rectification process and the waiting for the review and the certification by the regulators.

So <unk> obviously within that.

Please check to Colombia.

Yes.

Switzerland acquisition.

Thank you Bill.

Thanks, John .

Sure.

John .

Hey, guys.

Should you quickly from there we'll move to Scott.

He has over to Janssen.

Yes.

Yes.

Global launches and how do you think the evolution into June .

Goldman Sachs.

The effects of weather that we've got as you can.

Okay.

Jimmy Gilbert and Indigo.

Yes.

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Yes.

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We haven't changed bank acquisition.

Don.

Yes.

Since 2001.

Okay.

In Q4, we also made progress in a few other compliance related areas.

API will allow for you to take it through our pathway declined 2% from previous quarter.

Effectively brought down the cost of our borrowing.

In terms of the data related compliant.

Due to increased investment in data security and they have quick action.

China Cyber security reveal have knowledge and the certification Sanjay.

The RSV awarded its security certification for our flagship product.

360, <unk> ATP, adding another national certification.

<unk> protection to our products.

We also obtained the ISO <unk> simplification privacy protection management system issued by <unk>.

I will now international standard certification organization.

This is the second important international standards certification in privacy and information protection area real estate.

In the ISO 2701 information security management system, a few months ago.

In addition, the cyber Security Management Bureau, and the Ministry of industry and information technology.

<unk>.

Issued a region commendation.

Our axon performance.

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Users' privacy protection.

Women that will continue.

Regulatory agencies.

In Q4, we also achieved excellent results in several operational areas.

Thank you Bonnie.

And you could assume that second half and.

And as you can talk to them.

So is that correct.

Sure.

Okay.

So we think we.

So in Q2.

Sure.

Thank you Tim.

Sure <unk>.

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Thank you Jason.

Terrific.

Uhm.

Okay.

So real quick so cohort done synergies shortly.

So we're seeing that obviously so.

Joe you've been more you're on mute.

And got them to EBIT.

Tony.

So a new 18 with Genco, Illinois, CNBC all related.

And could that Taiwan, four ships and hopefully.

We'll meet you don't see here, so it's something that Tom Hogan to torture Houston.

We're seeing that show a cohort in thank you.

Yes.

That sounds like it helps them pay that Thai hot.

Continuing with your 40% premium for attention for boots, which yet in terms of you before.

On the product front, our consumer loan business actually at the high quality growth throughout the year.

Our SME loan product, which we launched last year, so rapidly and the de lever that that goes back to readout in Q4 total amount of new approved credit lines for SME law accelerated and grew by one 616%.

The critically to RMB nine 3 billion.

As of the end of 2021 the outstanding loan balance.

<unk> accounted for one 3% of our total loan book. Meanwhile, we continue to refine Anthony product and expand to better quality customer group by offering larger ticket size product heaviest specific SME offline.

Sample, we expanded our collaboration with banks to access corporate credit Ratcliffe.

This allows us to offer bigger ticket size credit products and attract more high quality SME Barbara.

Another effective approach is that we offer a customized product to the tobacco and alcohol retail borrower during Chinese new year.

There are funding these search and turnover increase.

To capitalize that opportunity, we simplify approved procedures and increased direct sales for these customers.

In December quicker line granted to the tobacco retail borrower acquired by our direct sales team accounted for more than 20% of the total SME and the transaction volume increased by 1616, 106% or monthly basis.

Meanwhile, starting up this year to offer differentiated service to SME and consumers.

And to improve efficiency.

SME user through an upgraded at separate from <unk>.

In addition on top of the credit services. We currently provide we will actively explore other services and products to better support Smes business operations.

So.

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I mentioned to you.

Can you share with that Joe as you go forward.

<unk>.

Question, you've been asking Jim.

So do you see yourself from close to neutral.

Yes, Hi, can you or do you plan on toward sessions.

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Joseph Thank you must see ABS.

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In collaboration with financial institutions, we leverage our technology advantage and expanded partnership with stronger financial institutions. This enabled us to further optimize doesn't mix, our financial institution partners and establish a more balanced and resilient.

Let her know network newly added financial institution partners have brought rates with no coverage strong risk management capability and the diverse business lines.

Moreover, our IC products offered.

AD so better fitting the compliance requirements of some banks this will enable us to develop standard solutions to work with more banks in the future.

While the continued avs insurance in Q4 with a total of RMB, one 1 billion at a low coupon rate of five 7%.

This brought our total ABS insurance for the full year to RMB, six 5 billion up by 282% year on year.

Although our ABS funding costs for 2021 five.

547%.

Christian and Tom here.

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John John Ely, Doug away could you answer that in June .

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The agenda will acumen delek.

LTV.

And for our customer base.

Or quantity of newly acquired customers gradually improved coming along with lower pricing the value of those high quality customers will be gradually released over the lifecycle as price decline, but note. Some key indicators of the quality improved significantly such as the ratio of yoga, which module.

One credit lines with mortgage and the carload user with a stable income and to users with tangible asset.

Based on the good path, we conducted the drawdown ratio and the way to infer rate at both higher bar at lower pricing.

Why is that these customers will generate higher LTV as well.

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Dr.

Sure.

So again, thank you don't go ahead Jason.

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In Q4 will also made noticeable progress to enhance our capabilities on multiple fronts as we remain committed to become a pet empowered alone facilitating caf one serving our financial institution partners and for life.

We leverage our AI and big data pack to effectively identify customer risk profiles, and then Max borrowing needs and funding resource based massive data inputs.

Well, Jimmy Johnson, Shannon until now the most in connections and.

<unk> on a cohort I should have been.

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Tim Duncan do you want to know.

So Shannon John Jackie I'm going to Johan to Omar fall down further what nishu. So again, that's something that May go.

Jim.

Pamela Joseph.

We've made major upgrade to the framework, our smart marketing system.

<unk> significantly improved our ability to better identify users and enlarge our processing capacity.

Average user quality was up by over 20%.

Decency Yoga acquisition was also improved by over 20%.

Our identifiable user base increased by three volt.

Second we continue to make key innovation by deepening integration of AI application with our August waste management system in the areas of community detection hierarchical Federated learning and risk management strategies automation.

We have strengthened our ability to identify potential barak and the major risks.

Alright.

AI powered operations have knowledge, our proprietary production diagnostic platform provides one stop smart diagnostic service, but in App.

Expert experience into automated choice.

We've toured ensured that they boutiques and accessibility of our survey.

The platform you can't identify province, within 30 seconds and boost our diagnostic efficiency by 19, 9%.

Are they are on your minds.

Among these was a contributor.

Oh sure.

Sure.

We will get one to engineer or an uncertainty that chicken is another story.

What gives you capacity liquidity.

Part of it.

So on hand of 2022, considering the macro uncertainty we will continue to take prudent operating strategy at all.

What we have learned from past a success, we believe that holding prudent and steady approach in data creation is the Golden standard what's the thing that does it the macro uncertainty right.

Similarly, our non-GAAP .

On the island and that's critical here.

That sounds interesting.

Yes.

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At June 30 target tissue token Nordics excuse me inbox dumped into the clinic.

Were there any geological Moshe.

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We choose to leave their homes.

Thank you Omar.

In these months.

Three funding implemented defensive machine.

Immediate breakthroughs.

Congrats again.

After all the rectification in 2021, we expect to see a much clearer regulatory framework for the thing that industry in 2022.

Should allow industry participants to be more focused on long term business development.

Prioritize our technology driven strategy and continue to invest in R&D, but there are pursuing innovative solutions and our business model.

Two the business relates to a more diverse product and sell it for a different financial institution. Meanwhile, will collaborate with stronger financial institution to optimize the mix and the quality of our partnership network.

And ultimately to boost our service is sustainability.

Or just it isn't it we will continue to upgrade our technology and model to better identify high quality borrowers and optimize our user base matrix.

We'll roll out more products catering to this high quality customer base.

This will bring higher customer LTV, and our retention rate as well.

We have been very positive churn in our business. Following the Howard we did last year that we're quite looking forward to the year ahead.

For our own balance sheet loan business, we have.

And Chris the rebate the capital of our license not micro lending subsidiary to RMB 5 billion.

It's a crucial strategy resource that we definitely well capitalized.

Single digit gigawatt since it launched in July .

Thank you Jamie.

For sure.

Sure.

While we don't make too much when you go beyond that.

Kent Gen Con, which is ubiquitous.

Fortunately.

Thank you Sir.

Carriers continue particularly again.

With this structure upgrades and improvements I believe we will serve our customers partners and society more efficiently in 2022, making us healthy are more resilient and more sustainable company base.

This will enable us to better serve the real economy and contribute to China.

Angie was that economy growth.

I mean, assuming the CFO Alex good guys that can do that.

Now I will turn to our Saffell apps for more financial detail.

Thank you hi, good.

Good morning, and good evening, everyone welcome to our quarterly earnings call.

As Joe mentioned, despite facing multiple macro challenges, we delivered solid Q4 results in both operations.

Funds and finished 2021 with a series of record setting annual numbers on the book.

During the quarter, we saw continued healthy consumer demand for credit.

Our quality, which fluctuate in Q4, mainly as a result of us.

Glad to see improvement in the new year as funding becomes ample.

Net revenue for Q4 was $4 4 billion versus $4 6 billion in Q3, and $3 3 billion a year ago.

Revenue from credit doing service capital heavy was to spend $1 billion compared to $2 six 2 billion in Q3, and $2 $5 6 billion a year ago.

The year on year and sequential increase was mainly due to growth in on balance sheet loans and leasing guarantee liability on previous loan balance more than offsetting the decline in capital heavy facilitation volume and the revenue take rate.

Take rate decline was as expected as the average prices of our loans were lowered by 200 basis points during the quarter, while the offsetting factors yet to kick in.

Revenue from platform service capital Light was $1 seven 1 billion compared to $1 99 billion in Q3, and 788 million a year ago.

The strong year over year growth was mainly driven by a significant increase in capitalized loan volume. The sequential decline was due to a decrease in capitalized loan volume along with a modest decline in revenue take rate in Q4.

During the quarter topline and other technology solution contribute roughly 54% of total loan volume.

Top line loan volume was negatively impacted by seasonal shortage of overall funding supply as well as the 24% rate cap related tightening from traditional funding sources.

At least for the first half of 2022, we expect templates percentage contribution of our total volume to remain fluctuating around current level as the industry gradually adjust to the new rate cap.

At the core of our long term growth strategy, we will continue to pursue tech driven business model.

After this transitional period in 2022, we expect <unk> to become a larger portion of our business in the long run.

During the quarter average pricing of our loan portfolio dropped by 200 basis points and by the end of 2021 average interest rate of the loans on our platform we're already below 24%.

The 200 basis point cut in Q4 was faster than previous trajectory and we did it proactively.

We believe this will give us great flexibility in Q1, and Q2 of 2022 to the income lines with the regulatory requirements and ultimately hit our target rate cut target by mid tier deadline.

During the quarter.

Blended basis average customer acquisition cost per user was approved credit line was 319.

Compared to 305 in Q3.

As we elaborated in last quarter's earnings call, we continued to focus on attracting high quality borrowers.

Those with much larger credit lines and the relatively low risk.

The average ticket size of these customers typically run between 150000 to $200 at <unk>.

<unk> to average up 10000, who are regular borrowers the unit cost to acquire those high quality customers are justifiably much higher than the regular borrowers.

So to compare things apples to apples, excluding large ticket size customers in both consumer and SME markets average costs per approved credit line of regular borrowers.

It was approximately 246 in Q4 compared to 249 in Q3.

As we discussed in the past average cost per approved credit line is a calculated number with limited value in our internal decision, making process. We will continue to use lifecycle ROI and LTV as key metrics to determine the pace and scope of our customer.

<unk> strategy.

Throughout 2021, we have to maintain healthy ROI and LTV trend, which in turn drive stable net take rates.

As overall risk metrics fluctuating in Q4, we continue to take prudent approach in booking provisions against potential credit loss new.

New provisions for contingent liability for loans originated in the quarter was approximately $1 6 billion. Meanwhile, approximately 400 million of provisions from contingent liability to our previous peak period loans was rhythm back as actual performance of those loans was better.

Than expected.

The effective tax rate tax rate for Q4 was approximately 14, 8%.

Which brought full year ETR to approximately 17, 3%.

Going forward, we expect ETR to normalize to around 15%, which will be sustainable in the foreseeable future based on our current tax planning schedule.

With strong operating results and stable contribution from <unk> model or <unk>.

Leverage ratio, which is defined as a risk bearing loan balance divided by shareholders equity.

Pain at a historical low of four three times in Q4 compared to six six times a year ago.

We expect to see rather stable leverage ratio for the time being until <unk> contribution resumed growth in the future.

We generated 2 billion cash from operation and cure compared to $1 8 billion in Q3.

<unk> and $1 2 billion a year ago.

Total cash and cash equivalents was $9 6 billion in Q4 compared to $7 6 billion in Q3.

Nonrestricted cash was approximately $6 1 billion in Q4 versus $4 2 billion in Q3.

The meaningful increase in cash was in part due to the timing of the registered capital increase for our main core lending subsidiary.

Which resolved in large cash balance sitting in bank accounts at the year end as opposed to being deployed in normal course of our business as always a significant portion of our cash would normally be allocated to support our on balance sheet loans and the security deposit with our institutional partners.

And so we'll continue to generate healthy cash flow from operations. We believe our current cash position is sufficient to support the growth of our business to invest in key technologies.

That's why the potential regulatory requirements and to return to our shareholders.

If you'll recall our board of directors approved a quarterly dividend policy in Q3, allowing us to distribute approximately 15% to 20% of quarterly net income.

After tax in the form of cash dividends on a recurring basis.

In accordance with this dividend policy, we declared another quarterly dividend of U S dollars 26.

Per ads for Q4.

This cash dividend represents.

Approximately 20% of our Q4 earnings.

Finally, let me give you some update about our outlook for 2022.

As we communicated to the market previously we believe 2022 will be a transitional year for the industry as the.

Participants are adjusting to the new regulatory settings as well as some micro uncertainties.

We expect total loan volume for the year to be between RMB 410 billion.

RMB 450 billion.

Representing year on year growth up 15% to 26%.

We've been a transitional year as an opportunity was to optimize our operations strengthen our technology platform and upgrading our customer base.

To build an even stronger foundation for future growth as always this forecast reflects the company's current and preliminary views, which are subject to material change.

With that I would like to conclude our prepared remarks, operator, we can now take some questions.

Thank you management.

So who can speak Chinese please ask your question in Chinese first followed by English translation.

In order to have enough time to address everyone on the call. Please keep it to one question and one follow up and return to the queue. You have more questions. Thank you. So please press zero one on your telephone keypad now to answer your questions and zero to two cancelled so.

Once again zero one on your telephone keypad now to answer your questions.

First question is from.

<unk>. Thank you.

Please go ahead.

Hi, guys. Good morning, So I'm going to go to you on that.

Tony went slowly yadav.

Suzanne consequent virtuoso Diana join our team.

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The share buyback why don't we put it out there obviously each other to go <unk> you David.

I'll go home.

Oh I'm sorry.

Leading the charge.

When we go put you in your question. Thanks, Good morning.

Any thoughts one year without an excuse I wanted to go to what are called <unk> Ductal code, Washington, Greene will go quicker and you will not see it.

I assume that beyond the local portfolio.

Okay that will do the translation for the first one is I would like to know the progress of the pricing adjustment.

What's the proportion of loans in <unk> 'twenty, one that are priced under 24% and the hallmark disproportion can reach up to for the fourth quarter. This year.

And the one the pricing going downward and target customers sort of strong I was wondering how are we shifting our customer acquisition strategy.

Sure. Thanks.

Yes.

I'll take the first part of the question and then <unk> will do the second part.

So in the fourth quarter over 70% our.

Our customers are priced below 24.

As I mentioned in the prepared remarks by year ending the average price is already below 24, and this quarter in Q1, we're expecting even larger portion of our customers being priced below 20.

And we are pretty confident that we will.

Yet.

The targeted rate cut goal.

The midyear deadline.

Okay.

Sure.

Thanks Glenn.

Could you send them home.

<unk> <unk> hundred two.

New Hampshire.

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Could you tell me jump right to the beach.

Tim.

With this evolution.

Yes.

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I'm sure some customer equipment.

If we go through 2016.

We're going to continue through the year.

Okay.

Our balance sheet.

Okay. Thank you guys.

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Ian.

Jamie.

Each of them.

Sure.

Cyclically low retention.

<unk>.

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We can get it yourself.

These companies eager to get started and seem to be particularly those with you.

Yes, let me translate for our deal as for your question the customer acquisition strategy to access higher quality econo groups. We will navigate three approach number one surgery increased more invest more in R&D to improve our cap and AI models to better.

<unk> identified a customer risk profiles.

<unk>.

Well, Matt in Q4, they can approach, we adjust our API customer acquisition approach with our cash on hand.

<unk>.

We ran the offline channel, which historically shelf is a much better approach is battery for the high quality customers.

Okay.

Yeah.

Okay, Great answers, we'll consider them they go with Oxford, Ohio.

Thank you.

Our next question is.

Shoot shoot from Morgan Stanley .

Gordon Wilson Morgan Stanley . Thank you.

Well just talk to my guys are women.

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Although OIBDA ABS the BD Sheldon.

Thank you the answer yes.

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Our capital heavy that you the BD.

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Alright, guys.

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Thank you Jeff.

Jacob credit lines.

Yes.

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BD that AGL women total alcon on your own.

Got it.

John J D.

It seems that Im sure you guys.

Sure.

Okay that sounds good.

Basically my question is.

On the funding front.

It's been increasing in ABS also the small loan company.

Capital injection. This also completed.

Wanted to see whether Theres a credit line with the banks were cooperation with the banks is still expanding.

And what will be the long term mix in terms of the funding.

Capital light.

Capital heavy and then.

Funding sources.

Okay.

So this is John .

In two weeks.

And you're kind of in the contingent women.

Hi, Jordan.

Jim how many go Green with final question really begins in young women.

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You got any other questions.

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One year before.

Yes to answer your question <unk>.

Yep.

Third we will continuously expand our number our financial institution partners by introducing a stronger bank.

As this comes along we can't offer larger ticket size to better quality customers.

As for the capital light volume.

We will explore more diverse products catering to different needs of financial institutions.

These include marketing surveys with management survey and loan collection survey.

I just wanted to add one point so from a longer term perspective, the capital contribution as I mentioned in the prepared remarks.

I'll be.

When we hire from current level.

If you recall in the past we were.

At some point targeting like.

Two thirds or 70% I think from a longer term perspective, thats, probably still be the target. This year will be fluctuated around this current level just because the whole industry is adjusting to the new environment and when we done with this adjustment.

Trend line will start to move to the to the higher direction for Capex.

Alright, thanks, guys.

We don't see them.

Yes, yes.

Our next question is Ethan Wang CIC.

Hey, good afternoon.

<unk>.

My follow up is a reset here went to their job.

Regarding our partnered products with UBS.

Thanks Erica.

So.

Thanks <unk>.

Understood.

Ah patients.

Alright.

Dan.

<unk> Bank in March.

Sure Jim.

John It's Andrew.

<unk> earned through the.

Alright.

Biogen worthy Empire, Dardar syndrome, or delayed shareholder Jaguar and discipline in terms of all of that.

Our momentum in New Jersey.

Loan covenants.

Yes.

Common Dr hydropower player recur.

Where each year concern.

You put out something that we are ready for Walmart.

Thanks.

Can I ask on the door and boosted that number one.

Which are Jon I'll comment on shortly.

It will shorten cycle time into it our terminals encore.

Okay.

Two questions.

And a quick follow up just wanted to raise the funding costs for the fourth quarter and the management's view on our funding cost.

For this year.

Question is down in the market concern on a tightening of regulation for the low coal.

Financial institutions are quoting financial institution, so for the regional bank to our collaborating just wondering whether there are half of consumer loans, and whether thats going to empower business and for the guarantee comfortably could that mean they were set up various institutions.

Across the country.

<unk> cooperate with them to lend nationwide. Thank you.

Okay. Thank you Ethan I would take the first part again and then we're taking care of the second one so for the funding cost for the Q4.

Was approximately 7%.

And.

The.

Q4, as you know, it's always been a very tightening periods from managed supply perspective in the financial system.

So normally that.

Reflecting the funding cost and four.

Moving into this year.

As we sort of gradually transition.

Two new institutional partners.

The overall funding supply, we're getting more sufficient.

But during this transition we are expecting a rather stable funding cost around 7% and after we done with this transition we.

We will probably start to see a graph.

Gradual although a modest kind of decline in funding costs in the long run.

Okay.

Thank you Helen.

Good morning.

John as you go they didn't seem to have internet banking.

<unk> to now.

Greeting, particularly with yen to try this again.

Just dollar tabular hernia yields will go to amigo could achieve.

True.

Good morning, <unk>, how are we building towards the issue right now.

We can integrate with your comments John .

For the digital marketing.

In total at Eden and <unk>.

<unk> <unk> hundred Jonathan our women and children, which overdue loans.

And Joe and Jim will give you Johan <unk> <unk> London.

But johan generally answered on <unk>.

Hey, good when you're doing a young entrepreneurship.

Spacing behind differently I cannot identify different Chinese policy.

Sure sure.

Yes.

So your question number one your question comes from Doug I mean, it literally requirement that.

All right.

Loan business or commercial bank. This is up quite early regulation and the regulator gives a rather long grace period for all the market participants the cutoff date issue.

January 1st this year.

Currently all our financial institution partners are within the compliance.

Secondly, looking at the metrics of our financial institution partners network most of them.

National wide operation Airport.

Very limited impact from this regulation.

Got it.

Sharon.

Encountered Dunbar brands reporting directly to farmers and centered around them.

Okay, I'm going to answer.

Thank you.

Looking at other ones.

Hello Yoga.

So you get paid for what they don't.

And Lisa to past years retention.

Towards the download as hopefully as you go international.

We couldn't be happier with it.

C C.

So you have to get to a distributor.

Yes.

Second part of your question the original restriction for guaranteed companies.

Currently company Kenneth that local branch national wide to satisfy this requirement is comparatively easy compelled to the banks to cover national lines.

Okay.

Thank you.

Tissue.

Our next question is Thomas Chong from Jefferies.

I was just wondering.

Well, if you and what do you want to ask one.

A woman comes out sheet Gianluca comedown a woman.

I think why <unk> seen the APB tie further.

Yeah.

I'll, let newly named in Austin, where we saw momentum lies at the SMB.

Maybe ill children.

Good morning caused loan size.

Hum.

The industry categories that typically.

I understand.

<unk> issued one.

Since you pointed were trading this one as well.

Total enrollment I was hoping common dosages of Taiwan.

Well, yes, I'm, hoping Nevada.

Thanks management for taking my questions.

I have two my first question is about the SME strategy can management comment about how we should think about the contribution over the future as well as the bone and costs on the loan side going forward.

Together.

The industry categories that we are working with and on my second question is more about the macro headwinds. We are facing these days an outbreak of Covid, obviously seeing any changes in terms of the consumer behavior in terms of the use of the policies are thank you.

Yes.

Sure.

Okay.

And as you go into here.

<unk> gone down.

Can you just mentioned there.

Thompson.

Tony.

Criticized figured out, but I don't know how women to determine the dose CPL attempting that relation and tau.

Oh sure one igo.

Sandy finally hit integration.

Sure.

And then suddenly they don't even create total <expletive> SME on that type of thing.

Can you kind of it wasn't accidental show went for you.

Thank you guys.

Thanks.

Okay.

Doug will identify will mainly.

Shipyards are attempting antagonists, Shanghai io towards the balance sheet.

Quick would you be at Deutsche <unk> <unk> Youre.

So when I'm talking about <unk>.

Sure.

Jim.

And to your liquidity.

You want to pass.

And for me, that's really kind of becoming a middle question congratulation to the <unk>.

With your question.

Yeah.

Yes.

Yes.

So year on year.

John .

The issue is you know coming into <unk>.

Are you seeing your question there when things so you'll mill camera inventory here you go.

Second with the BMR.

Well regarding your question about <unk> and <unk> business the average ticket size.

Acme products.

Or is.

About 55 zero pay RMB four seven tax laws.

Which is larger ticket size usually will provide.

Over 250, K RMB for the tax law, we estimate the margin impact is around 2%.

For your question about the use of low ASP.

Most of our consumers were in inventory that are less impacted by the calling and the macro economy. We are seeing the yields of now is consistent with previous.

Okay.

Yes.

Hey, guys.

Sure.

<unk> in which you're seeing here is that kind of a debate Josephine.

Could you add some color.

Yes.

Sure sure.

You don't want to go faster.

Sure the only tool.

If I kind of again I mentioned that it has all year.

DSO, yes, good morning.

John in General again will be the only type of vigor.

Jimmy and which in India.

Do you think you'll be how Asia.

<unk>.

Continuing that kind of Halloween.

Brokerage shoot off with it she taught degree SME.

Thank you.

London listen Windows.

Shoot.

You can see our balance sheet.

This woman and push on <unk>.

Joining me here, which I know will not continue question tangible.

She has been even more neutral Mckay good opportunity in context with the video whether it's EQT Goldman chicken.

In Gulf War political initiatives Wichita Moshe.

<unk> SME.

I want to add more color for our operating strategy for SME business line.

Under the tremendous amount of.

Any barrage and the support of the pod from government.

We take a very prudent strategy in this business.

<unk> focused on.

Industries that are less impacted by the economy macro economy, such as manufacturing and the ratio. This year, we do not expect to accelerate it.

X potentially in this business again, we all take very conservative about.

Also we like strong well capitalized and a more tech driven solution.

Financial institutions in the SME business.

I appreciate it.

C J.

Thank you. This is the end of our question and answer sessions now.

Is it back to the management for closing remarks. Thank you.

Okay.

Thank you for again for participating in the call and if you have any additional questions. Please contact us and.

Thank you.

Okay.

This conclude the conference call you may disconnect Goodbye.

Okay.

[music].

[music].

Ladies and gentlemen, thank you for standing by and welcome to the 360 <unk> fourth quarter and full year 2021, earning conference call. Please also note today's event is being recorded.

At this time I would like to turn the conference call over to Mr. <unk> IR Director. Please go ahead Mindy.

Thank you Hello, everyone and welcome to our fourth quarter and full year 2021 earnings Conference call. Our results were issued earlier today and can be found on our IR website. Joining me today are Mr. <unk> Zhu.

Our CEO and director.

Mr <unk>, our CFO and director and Mr. Don Yang our CFO before.

Before we begin the prepared remarks, I would like to remind you of our safe Harbor statement in our earnings press release, which also applies to this call may refer to forward looking statements based on our current plans estimates and projections also this call includes discussions of certain non-GAAP measures.

Please refer to our earnings release for a reconciliation between non-GAAP and the GAAP what.

Yeah.

Otherwise stated all Beavers here are in RMB.

I will turn the call over to our CEO Mr.

Okay.

Bye now.

Okay.

<unk> year to date.

Great.

Are you willing to talk about.

Thank you Julien.

I don't want to send a couple of NSC seven Kimball.

Thank you.

Understood.

And switching to.

So.

Goodbye.

When we get the document Fisher.

Got it.

This is about.

We'll get them done.

Zip.

Yes.

Thank you.

No.

The year over year.

London.

Issue near term.

And total revenues were virtually.

Yes sure.

Let me get into the auction.

David and John .

Yes.

So you will get a discount.

Many of the data.

Hello, everyone and were happy to report another solid quarter that capped off a strong year.

In 2021 total loan facilitation through our cash flow reached RMB $357 1 billion.

45% year on year.

The midpoint of our raised our full year guidance.

In Q4 total loan facilitation reached RMB 96 nine.

Four zero, 40% year on year.

Outstanding loan balance reached RMB 142 bed at.

40.

What he is by 54% year on year.

This is overcome multiple challenges related to macro economy uncertainty through erratic outbreak of Kobe, and if that Tianjin regulatory environment, rather a volatile year of 2020.

You've heard the growth, while maintaining stable asset quality and further demonstrating the resilience and the flexibility of our business.

Well, thank God, yes women's judo Kinder.

Now, let me walk you through some updates for Q4.

So yeah, yeah that'd be great.

Okay.

10, <unk> hundred <unk>.

We've been down switch outfit you would switch the Soviet Union.

<unk>, which I'll say, if I'm backing down towards where the winter.

Which would have been switches, hoping you could just show a CFO John <unk>.

<unk>, which always shaking.

This is Jim.

Jim.

Kidney Geiger financial so Cleveland Q4 quarter.

<unk> really seen that shelf.

Thanks again Don.

Johan <unk> implemented I'll, let Jimmy could you find anguilla.

Okay.

When do you could you go through the door.

Continuing shows of hydration.

Dio Kuwait.

So I'm done dobell with William Blair.

You can find that golden flashes or Pat him. Good luck in Q2.

<unk> got a good.

While this is heng Chen will implement will do that Deutsche on pay downs to do that to do things, which you don't have any ability to pay.

Through the June doesn't know how can go two for me.

Regulation remains an area that's got a lot of attention. So let me first share some opex here.

The overarching theme of the government policy.

'twenty two is a very clear, which is to achieve better economies well by driving consumption, suggesting more supportive.

<unk> moment of consumer finance.

Expand the policymakers to introduce additional measures to drive consumption and a support Smes.

As China's state coastal as Meda above management policy as a higher priority.

For example is in municipal level, what is your plan for the financial industry report video control team support the expansion of Christian will finance industry through proper loosening of financing with fixed while consumer finance company.

And the central government level PV OSB has acknowledged the value of Fintech.

<unk> plan for 2022 to 2025.

There are tremendous opportunities for financial institution, and the tech companies to work together and contribute to the digital transformation of financial Center.

Patient the PV Oc and other national regulator are promoting innovation in financial standardization outline in the 14th by year plan quarter financial standardization.

We actively participate in IC design related discussion overnight, thereby regulator and contribute our industry know how to support efforts.

So certainly dwarf women.

<unk> implemented a yoyo.

Good Jonathan that window.

Closer to 30 Gigawatts.

How long can you don't.

To recap <unk> got gotcha.

Throw it out.

Hum.

What you can say food and beverage.

Cynthia.

David <unk> Buckingham.

Simpson stabilization by the end of this year.

Sorry, what was that.

Yes.

On the leisure component.

Sure.

We will begin.

Yes.

We've only basis.

Yes.

Cannot be totally totally together.

Tissue based on you guys.

Thank you.

Sure.

James.

It was a bigger from there.

Okay.

Okay.

We should end the year.

<unk> cash flows.

Thank you.

Bye bye.

Okay.

Okay.

Can we get down to the industry.

Thank you.

In Q4, we started to implement rectification maggard accordance with regulatory requirements we.

We have enhanced our corporate governance structure and focus on our core business.

At a recent briefing will shooting chairman of CDI RSV stated that the shelf chip Clark of rectification works have been largely completed.

Overall progress of rectification has been smooth, so far and I'll call. It yet to complete the rectification work very well.

Based on the regulatory guidelines in our own business needs, we increased our registered capital of our micro lending subsidiary in Wichita to RMB 5 billion.

This enhanced our capabilities to serve users and the managed risk.

Going forward, we will continue our strategy of both direct and indirect loans sorry.

On one hand, we offer through our micro lending company directly to targeted customers and the industry.

Other hand, we'll work with credit agencies and help financial institutions better serve consumers.

We believe that financial regulator will continue to work on the implementation of the previously released the general regulatory principles.

Financial service can only be undertaken with proper financial license.

They will focus on the execution of the rectification plan and the regular monitoring of their progress.

We are entering the late stage of menu rectification process and the waiting for the reveal and certification by the regulators.

<unk> will then should have genetic debating that.

Technical problem here.

Hey, Jeff.

Yes.

Citigroup.

And you want to issue bonds.

Thank you John .

Sure I'll speak to that.

John .

Yes.

Should you Huawei from their performance as Scott.

Gotcha.

Yes.

And how do you think the conditions are unchanged imaging tool kit Goldman downgrades from the effects of weather that we've got the genco.

Jimmy Gilbert ego.

Yes.

Artistry two is the heat.

But it isn't.

It is yes.

The congestion equals uhm.

And we are Canadian.

Interesting. Thank you.

So it hasnt really changed.

Okay.

Thank you.

Yes.

In Q4, we also made progress in a few other compliance related areas.

However, the API will allow facilitated through our pathway declined 2% from previous quarter.

Effectively brought down the cost for our borrowing.

In terms of tableau data related compliance, we continue to increase investment in data security and they have projection.

The China cyber security reveal acknowledge and certification Sanjay CIC awarded security certification to our flagship product <unk>.

<unk> ATP, adding another national certification for our privacy protection to our products.

We also obtained the ISO two <unk> certification privacy protection management system issued by SGS, a well known international standard certification organization.

This is the second important international standards certification in privacy and information protection area. We received following the ISO 2701 information security management system, a few months ago.

The cyber Security Management Bureau, and the Ministry of industry and information technology.

It.

Issued a region commendation.

Our axon performance.

Does that help <unk>.

Users' privacy protection.

Women that will continue.

The regulatory agency.

Q4, we also achieved excellent results in several operational areas.

Two new venue.

And as you can talk to them.

So each year that were attended.

Sure.

Yes.

Sure Doug.

So we can be offensive so in chemo.

Sure.

Joe.

Q2, assuming that assumption.

Okay.

Documentation from Citibank.

Yes.

Please.

Sure.

<unk>.

Due to the Epocrates team.

<unk>.

Yes.

So here.

We will work with Samsung.

Physical utilization.

Yes.

Ladies and gentlemen.

Both acquisitions for that.

Okay.

For both geographic Geos.

And John will be appropriate.

Yes rich.

Hubert.

Yes.

Terrific.

Is that macro.

Sorry.

So cohort done synergies outweigh Dean <unk> our CFO .

Joe you've been more on the agenda.

E mail email.

Tony.

No 18, with Genco, Illinois, CNBC all related costs.

Hopefully you can put a tiny handful 15 hopefully.

We'll meet you don't see here, so it's something that Tom Hogan to torture Houston.

We're seeing that show a cohort in the ICU.

Yes.

That sounds like it helps them pay that Thai hot.

We're continuing to assume 40% premium for attention.

Well I wish you had kidney in terms of you before.

On the product front, our consumer loan business actually at the high quality growth throughout the year, our SME loan product, which we launched last year, so rapidly and deliver that that goes back to readout in Q4 total amount of new approved credit lines for SME loans accelerated.

<unk> grew by one 616%.

Sequentially to RMB nine 3 billion.

As of the end of 2021 the outstanding loan balance of <unk>.

Semi alone accounted for one 313% of our total loan book. Meanwhile, we continue to refine SME product and expand to better quality customer growth by offering larger ticket size product Calgary and specific SME offline.

For example, we expanded our collaboration with banks to access corporate credit Ratcliffe.

This allows us to offer bigger ticket size credit products and attract more high quality SME Barbara.

Another effective approach is that we offer a customized product to the tobacco and alcohol retail borrower or in Chinese new year.

They are funding these search and turnover increase.

To capitalize that opportunity we are simplifying our pro procedure and increased direct sales for these customers.

In December <unk> granted to the tobacco retail borrower acquired by our direct sales team accounted for more than 20% of the total SME and the transaction volume increased by 1616, 106% or monthly basis.

Meanwhile, starting up this year to offer differentiated service to SME and consumers.

And to improve efficiency.

Served SME user through an upgraded app separate from <unk>.

In addition on top of the credit services. We currently provide we will actively explore other services and products to better support Smes business operations.

So that's.

Well, then just frankly it could have been had a user who can do a conjunction either Eagle Ford zone.

Well Europe aka door opening the genco.

What about <unk>.

Thank you Jim.

<unk>.

Thank you Jerry Jones you go from.

Two question International growth agenda. So do you see this shock for Nissan.

Yes, Hi, can you or do you plan on mature decisions.

Our neighborhood, where this year, we <unk> 100 zero change within that.

<unk>.

Maybe if I can Doug Fischer.

Tissue Joseph as you can see ABS situates determined founder we didn't see it.

You mentioned, you're in fact, you maybe towards the unusual.

<unk>, then dunbavin job there by sharp fashion, So I'll go to William switches.

In collaboration with financial institutions, we leverage our technology advantage and expanded partnership with stronger financial institution.

This enabled us to further optimize doesn't mix, our financial institution partners and establish a more balanced and resilient partner network newly added financial institution partners have brought reviews now coverage strong risk management capability and the diverse business lines.

Moreover, our IC products offered capacity add to better fitting.

Climate of sandbox.

Will enable us to develop a standard solutions to work with more banks in the future.

While the continued avs insurance in Q4 with a total of RMB, one 1 billion at a low coupon rate of five 7%.

This brought our total ABS insurance for the full year to RMB, six 5 billion up by 282% year on year.

Although our ABS funding costs for 2021 five.

547%.

Christian and Tom here.

Yes, the shutdown well maintained you cleared insulin pedantic.

<unk> jumped agenda with likeable chiffon J&J.

Sanjay you lap dog away too there could you answer that.

Sure Ghansham.

But what we can keep.

<unk> your phone Youll found Daniel.

So it will go Indian coaching them to Samsung.

It's just how you put on it.

Ticket youll to cope with it.

Sure John .

And you can't do it you go.

This is some of that cushion.

Sure didn't get the cohort on JD com.

The agenda will ask Joe Montella LTV.

<unk> TV.

As for our customer base.

Or quantity of newly acquired customers gradually improved coming along with lower pricing the value of those high quality customers will be gradually released over the lifecycle as price decline will note. Some key indicators of user quality improved significantly such as the ratio of yoga, which module.

I have one credit lines with mortgage and the car loan user with a stable income and users with tangible asset base.

Based on the good path, we conducted the drawdown ratio and our retention rate at both higher bar at lower pricing.

Why is that these customers will generate higher LTV as well.

Women.

Could you talk about that off of my introduction, which <unk> done well.

Well this is.

Tony could you comment on that.

Any woman.

It actually didn't meet the Highlander.

Sure.

So this is.

How much are those changing with Jim Don question on weather.

Sundar could you for <unk>.

Packed room, one cogent Gordon do that Copel quite zhangzhou Fujian subscription.

In Q4 will also made noticeable progress to enhance our capabilities on multiple fronts as we remain committed to become a tap empowered alone facilitating task one serving our financial institution partners and poorly.

We leverage our AI and big data pack to effectively identify customer risk profiles, and then Max borrowing needs and funding resource based massive data inputs.

Well Linda <unk>.

This is Susan Morrison.

It wasn't connections Jim.

<unk> is on a cohort I should've been more can you do something about it.

<unk>.

What you show your excuse me, but I'm Joshua closer to being able to be more sustainable I mean, there's some that had been done.

I got to know for quite some time.

I assume to even from here.

So as you're talking about.

<unk> <unk> thousand two book.

The shelf one could use have been unusual for Q1.

You will excuse me.

Tim Duncan do you want me to answer that John .

So Shannon John John Guinee, I'm going to Johan to Omar fall down further what nishu, So C&I funding.

When you go down 10 bank charter tissue Pamela Joseph.

First we made major upgrade to the framework, our smart banking sector.

<unk> significantly improved our ability to better identify users and enlarge our processing capacity.

Average user quality was up by over 20%.

In addition, the yoga acquisition was also improved by over 20%.

Gil of our identifiable user base increased by three fold.

Second we continue to make key innovation by deepening integration of AI application with our August risk management systems in the areas of <unk>.

Immunity detection hierarchical Federated learning and risk management strategy automation.

We have strengthened our ability to identify potential borrower and the major risks.

Alright.

AI powered operations have managed our proprietary production diagnostic platform provides one stop smart diagnostic service with in App, the advert experience into automated choice.

Tourists ensure the stability and accessibility of our service.

The platform you can't identify province, within 30 seconds and boost our diagnostic efficiency by 19, 9%.

Maybe remind us where the contributor.

Oh sure.

Sure.

We will get one to engineer or an incentive that one chickens and the other shareholders.

This compares to diluted EPS.

Part of it.

Looking ahead of 2022, considering the macro uncertainty we will continue to take prudent operating strategy at all.

Brown, what we have learned from past success, we believe that holding prudent and steady approach in data creation is a golden standard what's the thing that visit when macro uncertainties arise.

Similar.

And Thats generally correct.

Daniel Santos shifts that you can do that.

Yes, I think over to Independencia, we've been guiding between these deductions project when we get comfortable that June could be target should token nordics excuse me inbox that into the clinic.

Sure.

Whether it's two months ago with leather motion.

And digital political issue.

Uh huh.

<unk> gigawatt.

Once again.

We intend to conduct the geos since the decision for the coaches issue.

Silver for example can deliver yoga moisture.

Dave will have a cash outflow in the Cosmos, yes.

The council of the yield to Cushing.

And how should we judge genre she values.

Turning to leave their homes.

Irma.

Intramuscular.

<unk> implemented in terms of Wuxi that wanted to come back.

Immediate recruited Johan.

You can take it from our guidance again.

After all the rectification in 2021, we expect to see a much clear regulatory frameworks for the thing that industry in 2022, which should allow industry participants to be more focused on long term business development.

Prioritize our technology driven strategy and continue to invest in R&D further pursuing innovative solutions and our business model.

To the business, we will explore more diverse program and to serve it with a different financial institution. Meanwhile, will collaborate with stronger financial institutions to optimize the mix and the quality of our partnership network.

And ultimately to boost our survey this sustainability.

Or just it isn't it we will continue to upgrade our technology and model to better identify high quality borrowers and optimize our user base matrix.

We'll roll out more products catering to these high quality customers. This.

This will bring higher customer LTV, and our retention rate as well.

We have been very positive churn in our business following the Howard we did last year.

We're quite looking forward to the year ahead.

For our own balance sheet loan business, we have increased our registered capital of our license not micro lending subsidiary to RMB 5 billion. This is a crucial strategy resource that we definitely well capitalized.

Single digit gigawatt since launching with July .

Thank you Jamie.

Sure.

Great.

When we can't give you too much.

Jet Com, which is ubiquitous.

Unfortunately.

When we look at some detail whats been done consistently here.

With this structure upgrades and improvements I believe we will serve our customers partners and society more efficiently in 2022, making us a healthy are more resilient and more sustainable company.

This will enable us to better serve the real economy and contribute to China.

GE was steady economy growth.

I mean, assuming that therefore allocate to that guys that can do that.

Now I'll turn to our Saffell apps for more financial detail.

Thank you Sam and good morning, and good evening, everyone welcome to our quarterly earnings call.

As Andrew mentioned, despite facing multiple micro challenges, we delivered solid Q4 results in both operation financial fronts.

<unk> finished 2021 with a series of record setting annual numbers on the book.

During the quarter, we saw continued healthy consumer demand for credit.

Asset quality whats fluctuated in Q4, mainly as a result of us.

Glad to see improvement in the new year as funding becomes ample.

Net revenue for Q4 was $4 4 billion versus $4 six billings in Q3, and $3 3 billion a year ago revenue from credit driven service capital heavy was to spend 1 billion compared to 2.62 billion in Q3 and $2 $5 6 billion.

A year ago.

The year on year and sequential increase was mainly due to growth in on balance sheet loans and leasing guarantee liability on previous loan balance more than offsetting the decline in capital heavy facilitation volume and the revenue take rate.

Take rate decline was as expected as the average prices of our loans were lowered by 200 basis point during the quarter, while the offsetting factors yet to kick in.

Revenue from platform service capital Light was $1 seven 1 billion compared to $1 99 billion in Q3, and 780 million a year ago.

The strong year over year growth was mainly driven by a significant increase in capitalized loan volume. The sequential decline was due to a decrease in capitalized loan volume along with a modest decline in revenue take rate in Q4.

During the quarter capitalized and other technology solution contribute roughly 54% of total loan volume.

Top line loan volume was negatively impacted by seasonal shortage of overall funding supplies as well as the 24% rate cap related tightening from traditional funding sources.

At least for the first half of 2022, we expect <unk> percentage contribution to our total volume to remain fluctuating around current level as the industry gradually adjust to the new rate cap.

At the core of our long term growth strategy, we will continue to pursue tech driven business model.

After this transitional period in 2022, we expect capitalized to become a larger portion of our business in the long run.

During the quarter average pricing of our loan portfolio dropped by 200 basis points and by the end of 2021 average interest rate of the loans on our platform we're already below 24%.

200 basis point cut in Q4 was faster than previous trajectory and we did it proactively.

We believe this will give us a great flexibility in Q1, and Q2 of 2022 to the income lines with the regulatory requirements and ultimately hit our target rate cut target by mid year deadline.

During the quarter our blended.

Blended basis average customer acquisition cost per user was approved credit line was 390 <unk>.

<unk> two <unk> 305 in Q3.

As we elaborated in last quarter's earnings call, we continued to focus on attracting high quality borrowers.

Those with much larger credit lines and the relatively low risk.

The average ticket size of these customers typically run between 150000 to $200 <unk>.

Compared to average of 10000 for our regular borrowers the unit cost to acquire those high quality customers are justifiably much higher than the regular borrowers.

So to comparisons apples to apples, excluding large ticket size customers in both consumer and SME markets average costs per approved credit line of regular borrowers.

It was approximately 246 in Q4 compared to 249 in Q3.

As we discussed in the past average cost per approved credit line is a calculated number with limited value in our internal decision, making process. We will continue to use lifecycle ROI and LTV as key metrics to determine the pace and scope of our customer acquisition.

<unk>.

Throughout 2021, we have to maintain healthy ROI and LTV trend, which in turn drive stable net take rates.

<unk>.

As overall risk metrics fluctuating in Q4, we continue to take prudent approach in booking provisions against potential credit loss new.

New provisions for contingent liability for loans originated in the quarter was approximately $1 6 billion. Meanwhile, approximately 400 million of provisions from contingent liability to our previous peak period loans was rhythm back as actual performance of those loans was better.

Than expected.

The effective tax rate tax rate for Q4 was approximately 14, 8%.

Which brought full year ETR to approximately 17, 3%.

Going forward, we expect ETR to normalize to around 15%, which will be sustainable in the foreseeable future based on our current tax planning schedule.

With strong operating results and stable contribution from capitalized model, our leverage ratio, which is defined as a risk bearing loan balance divided by shareholders equity remains at a historical low of four three times in Q4 compared to six six times a year ago.

We expect to see rather stable leverage ratio for the time being and to capitalize contribution resumed growth in the future.

We generated 2 billion cash from operation and cure compared to $1 8 billion and <unk>, three and $1 2 billion a year ago.

Total cash and cash equivalents was $9 6 billion in Q4 compared to seven 6 billion in Q3.

Nonrestricted cash was approximately $6 1 billion in Q4 versus $4 2 billion in Q3.

The meaningful increase in cash was in part due to the timing of the registered capital increase for our main core lending subsidiary.

Which resolved in large cash balance sitting in bank accounts at the year end as opposed to being deployed in normal course of our business as always a significant portion of our cash would normally be allocated to support our on balance sheet loans and the security deposit with our initiatives your institutional partners.

As we will continue to generate healthy cash flow from operations. We believe our current tax position is sufficient to support the growth of our business to invest in key technologies.

That's why the potential regulatory requirements and to return to our shareholders.

If you'll recall our board of directors approved a quarterly dividend policy in Q3, allowing us to distribute approximately 15% to 20% of quarterly net income.

After tax in the form of cash dividends on a recurring basis.

In accordance with this dividend policy, we declared another quarterly dividend of USD <unk> 26.

Per ads for Q4.

This cash dividend represents.

Approximately 20% of our Q4 earnings.

Finally, let me give you some update about our outlook for 2022.

As we communicated to the market previously we believe 2022 will be a transitional year for the industry as a.

Participants are adjusting to the new regulatory settings, as well as some macro uncertainties.

We expect total loan volume for the year to be between RMB 410 billion.

RMB 450 billion.

Representing year on year growth up 15% to 26%.

We view as a transitional year as an opportunity was to optimize our operations strengthen our technology platform and upgrading our customer base.

To build an even stronger foundation for our future growth as always this forecast reflects the company's current and preliminary views, which are subject to material change.

With that I would like to conclude our prepared remarks, operator, we can now take some questions.

Thank you management.

So who can speak Chinese. Please can you ask your question in Chinese first followed by English translation.

In order to have enough time to address everyone on the call. Please keep it to one question and one follow up and return to the queue. You have more questions. Thank you. So please press zero one on your telephone keypad now to ask the questions and zero to two cancelled. So once again zero one on your telephone keypad now to Oscar.

Questions.

First question is yes.

Thank you.

Please go ahead.

Hi, guys, Hey, why it's a good way to go to you on that.

When you're going through that yet.

And consequent virtuoso Diana.

Thank you guys for you guys I wanted to delve what it points out shall we say.

I'm not sure, there's a woman, which center and Dr. Joseph <unk> chosen gimbal touchless element.

Thanks to buyback one two things out there obviously each other to go PV you David Anhui Shandong.

George Hoagland.

Oh, My gosh, I can what everybody's going to charge them with you.

Can we go quickly on your question Doug.

Sounds good thanks, Alex one year without you so I'm going to go to a what I call.

The core code, Washington, Greene will go quicker and you will not charge does not seem to be on the local portfolio.

Okay that will do the translation for the first one is I would like to know the progress of the pricing adjustment.

What's the proportion of loans in <unk> 'twenty, one that are priced under 24% and the hallmark disproportion can reach up to for the fourth quarter. This year.

And the one the pricing going downward in the target customers sort of got strong I was wondering how are we shifting our customer acquisition strategy.

Sure. Thanks.

Yes.

I'll take the first part of the question and then <unk> will do the second part so in the first quarter over 70% our.

Customers are priced below 24, and as I mentioned in the prepared remarks by year ending.

The average price is already below 24 and.

This quarter in Q1, we're expecting even larger portion of our customers being priced at and below 20.

And we are pretty confident that we will.

Yet.

The targeted rate cut goal.

The midyear deadline on business.

Okay.

Yeah.

Okay.

Because you said that both meet the Coca Cola Championship.

Absolutely.

Sure.

Total usage opportunities.

Thank you.

Thanks, Jim.

Now that the requisite talent to jump to the beach.

Ken.

Mobile usage this evolution.

I'm sure some bigger.

Think of something that we watch because I think that youre not going to continue that.

We want to lose it.

Contributing to the year.

Bill.

The balance sheet.

Okay. Thank you guys.

Significant change.

<unk> integrates helga.

You can get into this will be a technical.

<unk>.

Until Jordan Sandler <unk> good.

On the equipment.

In.

Jamie.

Regeneron.

<unk>.

<unk>.

Deluge.

Good question.

We can get it yourself.

Discounting cheaper to get you Doug. Thank you is due to the efficiency ratio.

Yes, let me translate for our deal as for your question the customer acquisition strategy to access higher quantity <unk> well.

Three approach number one surgery increased more invest more in R&D to improve our cat and AI models to better identify their customer risk profiles.

<unk>.

Well, Matt in Q4, they can approach, we adjust our API CASM acquisition approach with our capital.

The next study.

We ran the offline channel, which is already shelf is a much better approach is battery for the high quality customers.

Yeah.

Okay.

San Diego, we think should go higher.

Thank you.

Our next question is <unk>.

<unk> shoot from Morgan Stanley .

I wasn't Morgan Stanley . Thank you Sharon.

Well just talk to my guys are women.

Yes ghansham.

Got it.

Okay. Good morning.

Although on the ABS the BD at Sherwood.

Thank you the <unk> also yes.

Yes, you bet Bellway now on Macondo.

Alright.

Our capital heavy that you the BD, how long it'd be up right.

General merchandise.

Hello again.

On the ACF with order intake.

Sure.

Jacob credit lines.

Yes.

So when we think about that.

<unk> IGF one in Tulsa, Oklahoma.

Hi, guys.

Hello, Daniel.

That one Jake change would have more share.

Sure.

Okay. That's helpful.

Basically my question is.

On the funding front.

It's been increasing ABS also the small loan company.

Capital injection. This also completed.

I just wanted to see whether there is a credit line with banks, where our cooperation with banks is still expanding.

And what's what will be the long term mix in terms of the funding.

Capital light.

Capital heavy and then.

Funding sources.

Okay.

Sure Sean.

In two weeks.

And you're kind of in the contingent.

Okay.

Hi, Jordan.

And how many go green with Shannon Ginza.

Yes.

So could you maybe take a shot.

Can you hand integral.

Great.

So as you know so as you choose.

It's usually people who can go green tissue could you <unk> incidents and exactly where you guys are good.

Caroline that you're getting the adequate time.

Wait a moment.

Good choices of financing mentioned agile compensated the baton.

Great.

You did a quick housekeeping.

Ken Clarke fee.

To begin with the income.

Okay.

Just as a kind of credit lines.

Glen you want <unk>.

To the time when other cement fluids on women.

As you can do the tens or.

<unk>.

Yes.

The CTO, you Tien tsin and frequently on heart failure.

You will see us this year.

Somebody had to get to the Eagle Ford.

It's a show you can find you Therefore bureau, Jordan <unk> good to hear from him and therefore they are converging.

Continuing to grow and Jonathan meaningful.

So no you shouldn't see women.

Thanks, Susan.

You can do this year.

Shareholder between with Hanwha <unk>.

Plenty of hot so if you don't have an issue.

Just before.

Okay.

Yes to answer your question Rich high you are very correct.

<unk>.

Wei.

Daniel Lee expand our number our financial institution partners by introducing a stronger bank.

As this comes along we can't offer larger ticket size to battle quantity customers take him at Florida capital Light volume.

We will explore more diverse products catering to different needs of financial institutions.

It includes marketing surveys with management service and loan collection survey.

I just wanted to add one point so from a longer term perspective, the capital contribution as I mentioned in the prepared remarks will be.

Moving higher from current level.

If you recall in the past we were.

At some point in targeting right.

Two thirds or 70% I think from a longer term perspective, that's probably still be the target. This year will be fluctuated around this current level just because the whole industry is adjusting to the new environment and when we done with this adjustment.

And I will start to move to the to the higher direction for Capex.

Okay.

Yes, hi, guys.

Thanks Sheila.

Yes, yes.

Our next question is Ethan Wang CIC.

Hey, good afternoon.

<unk>.

Mark were up as our reach out here one for you John .

Hi, Brian .

So I'm just wondering how.

That's a door hardware, whether it's senior lenders reminder, expectations.

Ah patients.

Alright, a hole with GBM.

<unk> Bank in March.

Sure Jeff.

It sounds good.

Earned through the.

Sure.

Biogen worthy Empire, Dardar syndromes or delayed mature young Rok arent just one in terms of all of that.

Women in New Jersey.

That's helpful.

Yes.

Comment on that.

We are weaker constrict, where each year.

Sure.

<unk> put out yesterday.

We are ready for a one time item is that correct.

Can I ask on the door and boosted that number one suggestion britney wage or John or common Xiang shortly.

Maybe it will shorten cycle time into it or in terms of pharma, Okay I have two questions.

First of all a quick follow up just wanted to raise the funding part for the fourth quarter and the management's view on our funding cost.

For this year and second question is down in the market concern on a tightening in recreation for the low coal.

Financial institutions are quoting financial institution.

For the regional bank to collaborate I'm, just wondering whether there are half of consumer loans, and whether thats going to empower business and for the guarantee companies does that mean, they will set out the areas.

<unk>.

Across our country.

Kevin.

But with the two land nationwide. Thank you.

Okay. Thank you Ethan I will take the first part again and then we're taking care of the second one so for the funding cost for the Q4.

Was approximately 7%.

The.

Q4, as you know, it's always been a very tightening periods from money supply perspective in the financial system. So normally that.

Reflecting the funding cost.

Four.

Moving into this year.

As we sort of a gradual transition.

Two new institutional partners.

The overall funding supply, we're getting more sufficient.

But during this transition we are expecting a rather stable funding cost around 7% and after we done with this transition we.

We will probably start to see a gradual although a modest.

The decline in funding cost.

Alright.

Hi, Jeff.

Okay.

Good morning.

Two weeks ago, they didn't seem to have internet banking.

And lastly to now.

Greeting, particularly one yen to try this again.

Josef just dollar tabular hernia yields will go to amigo could achieve.

True.

And does.

<unk> II towards the issue either Max Torres led negotiated kind of different channel.

For the digital government, though we do maintain total idiot.

This woman.

So you're going to do because they go hand to Jonathan are women.

Which obviously earnings and.

Thank you, Joe and Jim will give you Johan <unk> give you one day.

But Johan channel yesterday on <unk>.

And particularly when you're doing a young entrepreneurship.

The spacing behind them and then again I'll ask you about China.

Yes.

Sure sure.

Yes, yes and to answer your question number one your question comes from Doug <unk> early requirement that.

All right.

Hi.

<unk> business or commercial bank. This is up quite early regulation added to the regulator. It gives a rather long grace periods for other market participants the cutoff date issue.

January 1st this year.

Currently all our financial institution partners are within the compliance.

Secondly, looking at the matrix of our financial institution partners network most of them.

National wide operation therefore.

Very limited impact from this regulation.

Got it.

Sharon.

Encountered some programs reported directly to farmers and centered around them.

Okay, I'm going to answer.

Thank you.

Termination of Dahlman rose.

Hello Yoga.

Toward that goal.

And Lisa just retention.

Was hoping as you go international.

It can be.

Got it.

So you have to get you to slow down.

Yes.

The second part of your question.

There are no restrictions for guaranteed companies guarantee company Kenneth that local branch national wide to satisfy this requirement is comparatively easy compelled to the banks to cover national wine.

Okay.

Thank you.

Tissue.

Our next question is Thomas Chong from Jefferies.

I was just wondering chung.

I Wonder if you and what do you want to ask one woman alkermes algae that zander.

Yes.

<unk>.

In the EDA APB tie.

Further penetrated.

I'll, let newly named an awesome when you saw momentum by Eli.

Ill children, Jeff BOVA.

Paul will then caused loan size.

Josh.

The industry categories.

Typically.

Understand.

Why are you moving pieces.

Just looking to your point, we're trading this one as well.

You may all come out.

Enrollment I was hoping common associated with icon.

Yes.

Thanks management for taking my questions I have two.

First question is about the SME strategy can management comment about how.

How we should think about the contribution over the future as well as the bone and cost on the loan side going forward.

Together.

Industry categories that we are working with and my second question is more about the <unk>.

Macro headwinds that we offer.

And these days.

<unk> corporate.

Are you seeing any changes in terms of the consumer behavior in terms of the use of the policies are thank you.

Yes.

Sure.

Hum.

And if you go into here.

<unk> gone down.

Can you just mention that.

Attempting.

Tony.

<unk> decided to go down, but I don't know how women to determine how attempting that relation and tau.

Also one igo.

Sandy hit integration.

Since the time that they do.

And suddenly they don't even create total <expletive> SME on that type of thing.

Can you <unk> you.

The preclinical data.

Yes.

We need to do.

I don't know how many way.

Could you talk a good time to Genentech and then Jay.

Higher towards that lets you don't go too quickly can be at Deutsche <unk> <unk> Youre.

I'm talking about <unk>.

Sure.

And to your liquidity.

You want to pass.

And this really kind of coming in below question congratulation to the Ethiopia.

With your question.

Yeah.

Jim.

Yes.

So year on year.

So it isn't an issue no time, we litigate.

In your question there when things so you'll mill camera, even before you get patient with the BMR.

Well regarding your question about <unk> and <unk> business, the average ticket size for Acme products.

Or is it.

<unk> 55 zero, Okay RMB four.

Tax loss.

Larger ticket size, usually will provide over 250 K RMB for the tax law, we estimate the margin stands at around 2%.

Tony for your question about the use of low as most of our consumers.

Inventory that are less impacted by the calling and the macro economy. We are seeing the yields of now is consistent with previous.

Okay.

At IHOP.

Hey, guys.

No.

Yes.

Sure John .

When would you say it was that kind of a debate.

Could you add some color either.

Yes sure.

You don't want me go financial improvement.

The only tool, we litigate and see if I can.

Again, I mentioned that it has all year.

So yeah good morning, John .

So in general again, <unk> hundred Giga.

And which would indicate.

100 <unk>.

Nolan.

Continuing that kind of our mid year.

<unk> with its shift towards SME.

Equation that attention to.

When did listen we've dealt.

Shoot.

You can see on that issue.

These women and push with <unk>.

Joining me here, which I now welcome any questions.

Can you actually double Eagle.

Okay. Good openly in contact with the video with Goldman <unk>.

Political initiatives for digital for the motion forward.

Thanks, Amit.

I want to add more color for our operating strategy for SME business line.

Even under the tremendous amount of <unk> <unk>.

<unk> and the support in the past from.

From government.

We take a very prudent strategy.

We are focused on industries.

Industries that are less impacted by the economy macro economy, such as manufacturing and the ratio. This year, we do not.

<unk> accelerated.

X potentially in this business again, we all take very.

<unk> also we like strong more capital light and more tech driven solutions for financial institutions.

SME business.

I appreciate it.

C J.

Thank you. This is the end of our question and answer sessions now.

Give it back to the management for closing remarks. Thank you.

Okay. Thank you for again for participating the call and if you have any additional questions. Please contact us and.

And with that thank you.

Yeah.

This conclude the conference call you may disconnect now goodbye.