Q2 2022 Lufax Holding Ltd Earnings Call
It had no impact or small piece ornella's, creating challenges for our operations.
With April and May being the most adversely impacted months.
Our CTO MCT monthly flow rate, which is leading risk indicator peaked in April at point, a 3% and decreased two points 61% in June .
We believe in terms of domestic credit environment.
<unk> is now behind us.
Nonetheless, domestic and international macro uncertainties, including COVID-19, resurgence inflation and recession fears continue to persist and will likely place near term pressure on our business operations.
And growth prospects.
In the face of this difficult macro operating environment, we remain prudent in our operations.
In our private cloud archiving quality over volume growth for the balance of this year.
While we remain cautious key initiatives launched last year are starting to bear fruit for the medium term.
We believe the sourcing contribution from Peanuts has bottomed out and is now stabilized contributing about 22% of our New York State in the second quarter.
Our reduced loan growth. This year is largely the result of our proactive focus on quality, our selective tightening of credit standards by customer segment and geography has resulted in a meaningful narrowed the scope of new business, the sourcing and the first half.
However, as a result of shelf, we're targeting of new new growth.
By our direct sales team in better performing regions, we have been able to offset some of the sourcing complexion gross by.
These tighter credit standards.
As of June <unk>.
<unk> of high quality talents in our direct sales force increased as we continue to execute our channel transformation.
Our Barrick days made up 53, 6% of new launch phase in the second quarter.
<unk>, 49% a year ago.
S and length of Covid impact recede in negatively impacted regions will be able to quickly adjust our credit policy and fully deploy our strengthened sales force.
Accelerated business growth.
While the specific timing flex elevation requires more observation we are confidence that when we of course we.
We are very well positioned.
Quickly.
In fact in the second quarter.
We recently achieved a 70% increase in number of loan applications probiotic sales year on year.
Market demands and policy support is clearly evident and it is not a metro picking the right timing to expand our small customer sources.
Finally, I would like to share some updates on our business strategies.
In the long term, we'll continue to focus on serving the financial needs of small business owners, who represent an important and growing share of China's middle class with formation.
And enhance our capabilities and the smoothness.
<unk> segment in the.
The second quarter, our loans for small business owners made up 81% utilization versus 77, 6% a year ago.
Going forward we.
Expand our offerings to meet the pools around the use of <unk>, such as providing industry insight online tools and other value added services to help <unk>.
The meat and.
Functions.
These facilities foundations, we need to offer a comprehensive financial services, including lending with mint.
Insurance products through expanded partnerships.
This strategic direction 60 content, our customer life cycle.
Data driven insights strengthening customer loyalty and optimize our customer acquisition and management cost.
For our wealth management business, we will continue to focus on serving customers in the online fund distribution space.
Having them to achieve their financial planning objectives through improved content and tools, both pre and post investment.
The online technology developed historically in the West management business with dynamic customer management will be further leveraging and aligned with the future services for small business owners.
<unk> has a long and proven history of making adjustments to anticipate and respond to the changing operating environment.
In response to today's environment, we are further integrating our meat in several fields and technology teams and we are aligning our structure.
To achieve greater nimbleness and optimize resource allocation.
Recent adjustments create more share the resources to better position our company for future growth opportunities.
The scope of this adjustment will not trigger material changes in our revenue, while our cost structure in near term.
We are confident in the steps, we have taken and will continue to support the growth and development of small and micro businesses and the real economy at large.
We also plan to adjust our dividend distribution to twice a year from one CEO to deliver value to our shareholders.
With that ill turn the call over to Craig <unk>, our business updates in detail.
Thank you.
Sure.
I will go through our second quarter results and provide more details on our operations.
Please note that all numbers are in renminbi terms and all comparisons are on a year over year basis, unless otherwise stated.
The second quarter was both a difficult and steady in time for the economy and our business difficult for our business in terms of being to be very selective in new growth, while facing increased credit costs, resulting mostly from COVID-19.
Steadying, our early stage risk indicators peaked in April and are now showing signs of recovery, while we did pursue ongoing improvements in our operations.
Through this period, we've remained committed to providing inclusive funding solutions to small business owners with 86, 1% of new lows sales distributed to small business owners up from 77, 6% in the same period last year. However.
However, our committed stance on prioritizing quality over volume for the last several quarters resulted in the second quarter total income growth of three 1% year on year.
We have taken a firm stance on cost control with total second quarter expenses, excluding credit and impairment losses, and other financial costs of losses declining 11% year on year.
Nonetheless, the increase in credit losses, where we directly bear risk through our guarantee company led to a profit decrease of 37, 9% in the second quarter versus a year ago.
Our net profit in the first half decreased by 15, 2% versus a year ago. While these results are clearly below the expectations. We set for ourselves at the beginning of the year. We believe our strategy provides protection on the downside it will allow us to adjust quickly as the macro environment gradually recovers.
Now, let's take a closer look at several of the core drivers for our business model and operating performance.
As <unk> just mentioned first we believe that the recent policy and regulatory announcements are positive for our business model medium term.
Supporting small businesses is only becoming more important in China's current economic priorities.
Regulatory there was increased recognition of the role the credit enhancement can play in helping funding availability for small business owners in the second quarter, excluding our consumer finance subsidiary credit insurance provided by our seven insurance partners the customers covered 76% of new loads the role of our Garen.
T company and its role in data transmission to our funding partners has recently been clarified we have received feedback that we will not need to share data with funding partners through a third party credit agency under the current bank guarantee model.
In the second quarter, the average APR loans facilitated portfolio wide reached 21, 4% down from 21, 8% in the previous quarter. We will continue to leverage our unique business model and take guidance from central policy initiatives to continue to enhance our market positioning.
Second our channel transformation continues to push ahead.
New business sourced from paying on channels in the second quarter dropped to 22% from 31% a year ago.
Importantly, new customer sourced in the first half of this year are a better quality that those source in the second half of last year in regions, where we have been successful in hiring higher quality direct sales the growth and productivity improvements have also been stronger.
When combining our channel adjustments with selective regional growth differentiated by superior credit performance, we are managing to optimize the overall quality of our new business and otherwise difficult market conditions.
Third we are seeing improved funding cost across our partner network in the second quarter overall banking institutional funding costs have decreased by about 10 basis points. This.
This improvement is driven both by the benign interest rate environment and strong demand by funding partners.
And amongst our funding partners reflects both a desire for our quality assets and their need to increase exposure to the small business owner segment. Our number of funding partners in the second quarter reached 78 about a 10% increase over the first quarter.
Fourth our balance sheet remains robust as of the end of the second quarter. Our net assets stood at <unk> 97 billion with 43 billion cash on hand, and the leverage ratio for our Guaranty company stood at roughly two times demonstrating our resilience in the face of risks fluctuations, we believe that our strong capital position will enable faster resumption of growth.
With the macro environment stabilizes.
At this point in the cycle, our unit economics are holding up reasonably well.
Despite the decrease in effective interest rate APR, we've observed relative resilience in terms of the take rate, reflecting ongoing improvements made in funding costs credit insurance costs and early repayment impact over the last 12 months in terms of net margins sales and operating expenses in the second quarter have improved somewhat versus it.
Year ago to offset partially the increased credit costs, we bear through our guarantee company.
Let me dive further into the change in credit cost as this has had the largest impact on our overall profitability.
Total credit costs in the second quarter were $3 5 billion in.
An increase of 152% versus a year ago the.
The increase was mainly due to increased risk sharing through the guarantee company and the deterioration of underlying.
Driven largely by the Covid resurgence as a reference excluding the consumer finance subsidiaries. The self guarantee portion of new loan sales increased from 16% in the second quarter of 2021% to 22% in the second quarter of 2022.
If we further look into the early risk indicators in December 2021, the <unk> flow rate was five 3%.
In April following the Covid resurgence in Shanghai and other regions of the portfolio's key to entry flow rate peaked at <unk> eight 3%.
In June 2022 defeated and three indicator stood at six 1%.
In the 2020 Covid way the CJ <unk> flow rate peaked at nine 8% and then returned to pre COVID-19 levels within a three month period.
Given the weaker macroeconomic environment today versus 'twenty.
'twenty, we anticipate that the return to normalized key to entry flow through rates will require a more extended period.
This reality combined with the uncertainty of potential for further Covid outbreak is the foundation for maintaining a prudent stance.
In the second half of this year, we do expect our lending facilitation economics take rates to be negatively impacted by increased credit insurance costs.
New business as our credit insurance partners price up in response to Covid resurgence in the first half.
We are reviewing possible pricing adjustments to reflect the change in credit insurance costs. However, we do not expect absolute credit cost to increase substantially in the second half as we believe the worst is already behind us based on the early risk indicators, but a return to our historical unit economic levels, both top and bottom line will serve.
We have to wait until 2023 with a host of improvement in the overall macroeconomic conditions.
We believe we are planting the right seeds for the medium term and are taking a prudent approach, but continue to build on strong underlying fundamentals to be able to reengage and net new business growth was the timing is right.
With this in mind that we turn to our guidance for the second half.
For the full year 2022, we expect our new loans facilitated to be in the range of $563 billion to 591 billion and our client assets in wealth management to be in the range of $390 billion to $430 billion.
We expect our total annual income to be in the range of 63 billion to 61 7 billion and our net profit to be in the range of $13 billion to $13 4 billion for the full year 2022.
This suggests flat to slightly negative revenue growth for the full year and a decline in annual profit up to 22%.
It's noncash foreign exchange losses are excluded from the calculation of net profit the projected decline in annual profits would be approximately 17%.
These forecasts reflect our current and preliminary views on the market and operational conditions, which are subject to change surprises to the upside drive for possibly more aggressive economic policy support are more likely to be visible in 2023.
Finally, we are fully aware of potential derisking risks in the U S and are ready to initiate a Hong Kong listing plan as soon as permissible and subject to relevant regulatory requirements.
As wireless mentioned earlier, starting from this year, we will be distributing our dividends twice a year to deliver greater value to our shareholders. Our board has approved a dividend distribution of 17 USD per avs for the first half of 2022.
I will now turn it over to Dave with more details on our financial performance.
Thank you Greg.
<unk> look into our second quarter results. Please note that O&M in relative terms and all comparisons are on a year over year basis, unless otherwise stated.
Our total income for the first half grew by 8%.
Sure.
In which the total income for second quarter grew by 416 million or three 1% yield.
Our total expenses for the first half grew by 24, 1%.
The increase in the total expense is primarily driven by the significant increase in credit impairment costs.
And also foreign exchange variations losses due to U S dollar appreciation.
While our operating related expenses actually decreased.
11% due to operating.
And optimizations.
That travel for the first half decreased by 15, 2%.
And the second quarter net profit decreased by.
Seven 9%.
Next let me highlight some of the key chain to see in our financials.
First of all we still achieved positive top line growth.
And that's a very difficult second quarter for China.
Total income increased by three 1% in second quarter or year over year.
Eight 4% in the first half as.
As we have advocated for building up a more sustainable business model the.
Toby income mix of retail credit facilitation business continued to evolve.
During the second during the quarter, while platform service fees decreased by 23, 1% to seven.
Seven 4 billion.
Our net interest income grew 55, 3% to $5 billion.
And our guarantee income grew by 117, 3% to $1 9 billion.
As a result.
Our retail credit reservation platform surface fees.
As a percentage of total income decreased to 45, 2% from 62%.
And as the trust lending model provide isn't currently lower funding cost in preparing the <unk> gives us model.
We continue to utilize them more funding mix.
Rest of respective accounting treatment of revenue under this multi it's recognized under the net interest income.
We find that our net interest income as a percentage of total income actually increased to 32, 6%.
From 21, 8% a year ago.
Moreover, as we continue to better utilize our guarantee companies abundant capital to spur more credit risk by ourselves instead of our P&C insurance process.
We've generated more guarantee income reaching 12, 7%.
Total op income compared with 6% a year ago.
In terms of wealth management.
Our platform transaction of service fees increased by 14, 7%.
Two $460 7 million in the second quarter from $407 million in the same period to two one.
This increase was mainly driven by the increase in fees generated from our current products and services.
Partially offset by the runoff of legacy products.
Turning to our expenses.
We are cost conscious.
Our operating expenses.
Clearly credit and asset impairment losses, and other losses actually decreased by 11%.
In the second quarter, our total expenses grew by $2 5 billion or 29% to $10 9 billion from $8 5 billion in the same people to hold to what.
Primarily driven by the increase of credit impairment causes.
Credit impairment losses actually increased by 152% to $3 5 billion in the second quarter of two to two <unk>.
From $1 4 billion in the same Google tool towards.
Total expenses, excluding credit and asset impairment losses, Finance course, and envelope is decreased by 11% to $6 3 billion in the second quarter to two two.
From seven 1% us intuit of tool to work with.
To improve our operating efficiency.
Our total sales and marketing expenses.
Which mainly include expenses for chorus, and faster acquisition costs as well as general sales and marketing expenses decreased by 19% to $3 5 billion in the second quarter.
This decrease was.
It's in line with the decrease in new loan sales.
The commission based compensation structure.
Of course, the continued optimization of productivity of our direct sales force also provide us with flexibility.
Cost structure.
Our general and administrative expenses also decreased by four 5% to $762 million in the second quarter from 98 million in the same period of 221.
Thanks to our stringent cost control measures as usual.
Our operation and service.
Ventas modestly increased by seven 1% to $1 6 billion in the second quarter from $1 5 billion a year ago.
Primarily due to the increase of cost plan management expenses, which is in line with the increase in consolidated plants.
Our credit impairment losses.
Pleased by 152% to $3 5 billion in the second quarter from $1 4 billion a year ago.
This was mainly driven by two factors first the <unk>.
Professional indemnity loss is driven by the increased risk exposure as we move towards a more bonds with chicken model.
As a reference Tony Boor risk on 21, 2% of its outstanding partners.
From 11, 3%.
Of.
June of last year to two one.
Secondly, the change in credit performance due to the impact of COVID-19 outbreak also contributed to the increase in credit.
<unk> losses.
Our assets impairment losses increase too.
For the 52 million in the second quarter from 2 million a year ago, mainly due to an impairment losses of one legacy equity investments given the show should company, which is unrelated to our core business.
Which we already plan to discontinue.
Yes.
The losses were 500.
<unk> 7 million in the second quarter compared with gains of $301 billion, a year ago, mainly due to the foreign.
Exchange losses on our U S dollar debt exposure in the second quarter of tool to tool as we witnessed a huge market volatility of U S stores and there will be.
In April .
As a consequence of a format.
Our net income decreased by 47, 9% to $2 9 billion during the second quarter from $4 7 billion in the same quarter of two to one.
Meanwhile, our basic and diluted earnings per ads during the second quarter.
Renminbi, one to seven with taller so 0.1.
<unk> nine and will it be 123 or U S dollar respectively.
On the balance sheet side, our policy remains strong.
Solid with cash and bank balance increased to $42 9 billion.
As of June end of June tool to two we had a cash balance of $42 9 billion in cash at bank as compared with.
$44 7 billion as of December two to one.
In addition, liquid assets maturing in 90 days on that amounted to $4 $42 3 billion.
As of end of June <unk>.
As of end of June to two hour guarantee companies leverage ratio.
Leverage times, it's only at two three.
III titles.
Whilst regulatory and primary allow us to leverage up to 10 times.
All of this provides strong support for the company to remain resilient in the face of economic downturn and continue beauty in our dividend payout.
That concludes.
That concludes our prepared remarks with state operator, we're now ready to take questions.
Thank you.
Ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your telephone keypad now if you change your mind. Please press star followed by two to withdraw your question when preparing to ask your questions. Please ensure your phone as a militant locally.
Our first question comes from Mei Yan from UBS. Please proceed with your question.
Thank you thanks Paul.
Kidney care first.
Sure.
My question.
Quality.
Greg mentioned that this low rate seems to have bottomed.
Bottom out.
And what's the what's the recent trend in July and Opex.
Kevin.
Annie's economy, it doesn't look like it's going to improve much in there.
Next few months are you in the near term what's your.
The expectation then.
In the second half of this year, where our asset quality.
Yes.
Okay.
It's all about asset quality.
Okay.
We said.
If you look at our two times three monthly net flow rates.
In a product.
0.83% and decreased down to six 1% in June so we strongly believe the worst is already overall.
However.
We understand Dr.
The comps naturally kind of situation environment is not as good as.
Back in 2020, so we take a prudent stance and we anticipate that the return to normalized <unk> flow rates.
Previous levers really pile more more extended time and in mice at relatively high levels throughout.
This year, so we estimate we.
Global asset quality will remain at current levels.
In the second half as it relates to our credit impairment cost.
Thank you.
Can I follow up with it.
Sure. So Chris go ahead.
Yes.
And I understand I think the.
Overall, our market share in.
On the <unk> sector.
I don't know if youre, maybe that has anything to do with the secured portfolio I understand the secured portfolio.
I'll say, 20% or less.
And that has stayed property sectors situation impacting Europe .
Asset quality.
At this point.
Actually we have we don't see much impact from the secured portfolio. It takes about.
So today it takes about.
20% of total loan balance we have how structured loans.
And then for that loan.
<unk> is not more than 70%.
So from the house.
<unk> to market debt.
In pet actually we don't have any.
The team at lab portfolio performance from secured loans.
Thank you thanks very much.
Thank you.
Question comes from Chi Tsang from Morgan Stanley . Please proceed with your question.
Alright, Thanks, Meghan So I've got two questions. The first is how.
Our new management team.
The current Covid control measures are impacting the underground operation all of our direct sale and second question talking about asset quality. Just wondering what are the active proactive measures, we're taking to defend the asset quality currently okay.
Yes regarding your first question about.
That's our ground force.
The operation.
We have a so called <unk>.
<unk> also operation process. So.
During the quarter sequential period, our customers to have more prevalence of capital loss through online online app.
So we don't see any failures.
Loan application <unk> plus users.
And even during the Covid control time.
And then we are taking up types many of corrective measures.
To cope with.
Rising concerns on that the credit environment.
No.
We tightened our underwriting policy very much <unk>.
Much starting from last year end and then continuously.
Through the first half of the shops, and then as a resorts.
Our sales volume actually did increase but if you look at it most of it to buy our life agents Jinan China.
The decrease much but if you look at our <unk>.
I want to emphasize.
It has to make.
<unk> gross and then more importantly, despite re.
<unk> tightened our automation palatin much.
Turning to our acquisition volume increased.
<unk> increased by.
Almost 20% so rich red indicate.
Market demand is still there so agonists we are ready.
We see that the overall economy is better.
Better than we believe we have a couple.
To start out Bruce again.
Thank you.
Thank you. Our next question comes from <unk> <unk> from Bank of America Securities. Please proceed with your question.
Yes sure. Thank you so just want to follow up on that.
Since the second quarter Lockdown, how do the companies see the demand from the SME segment, and let's say, if China stay with zero Colby policy in the next one to two years where that change.
Yeah.
Mid term loan growth target right previously I think the company is looking for generally double digit teens sort of the sustainable growth.
Zero Copay doesn't change would that impact your target.
Target and also is there any light sensitivity analysis you've done.
Every one percentage point changing loan origination.
That impacted the net profit growth for the following two to three year. Thank you.
Okay. Thanks.
Market demand I want to say one more time.
The overall market demand is now has gone because we all know that the overall market demand.
<unk> from <unk> segment or not.
Before this tool because.
Data once in days in the peak expansion in this time however.
Also note that our market share is nearly about 1% and then as I just mentioned.
Our acquisition volume of that channel and increased in light of increased despite really just talking about a much increased by almost 20% in the first half so.
The demand is that we don't have any concern anytime we have more comfort on the credit environment. We can we can grow.
And then can deliver higher sales volume.
And then no question about that.
The percentage of Athene.
This is quite simply put.
If you look at if you compare our annual.
Ending loan balance so loan balance at the end of December 31 area, and then compare that number with our new launches in that year.
It's very close very close and then.
That loan balance average loan balance is achieved levels, our net margin net pockets.
So 1% sales volume dropped it means.
Three 1% balanced drop so assuming there is no unique carnage change it means it's a 1% profits up.
And.
Other questions, Yes, no I think just to follow up the signal.
I would emphasize is if you look at is why I said, we really started to tighten credit kind of ended the third quarter of last year, and then more significantly fourth quarter and then we had the.
The transformation on channels with the change in Ping an life, if you fast forward to.
Today over the last two quarters, we've really been self imposing restrictions on our growth.
If we're not comfortable with the credit quality, what we're really doing region by region is cutting out what we view to be the highest potential risk customers and so if you look at what's going on today on the ground two things are happening one is the new customers that we do.
In regions that we do choose our.
Higher quality today than they were six months ago.
So the key factor for us is a judgment on timing.
We have more than enough funding, we have more than enough capital we have full confidence in our credit models that we need to be.
Comfortable that the macro environment justifies, putting our foot back on the gas.
And we have our foot on the gas.
Probably about two thirds of the regions today, where we actually think there hasnt been as severe COVID-19 impact and where we.
We think the dynamics are right to do so but there is a third of the regions that were being very cautious side today.
That's how we're planning it out so to your question around if Covid policy continues for the long term there will continue to have to be selective on credit quality will have to be continue to be selective on region.
But we do look at the third quarter now compared to where we were three months ago is that right. It is clearly better from the times of the Shanghai Lockdown and surrounding regions, but we'll continue to have to look at it region by region quarter by quarter.
Thank you very much so on the year one year two profit impact I think my question was more.
That delay because the revenue was booked as throughout the lifecycle of the loan. So the slowdown this year, we'll probably have delayed impact so how is that impacting.
Impacting next year.
Three as well.
Yes, there is clearly a roll on effect of this right I mean, if you'd add last year portfolio. This year than Europe is and your base for next year, yet somewhat impacted that's for sure.
But generally the way we look at this business is on each new loan economics over a two to three year period, and so we're comfortable with that it's really a question of that how much do you add year by year or quarter by quarter. I think you can really project down the road. So theres no question that.
You can see that our revenue growth through the second quarter of this year was 3% and thats because of actions we started to take few quarters ago right.
And so we will have to be a bit more prudent in our guidance around the medium term, but I think that when we look about look at that kind of more medium to long term, it's really finding the right time to Reengage and then you kind of deal with the path is from there.
Yes, thank you very much.
Thank you. Our next question comes from Yodlee from TICC. Please proceed with your question.
Yeah.
Hello management Thank question.
Yellow from TICC and we have two questions for today. The first one is about the insurance cost.
I'd like to know that what is the trend of our insurance caused into 'twenty, two and how do you view the trend in the next two quarters.
April repeats and when we see the microeconomic uncertainty intensive SaaS, how can we ensure that we have in the insurance partners to provide that.
Credit enhancement and the second one is about.
We adopted a prudent business development strategy. This year and however won the business growth is not our primary primary goal are there changes to our direct Sidoti assumes zero team work and how to control the operating costs abroad by a large direct sodium team at this stage. That's all thank you.
Okay. Thank you.
I guess your first questions about the interest cost.
As we all know insurance itself is a risk business.
I do and we all trust in <unk>.
<unk> partner, the ability and the Knowhow to <unk>.
Rice risk.
The long term and sustainable perspective of course short term volatility in credit spreads do exist.
At volatility issuance costs, but I think in the long term you can't normalize.
Turning to our business model.
What I want to emphasize this task.
New facts, we have at flattish.
Extensive training has been shown in Mccann assemblies on partners.
In quarter two as an example.
We take train 2% of risk from a new sales and at least less than 70% of the risk is taken by <unk> partners.
Our reliance on probably insurance has been reduced to less than <unk>.
7%.
And second.
We do have sufficient capital to increase our self guarantee ratio and further reduce the pressure on credit enhancement on the professional and the interest cost.
And just you mentioned.
Emphasize again.
Garrett company's laboratory as we swing to tax.
The rectory can allow us to grow up to 10 times and we are currently closer to bring increased to South Jersey ratio.
Repurchasing human EBIT term and when we feel the timing is appropriate.
Okay. This is my comments on.
First question.
And I don't see any.
Issue to how our insurance company partners to continue to work with us.
Because we are building this business with leadership and partnership for further long term perspective.
The second question I think it's about.
Sure.
With the changing of our business development strategy.
What kind of changed our BFS team in terms of the routine.
And the voice the impacts to operating costs.
I think our core duty of our gas team.
The primary change a tool.
Still remains the core focus is customer acquisition.
But we are actually adding more context to them.
In building stickiness with our small business owner Custer.
Customers.
And to know more about them on their risk.
Sure.
Yes, that's a price.
Customers.
So we do expect them to cooperate with the collection team to converting more connections.
Which are the customers.
I don't think it would takes too much time to talk with them and we won't incur additional cost of staff.
In terms of the cost.
As you'll note on note I'll call.
Cost structure is very flexible.
Commission based structure allow us to be with Soliris in tough times.
And have energy to source.
To food.
In.
In good times.
So I don't think we have extra burden for us.
Costs and you've already seen.
Okay.
Rick optimization and cost in the first half of this year.
Yes, I would just add on the specifics of the numbers if you look.
New loan sales.
Year on year.
<unk> reduced by about 15%.
And then if you look at our direct sales head count.
We are down about 10% from the end of last year.
So, but the reduction in the total sales force is coming mostly from removal of a battle.
Layer of management, so our actual number of frontline people have not decreased by that much which goes back to the point. The wireless is baked has made which is the total amount of new loan growth in the us has actually increased.
Year on year for the first half so while we've optimized the structure of the sales force what they do hasnt changed but their productivity has actually been improving.
While we have been maintained and overall head count control through the way we deploy those resources if you actually look through.
Second quarter sales and marketing expenses are optimized versus a year ago by about 19% so as the volume change.
We are adjusting our expenses accordingly.
So I think we are quite good positioning.
For our overall cost optimization.
And the only issue that we have to deal with I think in the next two quarters as our insurance partners, where theres more than enough capacity will price up because of the changes in the first half, but this is something that's rolling on a quarterly basis. So as the risk flows through as we move in towards next year, then there'll be repricing again, so overall we'd.
And quite a bit of flexibility on that front.
Thank you.
I'll hand over to time to management team for closing remarks.
Yes.
Yes.
Okay.
Our earnings conference call. Thank you for attending this call.
Keith.
Thank you ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.
Okay.