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, 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 MS. Mandy Dong IR Director. Please go ahead Mindy.

Thank you Hello, everyone and welcome to our fourth quarter and full year 2021 .

Next call. Our results were issued earlier today and can be found on our IR website.

With me today.

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

Mr <unk>, our CFO and thereafter.

Mr Jones.

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.

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.

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

Okay.

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Bye now.

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And gentlemen.

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Our central corporate team in June .

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Please turn to our business.

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Thank you.

Many of the data.

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

In 2021 total loan participation 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 99.

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.

Tien tsin regulatory environment, rather volatile yet of 2020.

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

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This is Jim.

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When we did the same arguments will do that Deutsche on Peanuts to do that didn't even go up which you said was how can you build.

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

Regulation remains an area that's got a lot of attention.

Let me share some opex here.

Arch is name of the government policy for all of 2022 is very clear, which is to achieve better economies, well I driving consumption, suggesting more supportive.

The vast amount of consumer finance.

Where do you stand the policymakers to introduce additional metric to drive consumption and a support Smes.

China's state coastal has made the above mentioned policy statement at that higher salaries.

For example is in municipal level Watkins bite your plan what are the financial industry report Citi Arbitron team support the expansion of consumer finance industry through proper listening a financing with fixed will come through more 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.

Edition, the PB Oc and other national regulators are promoting innovation in financial standardization.

In the 14th by year plan for the financial standardization.

We actively participate in product design related discussion all the night by regulator and the contribute our industry know how to support effort.

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Onto a piggy back window.

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David.

And battery metals.

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Thank you Lisa.

Okay.

We've also got some we did John .

Mr Yanai, yet until the budget.

In Q4, we started to implement rectification Margaret.

With the regulatory.

Client.

<unk> enhanced our corporate governance structure and further focus on our core business.

At a recent briefing.

Jean Chairman of CDI, RSV stated that the shelf chip Clark Rectification works have been largely completed overall progress of rectification has been smooth so far and are confident to complete the rectification work very well.

Based on the regulatory guidelines and our own business needs.

The Red is the 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.

Both direct and indirect loans serviced.

On one hand.

Upper level through our micro lending company directly to customers and the industry.

The other half will walk 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 services can only be undertaken with proper financial license.

I'll focus on the execution.

The vacation 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 you do a woman she does Jonathan.

Please check if I'm here.

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Giovanni do you think you can get.

John .

Due to that.

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Could you quickly from their performance as Scott.

Sure Jonathan.

Sounds good.

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The effect of weather that we got at the Genco.

Jimmy Gilbert and scope.

Yes.

For the year.

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Yes.

Thank you Cindy.

Okay.

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

Average API will allow 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 with.

The increased investment in data security and they have projection.

The China cyber security revealed acknowledge and certifications into DRC awarded.

Awarded its security certification for our flagship product.

<unk> hundred 60, <unk> ATP, adding another national certification.

VC protection to our products.

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

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

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

In addition, the cyber Security Management Bureau.

The ministry of industry, and information technology, and IP issued a region Commendation.

Our axon performance.

Does that as well.

Users' privacy protection.

Women that will continue.

Regulatory agencies.

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

Two new venue.

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Fourth Gen bucket uhm.

Asia will buy both of them.

Thank you Greg.

Yes.

So the agreement was video.

Does it do to macro.

Sorry.

So cohort done shortly.

So as you know our CTO.

Joe you win more you wanted.

E mail email.

So when we came with Genco, Illinois, CNBC all related.

And without talking about 415, hopefully Calgary.

You don't see here, so it's something that Tom Hogan torturing Houston.

Within that cohort.

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But it sounds like it helps them pay that Thai hot.

That continues with him for what you are seeing even more attention.

Shall we can you can talk to 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 delivered a satisfactory result.

In Q4.

And out of new approved credit lines for SME loans accelerated and grew by one 616%.

The critically to RMB nine 3 billion.

As of the end of 2021 the outstanding loan balance of SME loans accounted for one three.

Percent of our total loan book. Meanwhile, we continue to refine Anthony product and expand to better quality customer growth by offering larger ticket size product hovnanian, specifically 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 if that 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 credit 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 <unk> 616, 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> accounts.

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 all from me.

And then just you probably could have been had you should look into conjunction either Eagle Ford zone.

Jean will your cockpit door opening the genco.

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Jim Lynch Hugo mentioned G.

Thank you Jerry with Joe as you go phone.

One question, you've been asking to Genvec. So do you have to solve for Nissan.

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

Neighborhood, where they feel we can do the same.

Within that you're fine.

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Joseph I can see ABS.

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With the Institute.

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 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.

So better fitting.

Requirement of some banks this will enable us to develop standard solutions to work with more banks in the future.

While the continued ABS insurance in Q4 with the.

Total 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.

282% year on year.

Our although our ABS funding costs for 2021.

Five.

Or 7%.

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Our television.

As for our customer base.

All of our quality of newly acquired a customer gradually improved coming along with lower pricing.

<unk> of those high quality customers will be gradually released over the lifecycle of <unk>.

Price decline.

Some key indicators of quality improved significantly such as the ratio of yoga, which.

Multiplatform credit lines with mortgage in the carload user with a stable income and it uses with tangible assets.

Based on the good path that we conducted the drawdown ratio and the return rate of both higher bar at lower pricing.

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

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Could you talk to what is that off of my introduction, which <unk> done.

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Tony could you comment on that.

Enrollment is actually going up.

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For instance.

Hi, there.

C&I credit.

Packed room, one cogent got into that it couldnt quite zhangzhou Fujian subscription.

In Q4 will also made noticeable progress to enhance our capabilities.

Capabilities on multiple fronts as we remain committed to become a tech empowered alone facilitating task, one serving our financial institution partners and Florida.

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 here.

The more you can connections and Gucci is on a cohort I should've been more can you do something about it.

What you show your children I'm, Joshua closer to being able to be more sustainable I mean, there's some better than women.

I got to know for quite some time.

The assembly of them yet.

Since you're talking about.

Thanks Jackie.

Thanks, Linda <unk> will book.

It's helpful. And then could you just have been on your portfolio.

Linda.

You will excuse me.

Yes.

Tim do you want me to answer that.

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.

Jason from Nick Joseph.

First 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%.

Additionally, yoga acquisition was also improved by over 20%.

Our identifiable user base increased by three folks.

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

Immunity detection hierarchy called Federated learning and risk management strategies automation.

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

Alright.

For AI powered operations have knowledge, our proprietary production agnostic platform provides one stop smart diagnostic service.

The advert experience into automatic choice.

Tourists ensure that stability and accessibility of our service.

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

On you are on your minds.

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We will get one to engineer or mezzanine debt.

Chickens and the other shareholders.

So it gives us capacity and liquidity.

Perfect.

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

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

Similarly, our non-GAAP .

And that's critical here.

Thanks, Jim.

Yes, I think that with disciplined aircraft, we've been guiding between these two downtown Chicago.

When we get done before the June could be targets issued total can do that Julian.

Duncan to the clinic.

Were there any geological.

Sure.

<unk> put it in the future.

Electric vehicles.

Google fiber Johan Amsterdam.

Do you think you'll have another eagle.

Florida Curtis issue.

CEVA will jump who can deliver yoga.

This should be a huge cushion.

On the cash outflow Cosmos, yes.

Once you pencil to yield to Cushing.

And how should we judge genre she values.

We continue to leave their homes.

They have a demo.

Implement Sheila.

Three implementing defensive Wuxi that immediately.

Immediately.

You've got to implement accountants again.

After all direct indication in 2021, we expect to see a much clearer regulatory framework for the thing.

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 live isn't it relates to a more diverse product and install it with different financial institutions. Meanwhile, will collaborate with stronger financial institutions to optimize the mix and the quality of our partnership network.

Ultimately to boost our solicitor 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 retention rate as well.

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

We are quite looking forward to the year.

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

Single digit gigawatt since you mentioned that you work with.

Thank you Jamie.

So with that for sure.

Thanks Vishal.

When we don't read too much where you guys may not renew.

Gen Con which is ubiquitous.

Fortunately.

We can do that with continued.

Okay.

With this structure upgrades and improvements.

Lee we will serve our customers partners and society more efficiently in 2022.

Healthy are more resilient and more sustainable company.

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

Was that economy growth.

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

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

Thank you hi, 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 operations financial 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.

Asset quality, which fluctuate in Q4, mainly as a result of it.

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 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 through leasing guarantee liability.

This 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 <unk>.

Average prices.

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 71 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.

During the quarter <unk> 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.

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%.

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.

So the income lines with the regulatory requirements and ultimately hit our target rate cut target by mid year deadline.

During the quarter Brian .

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

<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 the 150000 to 200 solve it.

Third 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 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 costs 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 four <unk>.

Provisions from contingent liability all previous period loans was rhythm back as the 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, 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 until <unk> 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.

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.

Increase in cash was impart 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 which are strategic 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.

Satisfy the potential regulatory requirements and to return to our shareholders.

If youll 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.

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.

Participants are adjusting to the new regulatory settings as well as some macro uncertainties as such we expect total loan volume for the year to be between RMB 410 billion.

RMB 150 billion.

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

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

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 he 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 ask the questions and zero to two cancelled. So once again zero one on your telephone keypad now two assay.

Questions.

First question is yes.

Thank you.

Please go ahead.

Good way to go to you on that.

When you're going through that yet.

Rosanne consequent virtuoso Diana Julien I would think.

So you are you guys I wanted to touch points out.

Just one more thing I'm doing Dr. Joseph <unk> chosen gimbal touchless element.

Thanks to buyback one thing about the RSV each others, yes.

Yes, you did David I'm with you I can repeat that Alberta.

Hum.

Can we go put renewables.

Doug do you want to talk to one year without an excuse I wanted to go to a what I call. The core code, Washington will go quicker.

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> 21 that are priced under the 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 customer is sort of strong I was wondering how are we shifting our customer acquisition strategy.

Sure. Thanks.

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

So in the fourth 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 <unk>.

This quarter in Q1.

<unk>, even larger portion of our customers being priced at below 20.

And we are pretty confident that we will.

Yet.

The targeted rate cut goal.

The midyear deadline.

Yeah.

Okay.

Okay.

Could you sort of hope to meet the Coca Cola Championship.

Sure.

Mobile usage.

Thank you.

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Tim.

The voice usage this evolution.

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I think it's something that we watch.

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New enrollments are good.

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If you could change.

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However, you can get into this will be a technically.

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So John as you go on the women.

Jamie.

Kimberly.

Hello, gentlemen.

Thats a good question.

We can get yourself in these companies eager to get started.

You seem to be particularly with you.

Yes, let me translate for our deal as for your question the customer acquisition strategy to access higher quantity economic groups, well Leverages III approach number one surgery increased more invest more in R&D to improve our CAD and <unk>.

AI models to better identify the customer risk profiles.

<unk>.

Well, Matt in carefully they can approach, we adjust our API, Panama acquisition approach with our capital.

Thanks Debbie.

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 she was on highway diesel.

Thank you.

Our next question is <unk>.

You shoot from Morgan Stanley .

Gordon Wilson Morgan Stanley . Thank you guys.

Sure.

Well just talk to my guys are women.

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Yes.

The ABS the BD it Hasnt got Michele.

Thank you the answer.

Yes, you bet Bellway.

I understand that.

Capital light.

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

Got it got it.

Thank you Jeff.

Jacob credit lines.

Yes.

Okay, Okay got that.

BD that AGL women Dorsa Oakland.

Doug.

Hello, Daniel.

It seems that I'm sure you guys.

Sean Johnson Dennis.

Basically my question is.

On the funding front.

It's been increasing ABS also small loan company.

Capital injection. This also completed.

Just wanted to see whether Theres a credit line with bank cooperation with the banks is still expanding.

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

Between capital light.

Capital heavy and then theres different funding sources.

Got it.

Okay.

Sure.

So this is John .

In two weeks.

And you're kind of in the contingent women.

Hi, Jim.

<unk> Queenstown begins in young women cities could you maybe think of Shanghai.

I need to go to the.

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Caroline you got any other questions.

Oh man.

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To begin with the income.

Just as a kind of credit lines delegate Gwen.

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In the fluids on women.

If you can believe it tends to work.

So I don't mean to be enhanced.

And time in the future.

Okay.

He has this assembly.

Somebody had to get to the Eagle Ford.

Sure you can find you Therefore bureau, Jordan <unk> good to hear from him.

Converging hanging mitigating Jonathan meaningful.

You shouldn't do that.

We can do this year.

Between returns were good.

Good.

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

Before.

Yes to answer your question, which you are very correct.

Third way.

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. They only include marketing surveys with management service and loan collection survey.

I just wanted to add one point or so.

Longer term perspective, the capital contribution as I mentioned in the prepared remarks.

We'll be moving.

Moving higher 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, 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.

<unk> and the one we done with this adjustment.

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

Hello, guys.

We don't see that.

Yes, yes.

Our next question is Ethan Wang CIC.

Hey, good afternoon.

<unk>.

Quite go up as a reset here went to Vishal. Congrats Brandon debuted our did occur.

So thanks.

<unk>.

Ah patients.

As a whole.

Consumer banking Marsh Thompson George here Tim.

John .

Earned through the.

So just make sure I'm working on higher Dardar syndrome here or the mid term shareholder Jaguar, our endocrine in terms of loan purchases online in New Jersey.

Hum.

Yes.

Common equity.

We are weaker.

Sure.

Sure.

To put our company, yes, we are ready for Walmart for some items that correct.

Sure.

And boosted function that on that one.

John our common Xiang surely.

Sure Tycho.

In terms of drama.

Two questions. Firstly, a quick follow up just wanted to raise the funding costs for the fourth quarter and the management's view on our funding costs.

For this year.

Question is down in the market concern on a tightened and recreation for the low coal.

Financial institutions are quoting financial institution.

For the regional bank to our collaborate I'm just wondering whether there are half of consumer loans, and whether thats going to empower business and for the guarantee of comprehensive domain. They will set out the areas institutions across the country. So we can cooperate with them to lend nationwide. Thank you.

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

Normally that that.

Reflecting the funding cost.

Four.

Moving into this year.

As we sort of have gratulate 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 up.

Are we done with this transition we.

We will probably start to see a gradual although modest.

The decline in funding cost.

Alright.

Hi, Jeff.

Okay.

Thank you Glenn.

John as you go they didn't seem to have internet banking in particular NGL lately to known.

Doug.

Greeting, particularly with yen to try this again.

Jim just dollar popular hernia yields will go timing could achieve.

True.

I'm, Doug <unk> Johan we built towards the issue so do either.

We can now negotiate different John .

For the digital government oil and.

$2 <unk>.

I just want one could do that.

So if you take 100, Jonathan are women and data, which overdue loans.

Jim will give you Johan <unk> give you one day.

Johan Santana yesterday on <unk> C and <unk>.

When you're doing a young entrepreneurship.

It's amazing the high end I know you cannot identify different Chinese policy.

Sure sure.

Yes, yes and to answer your question number one your question comes from Joe very early requirement that all right.

And loan business.

When commercial bank. This is up quite early regulation and the regulator. It gives a rather long grace periods for other market participants the cutoff date issue.

In January 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 are national wide operation Airport.

Very limited impact from this regulation.

Sure.

Sharon.

Okay.

Alright.

Great.

Centered around them.

Okay.

Hum.

Okay, I'm going to answer.

Thank you.

Generally you know number one is the.

Hello Yoga.

So you paid towards.

And Lisa talk about guest retention.

Hopefully as you go international.

Can be you can do with it.

C C.

You have to get you through that.

Yes, the second part of your question.

The original restriction for guaranteed companies guarantee company Kenneth that local branch national wide to satisfy this requirement is comparatively easy compel to the banks to cover national wide.

Okay.

Thank you.

Tissue.

Our next question is Thomas Chong from Jefferies.

Ill just add one thing.

If you and what do you think you all should one woman comes out see that come down.

A woman.

I think why <unk> seen the APB.

Further penetrated.

I'll, let newly named Awesome. When you saw a woman very light MD <unk>.

Tom.

Paul will then caused loan size.

Josh.

The industry categories that typically.

Sam.

Why are you <unk>.

And to your point, we're trading this one woman you'll may all come down to enrolment South Asia common dosage of taekwondo.

Yes.

Thanks management for taking my questions.

My first question is about the SMA strategies.

My comments 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 my second question is more about the macro headwinds that 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 if you go into your own language.

<unk>.

Can you mention that.

Attempting.

Tony.

Criticized and figured out, but I don't know how women to determine the dose of <unk> in total.

<unk>.

Sandy financial integration.

They don't want to spend the time that they do.

And then suddenly they don't know.

Total SME on that can.

Can you <unk> you.

The preclinical data.

Okay.

Doug and I don't know how many way.

So you've talked a good time to Genentech and then Jay I.

<unk>. If you don't go to work quickly to <unk> and go to <unk>, you're going to attack them and dump and.

Timber.

No.

Liquidity.

And for me. This is really kind of coming immuno question congratulation to the lumen.

Hum.

With your question.

Yeah.

Yes.

Yes.

Yes.

Jim did I answer isn't an issue as you know time will litigate.

In your question there when things so you'll mill camera in Korea U K pensions with the BMR.

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

Or is it.

<unk> 55 zero, Okay RMB four.

Tax loss.

Which is larger ticket size, usually we provide.

Oh boy.

250.

RMB for the tax law, we estimate the market stands at around 2%.

Secondly for your question about the use of low as most of our consumers in the industry that are less impacted by the calling and the macro economy. We are seeing the yields of now is consistent with previous.

Okay.

Yes.

At that meeting.

Hey, guys.

Sure John .

<unk>, which is kind of a debate in Georgia.

Could you add some color.

Either.

Sure women straddle it you don't want your financial improvement.

The only two minutes ago.

And see if I can again, we mentioned that it has all year.

So yeah. Good morning behind you had a question in general again will be the only type of vigor.

I mean, we can indicate yes.

Do you think you can see how Asia no.

Does.

Continuing that kind of our mid year book, which you thought would achieve taught degree SME.

What is generally unchanged.

Thank you.

When does this mean.

That would shoot me.

You can see our guidance you've done it.

These women and pollution women's Antigua.

Joining me here, which I know you tend to.

Can you actually would have been even more beautiful magee.

In contact with the video with Goldman <unk>.

In Gulf War, political initiatives with Jon and Moshe.

<unk> SME.

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

Under the tremendous amount of <unk>.

<unk> and the support in the past from government.

We take a very prudent strategy in this business.

<unk> focused on those 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 line again, we all take very conservative about.

Also we likes through a more capital light and more tech driven solutions.

Financial institutions in this SME business.

I appreciate it.

J 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.

Thank you.

Okay.

This concludes our conference call you may disconnect Goodbye.

Okay.

[music].

[music].

Ladies and gentlemen, thank you for standing by and welcome to the <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 MS. Mandy Dal tile director. Please go ahead Mindy.

Okay.

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.

Mr. Zhang our CEO and director.

The accuracy, our CFO and director and Mr. Don Yang our CFO .

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 discussions 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> Chen.

Okay.

Bye now.

Just looking at that ERP Aman <unk>.

Yes.

We intend to end up youre going to talk about.

Thank you Judy.

I don't understand helpful, Jim and Jim.

Thank you.

For me at least.

Yes.

They do tend to focus on our value.

Yoga yoga Jody when we did that.

Does this year.

Got it.

Just curious about.

Indeed, some type of annual visit.

So yes go.

You bet.

Hello.

Okay. That's helpful.

London.

So in total revenues.

Pardon me, yes akshay.

Let me get into this actually kind of treatment.

Yes.

Thank you.

Any of that nature.

Hello, everyone and now we're 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.

RMB $96 9 million.

For the 14th.

Year on year.

Outstanding loan balance reached RMB 142 P M.

40.

<unk> by 54% year on year.

This is overcome multiple challenges related to macro economy uncertainty, so erratic outbreak of Kobe and affect Tianjin regulatory environment, rather 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.

Semi well, thank Kenny yes women's judo.

Now, let me walk you through our baseball Q4.

So anthony on that that'd be great.

Thanks, John .

Turning to.

<unk> <unk> hundred <unk>.

And then down to which I would say you would switching Soviet Union the fact that.

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

<unk> booked for hectoliter switches, hoping you could just ratio is CFO John <unk>.

Focusing back, which I was checking that.

Sure Jim.

And when you Zoom tour.

<unk> got good financial so Cleveland Q.

Q4, just quit ourselves reaching that shelf Sudan.

Again Don.

Johan <unk> implemented should have that June could you find out that John could you that day.

As you grow your critical instead of continuing shows of hydrogen.

Oh Kuwait.

Right, Yeah, I'm done billboards with your input.

Pallet genome Golden flashes, all fundamentally flat in.

<unk> taken the genome go don't have geico.

While this is heng Chen will implement will do that but we can pay down to do that to do things, which you don't have your building.

Through June we don'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.

All of our testing of the government policy.

'twenty two is very clear.

To achieve better economies, well by driving consumption, suggesting more supportive.

<unk> moment of consumer finance.

And the policymakers to introduce additional measures to drive consumption and a support Smes as China's state coastal as meda above mentioned policies aimed.

At that higher priority.

For example is in municipal level Watkins bite your plan what are the financial industry report Citi Arbitron team support the expansion of consumer finance industry.

Proper loosening of financing restrictions, while consumer finance company.

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

<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 LLC and other national regulator are promoting innovation in financial standardization outline in the 14th by year plan quarter financial standardization.

We actively participate in part by design related discussion overnight by regulator and contribute our industry know how to support efforts.

Okay.

Absolutely.

Well again.

Jim will implement a yoyo.

Good Jonathan back window.

Consider <unk> lifetime.

And yet you don't.

Kim of course, English Purinton got courtroom.

For now.

Could help I mean, that's what you can say food initiatives, averaging 100 reduction.

David <unk> from Buckingham.

One moment please.

It looks the same pattern this year Jonathan.

Okay.

Yes.

In the <unk> footprint.

<unk>.

We will begin.

We can Jim.

We finally saw revenues.

John .

So it looks like in the tissue.

You've got a D&C Goldman.

James.

We are bigger.

Okay.

Okay.

Sure.

Sure.

Also with our members.

Can you update us.

John .

Thank you Mark.

And yet.

In Q4, we started to implement rectification Margaret.

With the regulatory requirements.

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 are confident 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 on both direct and indirect loans sorry.

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

Other <unk> will work with credit agencies and help financial institution 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 awaiting further revealed and the certification by the regulators.

City of women's judo, Jonathan within there.

Yes.

Yes.

Further debt reduction and Dr. Giovanni issue.

Thank you bill guaranteed by the John .

Sure.

Hey, guys.

Should you away from your comments that you've got.

Gotcha.

Sounds good.

Was it the launches and how do you think the conditions are unchanged.

Exactly.

Second quarter organic user input.

Jimmy Gilbert.

Yes, Bob.

On August two.

No.

Since this is what it is.

Yes.

Thank you.

The syngenta indicate whether the erosion.

And we are.

Interesting. Thank you.

We had an important change.

Okay.

Thank you.

Sure.

Okay.

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

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

We effectively brought down the cost for our borrowing.

In terms of the data related compliance we continue to increase investment in data security and they have rejection.

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

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

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

This is the second important international standards certification in privacy and information protection area real estate volume. The ISO 2701 information security management system, a few months ago.

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

Issued a region commendation.

Our excellent performance.

Therefore, while.

While at users' privacy protection.

Women that will continue.

Regulatory agencies.

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

Two new venue.

<unk> seen that.

And this is going to talk to them.

<unk> genetics.

Is that.

Classify them together.

Joey.

So we can be defensive.

If you can do that this year.

Susan.

So assuming that assumption.

Okay.

Document, Michigan <unk> CGM sensor.

What we can do.

Would you pursue.

Some Bakken diluted.

Yes.

Due to the above with EEP.

<unk>.

Yes.

When we came into Q2.

Sometimes even though utilization weakness.

Yes.

Mr Chairman.

To build on.

Acquisition for that type of issue.

Jim Basich Doj.

The income will be positive.

Rich thank you great application.

Understood.

Is that macro.

Sorry.

So cohort done synergies teams.

So we're seeing that oxygen.

Joe.

<unk> E mail email.

Tony.

It wasn't the way it came with Genco, Illinois industrial related.

Hopefully you can put a tiny handful 15 hopefully.

We will Miss you don't see here, so it's something that Tom Hogan cohorts in Houston.

We're seeing that show a cohort in <unk>.

Yes.

It does sound like it helps them pay that Thai hot.

It continues with him for genotype <unk> patients and look for Deutsche I wish 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 delivered a second back to readout in Q4 total amount of new approved credit lines for SME loans accelerated.

<unk> grew by one 616%.

The gradually to RMB nine 3 billion.

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

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

There are funding these search and turnover increase.

To capitalize that opportunity, we simplify approach for <unk> 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 consumer.

And to improve efficiency.

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

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 all from me.

And then just you probably could if you had a you should look into conjunction either genuine Hugo Cruz from <unk>.

For Europe Africa door opening the genco.

Without <unk>.

Jim.

We will then change it.

Can you share with us in June as you go phone.

One question Ive been asked from coal to Genvec. So do you see this all phone calls to Nissan.

Yes, Hi can you Antonio.

<unk> <unk> <unk>.

Neighborhood, where they feel we <unk> 100 zero Simpson.

Uh huh.

Maybe this is the pricing that you see.

Joseph I can see ABS.

Situates December Thunder, we didn't see it.

And if I can maybe add system solution.

<unk>, then dunbavin jamba by sharp fashion, so I'll go to them and we didn't succeed.

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.

No network newly added financial institution partners have brought reviews now coverage strong risk management capability and the diverse business lines.

Moreover, our ICT product offers.

So better fitting the compliance requirements of some banks this will enable us to develop a standard solution to work with more banks in the future.

Meanwhile, we continued ABS 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.

Our overall, our ABS funding costs for 2021.

Five.

Or 7%.

Christian and Tom here.

Yes, the shutdown.

Wilmington to Cushing <unk>.

Question on the jobs agenda will add global Chevron J&J.

Sanjay you lap dog away could you into.

June Chengdu Ghansham.

We can see.

Attempting Youll fund Youll found that Youre.

So we will go into the Cushing Samsung.

Just hang on for Jonathan.

Thank you.

To cope with it.

<unk>.

This sounds like Cushing.

You didn't get the cohort on JD.

It was can you kind of talk with the.

The agenda will acumen Delek <unk>.

Our television.

As for our customer base, the overall quality of our newly acquired a customer gradually improved coming along with lower pricing the value of those high quality customers will be gradually released over the lifecycle as price decline.

Some key indicators of user quality improved significantly such as the ratio of.

Multiplatform credit lines with mortgage and the car loan user with a stable income and users with tangible assets.

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.

For Linda.

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

Well this is.

Tony could you comment on that.

Okay.

Many women the AI Dr. Linda.

So you can go to.

Ghansham the Xinjiang Timna.

The C&I credit and background.

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 platforms, serving our financial institution partners and poorly.

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

Women in the east.

Ms Susan Morrison.

<unk> connections and Gucci is on a cohort I should've been.

Can you just on the <unk>.

And what you saw you're talking about I'm, Joshua Chris I mean, we're mostly talking about when there's somebody that's been done.

Well I got to know for quite some time.

I assume to even from here.

So as you're talking about.

Demonstrated courage.

Thanks Linda.

<unk> will book.

Its helpful and could you spend on your portfolio shaping.

When was that.

You will excuse me.

Tim Duncan do you want me to answer that.

So Shannon John John Guinee, I'm going to Johan to Omar fall down for the witness here. So again, that's something that I made.

Go down 10 time charter Chimbonda Joseph.

First we've made major upgrade to the framework, our smart racking systems.

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

Our average user quality was up by over 20% our efficiency Yoga acquisition was also improved by over 20%.

The scale of our identifiable user base increased by three fold.

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

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

As for AI powered operations have knowledge, our proprietary production diagnostic platform provides one stop smart diagnostic service, but in an effort experience into automated choice.

These tourists ensure the stability and accessibility of our service.

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

Hello <unk>.

Let me remind me with the contributor Wilmington, Porsche was down inventory.

<unk> will mention in that one.

Yes.

This compares to diluted EPS.

New hardware.

<unk> on hand 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 the Golden standard what's the thing that visit when macro uncertainties arise.

Sure.

On the island.

Critical here.

Jim.

Yes.

We've been guiding between these two projects will be.

Loans at June 30 target tissue token border excuse me inbox that into the clinic.

Whether it is general motion.

<unk> put on the schedule.

Electric vehicles.

Gigawatt Parliament lunchtime.

Since the decision for the coaches issue.

The receiver will jump, who can deliver yoga moisture homeowners to be a huge footprint.

Dave will touch on Christmas day.

In terms of the yield question.

And how should we be Deutsche genre she values.

What we've seen is related to that.

On behalf of Derma.

Taking intramuscular.

<unk> implemented in terms of machine.

Okay great.

Johan.

You can take it from what the targets again.

After all the rectification in 2021, we expect to see a much clearer regulatory framework, what athene had industry in 2022, which should allow industry participants to be more focused on long term business development with.

We will 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 product and install it for a different financial institution.

While we will collaborate with stronger financial institution to optimize the mix and the quality of our partnership network and ultimately to boost our survey the sustainability.

Or just the business, we will continue to upgrade our technology and model to better identify high quality borrowers and optimize our user base matrix.

We will roll out more products catering to this high quality customer.

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

We have a very positive churn in our business. Following the Howard we did last year that we are 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. These data crucial strategy resource that we definitely well capitalized.

288, Gigawatts since the question put to work.

Thank you Jamie.

Sure.

Great.

When we don't read too much where you get paid acquisition.

Jet Com, which is ubiquitous.

Amit Unfortunately.

From productivity that will continue.

Continue to do that again.

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.

Z prosthetic economy growth.

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

Now ill turn to our CFO 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 macro challenges, we delivered solid Q4 results in both operational and financial fronts.

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

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

Asset quality, which fluctuate in Q4, mainly as a result of it.

But 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 $2 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 171 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 templates 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%.

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.

So the income lines with the regulatory requirements and ultimately hit our target rate target by mid year deadline.

During the quarter our brand.

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

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 compared.

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 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 acquisition.

<unk>.

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 four <unk>.

Provisions from contingent liability all previous period loans was rhythm back as the 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 current tax planning schedule.

With strong operating results and stable contribution from <unk> 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 added to capitalize contribution resumed growth in the future.

We generated 2 billion cash from operation and cure compared to $1 8 billion in Q3, 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 result 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 which are strategic institutional partners.

As we will 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 youll 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.

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 macro uncertainties.

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

RMB 450 billion.

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

Vince transitional year adds 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 ask your question in Chinese first followed by English translation.

As you know 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 ask any questions.

Yeah.

Our first question is from.

From CLS.

Please go ahead.

Hi, guys, Hey, when is a good way to go to you on that when you're going through that the yacht onshore.

Jordan <unk> on for John .

Sure you are you guys I wanted to touch points out.

Hang on just one more thing I'm doing Dr Johnson and childrens Gymboree.

And Jacob.

I assumed buyback one thing about the RSV each other to go yes.

Yes, you did with <unk>.

We are hopeful that we can you guys talk about everybody being a chart.

Can we go quicker.

Doug do you want to talk to one year without an excuse I wanted to go to a what I call <unk> now called <unk>.

And we'll go quick.

It seemed that beyond the local portfolio.

Sure.

Okay that will do the translation with first one I'd like to know the progress of the pricing adjustment or.

What's the proportion of loans in <unk> 21 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 customer is sort of strong I was wondering how are we shifting our customer acquisition strategy.

Sure. Thanks.

Thanks.

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

So in the fourth quarter over 70% our.

Customers are priced at 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 at below 20.

And we are pretty confident that we will.

Yet.

The targeted rate cut goal.

The midyear deadline.

Yeah.

Thank you.

Okay.

Cookie segment, both meet the Coca Cola Championship.

Emily.

New Hampshire.

Thank you.

Yeah.

Continue to increasingly obviously recruiting talent for the future.

Tim.

And then we'll use it to the shareholders.

Yes.

Yeah, let's do that for you.

That's interesting.

I think it's something that we watch because I think that youre not going to continue that.

You might want to consider.

<unk> in the year.

The balance sheet.

Okay. Thank you guys.

A significant change.

Switching to the assembly and integration program.

Now you can get into this digital digitally.

Would you be a little bit.

Jordan Sandler <unk> good.

Thank you Hugo on the women.

Jamie.

Regionally.

Typically what we tend to do.

The huge debt.

We can get that yourself and these companies eager to get <unk> securities due to project delays with you John .

Yes, let me translate for our deal as for your question the customer acquisition strategy to access higher quality econo groups, we will.

Leverages three approach number one surgery increased more invest more in R&D to improve our CAD and <unk>.

AI models to better identify the customer risk profiles.

<unk>.

We will map in carefully they can approach, we adjust our API PRASM acquisition approach with our cash on hand.

Thanks Debbie.

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

Yeah.

Okay, Okay that answers, we'll consider nagle with Oxford, Ohio example.

Thank you.

Yes.

Our next question is.

<unk> shoot from Morgan Stanley .

I wasn't Morgan Stanley . Thank you guys.

Sudan.

Well I'll just talk to my guys are women.

So.

Got it.

Okay.

Wanted to avs the BD Sheldon.

Thank you the shallow also yes, you bet bellway.

Conduct and capital light.

Our capital heavy digital BD Hollywood.

No John .

I do understand that.

And then in the Cohen <unk> CFO Dave.

Jacob credit lines.

Yes.

Oh I apologize.

<unk> IGF one in Tulsa, Oklahoma.

Got it.

Hello, Daniel.

Jacob It seems would have more share.

Okay that sounds good.

Basically my question is.

On the funding front.

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

Couple of injection that is also completed.

I just want to want 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.

Sure.

In two weeks.

You're kind of in the contingent women.

Hi, Jordan.

And how many go quick question a question for you Tom Gibson.

Yes.

So could you maybe think of Shanghai.

Can you hand integral to the degree.

Switching now so as you choose.

Usually people go green tissue.

Could you Netherlands engine Thats around what you guys are good.

You're getting adequate time.

<unk>.

Good choices fit amputation in adjuvant instead of <unk>.

Dino creates that degree.

Could you just housekeeping.

Coffee.

To begin with the income.

Uh huh.

Just as a kind of credit lines.

Two the time to get their seamless Jewish woman.

Strategically you always you can believe it tends to work.

So you want <unk>.

Yes.

And time in the future, we're continuing to prudently.

Thank you.

He has this yo sandy somebody had to get to the Eagle Ford.

Sure you could find yourself.

Bureau, Jordan.

<unk> good to hear from whom meaningful conducting hearing really good income coming in for those two.

In addition to the backlog.

Susan can you and we can do this year.

Between returns works.

Yes.

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

Yes to answer your question <unk>.

Correct.

Third way.

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, Hey, Ken at Florida 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.

Longer term perspective, the capital contribution as I mentioned in the prepared remarks.

We'll be moving.

When we hire from current level.

If you recall in the past we were.

At some point targeting like two.

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 the one we downward adjustment.

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

Alright, thanks, guys.

Thanks Sheila.

Yes, yes.

Our next question is Ethan Wang CIC.

Hey, good afternoon.

<unk>.

Quite go up as a restart here wanted to Vishal Congrats Dr. Brian <unk> Zucker.

So I'm just wondering now that youre towards hardware, whether it's senior lenders reminder.

Patients with Miranda Alright, a hole.

<unk>.

Currently with answers.

Sure Jeff.

Sounds good.

Earned through the quarters here.

Sure I am working on prior Dardar syndrome here or the late majority if you're underwriting discipline in terms of all of that.

We've done one in new Jersey.

Chandler, Arizona.

So.

Before I comment on exactly what drove down that way or weaker constrict, where each year.

Sure.

<unk> put out yesterday, we are regulatory Walmart for some items that are now going through kind of a door.

So just a britney wage or John or common Xiang surely that's good it will shorten the cycle from a timing to it or in terms of Taiwan.

Okay. Two questions. Firstly, a quick follow up just wanted to raise the funding part for the fourth quarter.

Amazon to view our funding costs.

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

Financial institutions or quality financial institutions.

For the regional bank to collaborate I'm, just wondering whether there are heightened concern on this front and whether that's going to empower business and for the guarantee of comprehensive that mean, they will set out the areas.

Institutions across the country.

Cooperate with them to.

To lend nationwide. Thank you.

Okay. Thank you Ethan.

I'll take the first part again and then as you know we're taking care of the second one so for the funding cost for the Q4 it 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.

Normally that chubb 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 of around 7% and up.

Are we done with this transition we.

We will probably start to see a gradual although modest.

The decline in funding cost.

Alright.

Hi, Jeff.

Okay.

Glen.

John as you know they do seem to have internet banking in particular.

And here lately.

Good morning.

Greeting, particularly with yen to try this again.

Jeff just dollar popular hernia, yet so we'll go to amigo could achieve.

And so my <unk> year highway build towards the issue right now.

So when we can that integrates with your kind of different channel.

For the digital commentary in total at Adi.

I was just hoping to get.

<unk>, Hello, Jonathan that women and data, which obviously we will see.

Jim will give a new wholly owned <unk> <unk> London.

But you generally answered on <unk>.

When you're doing a young entrepreneurs suite.

Spacing behind it.

Mike you've been trying to model.

Gotcha.

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

Loan business.

<unk> commercial bank.

It's up quite early regulation added to the regulator. It 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 matrix of our financial institution partners network most of them are national wide operation. Therefore.

Very limited impact from this regulation.

So kind of excuse me I'm sorry.

When we got hammered.

Programs reported were directly farms and centered around them.

Okay, I'm going to answer.

Hi.

Generally you know number one.

Hello Yoga.

Okay toward they don't going live in Lesotho packages retention.

Hopefully as you go international.

We couldn't be happier.

Dorothy.

So you have to get to a distributor.

Yes, the second part of your question Doug.

The original restriction 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.

What do you want to I'll share one woman ouchie that zander.

Woman.

Tyler I think why <unk> seen the APB.

Further penetrated.

I'll, let newly named Awesome. When you saw a woman who realizes this RMB.

Tom and Jeff BOVA.

Paul will then caused alongside <unk>.

Josh.

The industry categories that typically.

Understand.

I mean, why are you moving pieces.

Since you're trading this one woman Youll Mayo comes out.

That's helpful Ajay common associated with high quality.

Well, yes.

Thanks management for taking my questions I have two my first question is about.

Our strategies are coming.

Instrument comments about how we should think about the contribution over the future as well.

All in cost and alongside going forward.

Together.

Industry categories that we are working with and my second question is more about the macro headwinds. We are facing these days an outbreak of Covid are you seeing any changes in terms of the consumer behavior.

<unk> of the use of the policies.

Sure.

Sure.

Okay.

Good wins here.

So <unk> gone down.

Can you just mentioned there.

Thompson.

Tony.

<unk> decided to get out, but I don't know how women.

Dave.

<unk> in total.

Sure one igo.

Sandy Thank you get integrated.

So at the time that they don't.

And suddenly they don't even create total SME on that type of thing can you in calendar <unk>.

But on liquidity.

Thanks.

Now turning to <unk>.

If you recall to juggle identifiable mainly.

Good shipyards at good times in Nantucket.

Higher towards the pellets you don't go too quickly can be addressed as a color gentlemen, and good <unk> youre going to attack them in <unk>.

Okay.

Good to hear your liquidity.

And for me this is really kind of coming of your question.

And with the.

Yeah.

With your question.

Sure.

Okay.

Jim.

So year on year.

Jim did I answer isn't your issue no time, we litigate.

And your question there when things get so you'll mill camera, even before you get for instance, with the BMR.

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

Or.

Is about 55 zero, Okay, RMB four seven tax loss.

Which is larger ticket size, usually will provide over 250 K RMB for the tax law, we actually made a marketing stands at around 2%.

Secondly for your question about the use of low as most of our consumers were in inventory that are lapping packet round, the calling and the macro economy. We are seeing the yields of now is consistent with previous.

Okay.

Yes.

Hey, guys.

When should it take a year.

John could you.

Is that kind of a debate Josephine.

Yes.

And gentlemen.

Sure sure.

You don't want me go financially.

Sure.

<unk>.

Question on again, we mentioned that it has all year.

Yeah. Good morning behind your departure in general again, when we know we have had a bigger.

It's a good sandy which in India.

Thank you can we how is here.

<unk>.

Titanium that kind of our mid year <unk> shoot off with achieved so what degree SME.

It is generally unchanged.

We continue.

When does this mean.

Shoot.

You can see on that issue.

These women and push on <unk>.

Joining me here, which I know you tangela.

Do you anticipate that you can push it.

Okay, good opportunity in contact with the video with Goldman <unk>.

And Joe for critical initiatives for digital for the motion.

Fujioka SME issue.

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

There's a tremendous amount of <unk>.

<unk> and the support in the past from.

Governments, we take a very prudent strategy.

We are focused on those 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.

Financial institutions in this SME business.

I appreciate it.

C J.

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

I'll 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.

Thank.

Thank you.

Yes.

Okay.

This concludes our conference call you may disconnect Goodbye.