Q1 2022 CNFinance Holdings Ltd Earnings Call

Hello, and welcome to the Cm Finance announces first quarter 2022, unaudited financial results Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.

After todays presentation, there will be an opportunity to ask questions.

Ask a question you May press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded.

Now I'd like to turn the conference over to MS. Jane Jim Financial manager of the capital market Department. Please go ahead.

Good morning, and good evening and welcome to <unk> first quarter of 2022 financial results conference call in today's call I'll Watch President and director Mr. Tien Tsin, We will walk you through the operating results followed by the financial results from our acting CFO Ms. Lee.

After that we will have a Q&A section our CEO Mr. Diabetes, we will also be available during the Q&A.

Before we start.

I'd like to remind you that this conference call contains forward looking statements within the meaning of section 21 off the Securities Exchange Act of minus 34, as amended and as defined in the U S. Private Securities Litigation Reform Act of 1995.

These forward looking statements can be identified by terminology such as wheel is backed anticipates future intends plans beliefs estimates targets going forward outlook and similar statements.

Such statements are based upon management's current expectations and current market and operating conditions.

Relate to events that involve known or unknown risks uncertainties and other factors.

All of which are difficult to predict and many of which are beyond the company's control, which.

Which may cause the company's actual results performance or achievements to differ materially from those in the forward looking statements.

Further information regarding this and other risks uncertainties or factors is included in the company's filings with the U S Securities and Exchange Commission. The company does not undertake any obligation to update any forward looking statements as a result of new information future events and otherwise is that.

As required under law.

Now please welcome Mr. Tien tsin.

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Thank you everyone for joining us in this conference call on today's call, we will introduce the company's financial and operational results in the first quarter of 2022, followed by a Q&A session.

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During the first quarter of 2022 we were able to maintain stable business operations. Despite his triangle challenges, we fulfill attach a loss of $2 3 billion and record the revenue and net income of approximately four $420 million and 43 million respectively.

Both of the daily average outstanding loan principal and revenue under the collaboration model had the year on year increase of over 20% and we're at 10.040 billion respectively.

Now I will share with you the challenges we faced and the measures we took in the quarter together with our future plans.

Good morning, Arnie by almost.

Yeah, well show homegrown wanted to ensure many other telecom.

So, but in general with whom watch any sort of change your farzana.

Ponca GDP, Johnny or Union distributable, one pizza and jump in lithium.

If you don't.

But if you do a bulk of Guangzhou, Shenzhen don't want and Cobra to another trencher switching each in foundry.

In terms of a woman's high school that Joe you can go to food.

Most of the year with syndrome useful farquhar.

Unfortunately, what's the G&A that you could easily get right sure I mean, it's we all sorts of all phone shimbun sort of leave you a little bit yards around the in shop also that for each one but you also assumption.

Try it might you are.

Our business was impacted by the economy downturn.

Both of China's National economy has slowed down with GDP growing one 3% as compared to Q4 tiny tiny one we experienced religion lockdowns caused by local outbreak of COVID-19 in cities within China, including major cities like Shanghai, Shenzhen and dog one well.

Over our funding cost remained high as our major founding partners. The trust companies continue to be put under tightened regulations.

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So we also wanted your chartered in Guangzhou in response to those challenges the company focus on stabilizing business operations and managing risks we did the following works.

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First we continue to per watt msas with inclusive financial services to help MFC owners, whose business worse interrupted I said, if you look back lever on theory roll or the interest rates of our long products.

We used that to more ethnic applications from south partners feel repurchase delinquency loans.

By installments.

Laughs, south probably less room to give payment extensions to MSE owners.

Our schools with Toyota loans, which would also I'm not sure if you've already.

Being crazy in Taiwan, Huntington Bouillon Paul.

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Go see your son, Sean Hogan, who called remote hygiene of some phone calls all Moshe.

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And the Jin Jiang from.

But you shouldn't you shouldn't.

Second.

And at our funding sources and continue to promote oversupplied products, which allowed us to reduce funding costs and cover more customers.

During this quarter, we started to cooperate with terminal truck and facilitate a loss of 76 million.

He also recommended drop perspective borrowers to commercial banks to sell.

Does it have had your lungs.

40 million.

Besides we are close to star trial run after three party cooperation with Shaanxi International Trust M. P. I C C.

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So sure there's really no illusions insurance co.

Also the showroom, yeah, you're all sorts of things here.

But we increased our support to south parlors in order to help staff pillars to grow that business and the current condition, we allow more south pillar is to repurchase delinquent loans by installments.

Tony we would charge a certain fee based on the terms of the installments.

Allowing installment payments, we help the sales plan there is to improve their liquidity.

And also increase the revenue of our all good.

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What gives them the ongoing fluctuation in China's property markets. The company maintained a rather low LTV ratio.

The weighted average LTV for loans facilitated in Q1 was 56%.

Besides we took into account the operation.

So a SaaS partners and took a conservative approach in evaluating the potential credit losses of loss to keep the allowance ratio at a safe level considering way. So its usually you don't see a need whereby Huntington 20 junk sushi turns up.

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Going forward, we are likely to be continuously challenge by economy fluctuations at the same time were also presented with huge opportunities as the government is now encouraging financial institutions to offer more support to MSE owners to see such opportunities.

We're focused on diversifying our product profile, helping so Panthers is then the business scale and reducing our funding costs.

Work plans are.

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One quick one.

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First let me, let's drive to finish upgrading and operation oriented and S. L. I model under which we will act as service provider and manager of loans.

Our plan is to introduce at least south partners to sign contract directly with trust companies.

We're bringing third parties subscribers to support in the units of the new loans facilitated.

As of today, several self Sunrise have already signed contracts with trust companies and a number of our trust company partners have injured do have conducted due diligence on third party investor introduced by Us.

Based on our estimation such cooperation arrangement will be ready to facilitate long before the end of Q2.

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Jim.

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Jim could you wish Sonya you want to opine, what's your one year.

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Oh, so that that one five.

Second we will promote diversified products is banned customer coverage the bank lending model with every one of our priorities as this model allowed us to reach customers with high credit ratings.

Actually the company is introducing in helping commercial banks, because it had a loss of $50 million each month.

We are now seeking to establish collaborations with more commercial banks and the lending models.

A more important contributor to our revenue stream.

Besides we also once you start facilitating lungs, two under the aforementioned corporation with P. I C C before the second quarter and.

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But we will keep supporting our SaaS pillars, we want to offer more flexible fee rate based on the terms and tender on the installment to steward, Seth pillar with different operational and financial capabilities and.

At the same time, we want to GAAP Trust company involved.

If a salesperson or clarify the Thunder of the Trust company. The Trust company could choose to pay us the full amount of repurchase on behalf of the south polar and received the installment payment from such a south Pollard.

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But Sean will you Richie Young Virginia Chevron into Peru.

So you'll keep investing in technology and use it to empower the business growth.

Well I did team is developing a mobile app that can attack rate or the information related to loan application.

By developing this app, we want to make it possible for our service team to obtain the status of ball or channel information loan products and found in in.

In real time.

And therefore to timely indirect with soft colors and now application with dealers. We hope this app could assist our service team with initial review and Tommy transfer of loan applications.

The App is expected to be put into use in the second half of 'twenty two.

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John do you consider longer term, but.

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Yes.

And of course in order to offer a long product with lower interest rates, we would keep the locking with trust companies on reducing our funding costs.

Sensors has been reached between us and several trust company partners on that.

Once the deal is finished we were soon apply the fee cuts off loans, we facilitate.

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The first quarter I was trying to tie it to where it's not all smooth.

And leave it with jewelry presented with both opportunities and challenges in the near future.

We have gained valuable experience from frustration in the past and have continuously refine our management and business strategy. We have already stayed true to our commission off providing accessible affordable and convenient financial services to MSE owners.

With more supportive micro process, taking effect in fact.

We are confident that there will be another source of capital demand from and that MSE owners. We believe we'll be well prepared to see such opportunity and expands out our business increase our revenue and provide higher returns to our shareholders.

Sandra what's your Amsterdam jewelry, a woman that had yourself or did you need to ship the old hardware and India saw going through the on air and engages with its high what's wrong.

With that I'd like to hand handled the hand, the call over to MS. Jamie the acting CFO of the company, who will walk you through the first quarter 2022 financials.

Thank you Mr. Chen.

Thank you everyone for joining us today I remember you for I'll find it so financials for the first quarter of 2022.

Unless otherwise stated or percentage changes I'm going to get will be all year over year basis.

Also unless otherwise a state or nimbus I'm going to get will be in RMB.

The first quarter of 2022 total interest and fees income was 417 million as compared to RMB 425 million in the same period 2021.

Interest and financial service fees are low.

By one point that 1% to 415 million small 400 tried to mean that.

Its primary due to a lower average interest rate of outstanding loans.

N D.

The decrease of average daily outstanding loan principal in the first quarter 'twenty to 'twenty two.

As compared to the same theory of last year.

The decrease in average daily outstanding loan principal was due to the lower loan facilitation, while I'm in the first quarter, all plenty plenty to resolve under lockdown due to local outbreaks of COVID-19 in multiple cities within China.

Interest and fees expenses increased by 28% to 201 million compared to 156 Amelia.

Partly due to the increase in the outstanding principal off all the borrowings as well as to funding cost from chest company.

Collaboration cost for sales partners.

Representing the south incentive paid to Satish partner.

<unk> by 19% to 18 million.

Compared to 19 8 million in last year.

And it's.

Finally attribute to the lower freight rate the company paid through the first part La West Alpha lower average effective interest rate of outstanding loans.

Well wishes for Cardinal Law office was.

Dirty streaming there.

As compared to a reversal of 17 million and last year the.

The increase was due to the English being the increasing economic uncertainties caused by locked us and reaction to local outbreak of COVID-19.

As well as the downward pressure faced by China re assay market during the first quarter of 2022.

2022.

Net gains on sales staff loved it.

Decrease was a medium as compared to 9 million in the same period totaled two one.

Total operating expenses decreased by 15% to 18 million.

Compared to 19 4 million in the same period of 2021.

Income tax expense was $15 million in the first quarter of 'twenty two.

Yeah.

Net income was 43 million.

Compared to 18 6 million in the same period totaled 31.

As of March 31st Tony if I need to.

The company has cash cash equivalents and restricted cash of $1 7 billion.

Compared to 2.2 Vlan S off December definitely want Tori if anything what Inc.

Including one point to me billions and one 5 billion is for.

<unk> structure funds as of March 31, 'twenty, two and December didn't want 2021.

Respectfully, which would be used to.

Brand, new lunch and activate it.

Yeah.

The delinquency ratio of loan originated by the company increased from 24%.

226% as compared to.

December 30 December 31 tornado and you want to this quarter.

And the delinquency ratio excluding loans held for sale for loans originated by the company increased six.

16% asks depends at December 31st Tony doesn't 1% to 17% as of March 31st 2032.

The NPL ratio for low to originate by Docomo increased from nine 4% as of December 31, Okay. So anyone to 10 point floor at stuff much studying what 2022.

The NPL ratio, excluding loans held for sale for loans originated by the formerly English.

Two 1% as of December 31, 2021 to one eight as of March 31, 2022.

With that we would like to open the Q&A.

Right.

Speaking.

We will now begin the question and answer session.

Yeah.

To ask a question.

May Press Star then one on.

Your telephone keypad.

If you were using.

Your phone please pick up your handset before pressing the keys.

If at any time your question has been addressed.

And you would like to withdraw your question. Please.

Please press Star then two.

At this time, we will pause momentarily.

It was simple our roster.

The first question.

Comes from Wil.

Greg the Jetski with Greenwich Global.

Please go ahead.

Hi, everyone I have a few questions can you.

Disclose what the average interest rate Youre lending at right now is and in the prepared remarks. It was mentioned.

Rates paid to the sales partner was lower is that a change in what they're getting or just lower because there's less interest income in the quarter.

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<unk> you also Jacques Joanne Joshi anyway.

So I don't know hundreds of human international rule banks all of them.

Okay.

Uh huh.

And no gender pay gap.

Julie do you mean.

But.

Hello, John .

Hello, Joe.

Okay.

So for your first question the weighted average interest rate of our loans right. Now is 60 them is around 16, 4%.

Uh huh.

The internet.

Yeah.

Oh, Jamie.

Hum.

So we're doing that.

Yes, okay.

Well yeah.

Judy do you authenticate a child there got it.

Yeah.

And.

Uh huh lowered interest rate, if not all of that because of our voluntarily adjustment, but also based on the.

Macro economy.

Condition, and the regulation and policies of the government.

So yes.

Okay.

Can you handicap.

So didn't have that.

Nice job today.

Jamba juice.

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The other man.

And then Felipe.

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Charles It.

Well, there's all these on the year.

Sure.

Oh, absolutely, yes seasonal.

Please hold okay, we modified that unbelievable that she wants.

Sure couple of things.

Okay.

So this is a this is a trend for overall a rate cut no matter no matter is for US are the sales partners and where did adjusted our policy of collaboration cost to sales partners.

And they do want to keep their keep their margin, but that that has to be based on the.

Based on the.

Girl with all of our business.

And the expansion of our scale.

Yeah.

Okay.

So.

Oh, sorry.

No go ahead.

Okay, Yeah. So.

I guess, if you could just talk kind of more generally about the impact of Covid Lockdowns have had on the first quarter and having now.

In the past you've mentioned that you've had more demand than you had capital available to lend out, but you've also mentioned that Shanghai is a big market for you guys. So I was curious if you can talk about how much of an impact that's had on what you've just reported today and then what's going on right now.

What's actually name Tullow generally.

Took a phone call at times, especially on digital or other digital Tricia.

<unk> you know whether you can share.

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She would have so much on doors, so much of a hole.

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It'll be up I E.

Jonathan.

Launching for fall Hi, how are you.

Yeah, Tony what I.

Do you have a fun time, nobody Tonight that had a huge role I am focused on Neal it's useful.

Okay.

Hmm.

Ooh.

Okay.

Uh huh.

The hurdles are for that.

So yes like I said, there was a relatively large impact on the demand for our capital because of the lockdown policies in for in the first quarter and are as we have introduced there wasn't the ollie's Shanghai, but all of us.

So Shenzhen and don't allow us that were locked down during the first quarter and I Wouldnt say there wasn't there wasn't demand, but it is just you cannot satisfy the satisfy those demand due to the lockdown policies and surely it will last day in the second quarter or two.

The impact.

Just to touch on.

Fulton.

Students for the user.

Maybe sticking with that.

Uh Huh wood Mackenzie the phone company.

Joe.

Neil Jim Miele, our balance sheet, how much of a savings of Bep's Ciena punchy shutdown.

<unk>.

Is it more G&A kind of Utah has achieved.

So you can see the impact of based on our financial results, especially on the loan facilitation, which had a year on year decrease.

I wouldn't really say I wouldn't really say that the impact was that large I think it still could be over a welcomed.

Yeah.

Yeah.

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Even though women 70 pounds.

A trend somewhat hello, well got bombed it up.

Jeremy So you will not be at home work.

All of that.

Equal to quote Matt.

Matt Please home more.

She had a T shirt, Hong Kong kind of in shock.

Here are the well known.

Well I mean, it's Jean <unk>, Hello, hopefully actually the childhood.

Volatile Oh man you don't need it.

Thank you Jackie.

So.

As for US first of all we have a network that is scattered across China.

So whether they will take years to really take advantage of this network and push the AR.

Business growth in all the areas that is not blocked out also the second thing is we will push to reduce our funding cost as well as our refine our profit split with the sales partners to maintain a reasonable margin.

Yeah.

Okay.

Sure.

Okay.

And thank you okay. Thank you Ann.

Two more questions.

You've talked about trying to get to about 30% of your lending from commercial from the commercial model by the end of the year do you think that's still achievable.

Well hold off I want to see you go sure and Antonio trouble Oh, that's been into more of a is it a whole long yeah, that's what I'm well, here's how I'll definitely be alert that I'll talk to you a little bit I'm, just I'm sure Nissan's I'd, rather drill them mobile halfway you're talking about.

Okay.

Well the thing is actually shrinking.

You mean turnkey huh.

For the children.

Okay.

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<unk> seen on the slide that the needle.

Got it.

Well many of that border well.

And that Josh.

John This is Jim Heaney.

Well Matt.

<unk> gotten good yeah.

So that's all kind of got that piece.

With that I'll ask about San Francisco still hasn't probably won't move up move down there.

I told you that.

We are still we still remain positive about the development of the commercial bank model because the governments policy.

Oh, just the banks to give more support to the M. S. Es has never been so strong and is getting even stronger.

And our our goal is it's one of our priorities to start collaboration with more commercial banks and to help them to facilitate along as to MSE owners. So we remain positive of our goal to make the.

Under the commercial land model, 20% to 30% of the total loan the total loan book at the end of the year.

Sure Yeah.

Okay.

Kind of touched on in that answer but the.

The push from the government towards the Smes have you seen any.

Impact on.

See more demand from Smbs or anything government related that's helping drive demand to you for <unk>.

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I was gonna daughter cells, which are double that on the English jinzhou city interested or not.

Uh huh.

So yeah, that's the only out there.

Thank you Hal.

Okay.

Hi, guys.

Taking all of that I don't play.

Thank you.

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Yeah, you bet.

Cause I E that there isn't a I don't know Huntington's holding Bob and Jack.

The geological now.

Yes.

Oh you bet.

Okay.

You know what goes on there.

Hey, good morning.

There's also a fossil.

Yeah.

Okay Jim.

Oh, Hey.

Yeah no.

Okay.

Okay.

Okay.

Okay. So the government support tours Msas are mainly reflected from two aspects.

So the first one is the support.

Supporting policy is about about refinance.

One of the.

So there was a meeting from the state Council, saying that they will have the support to refinance doubled and also today the People's Bank of China also released a document that's saying the commercial banks.

Sure.

Gave financial support to them as the owners.

And.

Selected in the tolerance in terms of myself.

The.

Well, thank you Keith.

Okay, Yeah. Thank you hope you're doing well.

People have a CFO you got here.

Thank you Louis.

Okay. Thank you Ken sure, Okay, what about that.

Oh sure Yeah right.

Right salvage Seattle.

Questions for the tender.

Okay.

So there was a there was a a policy made by the People's Bank of China, that's saying.

Michele gave more freedom and more room for commercial banks to support the financing needs of the M. S East and also so we estimate that.

And for sure there will be another surge of demand from the MSE owners for our capital.

Okay.

Sure Yeah.

Alright, Thank you guys.

Yeah.

This concludes our question and answer session I would like to turn the conference back over to MS. Jane Jin for any closing remarks.

That's where we are today. Thank you for joining us if you have any further questions. Please feel.

We're free to contact our IR also face at our Ikea, Canada, Yeah. Thank you.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.

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