Q2 2022 CNFinance Holdings Ltd Earnings Call
Good day, and welcome to the fee and finance announces second quarter and first half 2022 unaudited financial results all participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question you made.
Press Star then one on your Touchtone phone and to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to JJ manager of the capital market Department. Please go ahead.
Good morning, and good evening, and that's all just one five months ago.
In the first half.
I'd like to financial results conference call in.
Today's call.
Director and widespread.
Changing to walk us through the operating results followed by the financial results from our acting CFO .
After that we will have a Q&A section.
Before we start I'd like to.
I remind you that this conference call contains forward looking statements within the meaning of section 20, <unk> of the Securities Exchange Act of marking 34 as amended and as defined in U.
Private Securities Litigation Reform Act of 1995.
Yes.
These statements can be identified by terminology such as will in fact anticipate future in Paris.
I believe.
That's a nice target going forward outlook and similar statements.
Such statements are.
Based upon management's current expectations and current market and operating conditions and relate to events that you're most 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 may cause the company's actual results performance or achievements could differ materially from those seem to fall off.
Further information regarding this.
And other risks uncertainties or factors is included in the company's filings with the U S Securities and exchange.
Our mission.
The company does not undertake any obligation to update any forward looking statements as a result of new information future events or otherwise.
South as required under law now please welcome Mr. Tianjin.
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Thank you everyone for joining us in this conference call.
Today's call, we will introduce the company's financial and operation and operational results in the second quarter and first half off I'm glad you followed by Q&A section.
But as you know Jim Guangzhou Suzhou niche in the phone call. He is also the year when again I'm bullish about Q1, that's been job.
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In the second quarter.
Our business was continuously impacted probably to that make prevention and control measures.
We were able to maintain stable business.
During the quarter, we originated loan Oh three.
Three quarters of 1 billion under our collaboration with Trust company and introduced the levels of 200 million to the commercial banks.
The interest rate under the collaboration model for the second quarter were slightly higher than the same period of patent anytime you want and the interest expense decreased marginally.
And so we adjusted our commission policy Hourglass Dragon call degree.
Significantly year on year.
Rick throw off the company's gross profit margin, however, given the impact of pandemic prevention and control policy as well as the uncertainty of the Chinese.
China's real estate market, we continue to be conservative in evaluating potential losses and recorded a provision provision for credit losses.
18 million for the second quarter.
And this was the main reason for the net income to be lower than the same period of time, you want now I'd like to give a more detailed introduction of the challenges we face and the measures we have taken.
And also Shaffer manager my thoughts on our future developments.
But in general you shouldn't probably ensure shall woman for me and do that through our charter.
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Thanks, Sean well you already Java.
Our business continues to be challenged by the predominant prevention and control a number of cities, including Shanghai locked down during the quarter and China's GDP fell by two 6% as compared to the first quarter I'll close out in Q at the same time.
There are still uncertainties in China's real estate market.
They call. It mixed downturn has negatively affected our business growth and increase in delinquency rate has also affected the linkage quantity of our sales partners.
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So we are totally chartered in Guangzhou.
There are such conditions, we focus on stabilizing the business, while reducing financing costs, managing our risks and empower our saps tebo during the second quarter.
What we have done are as follows.
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First in order to that journey.
Our followers and have MSE owners.
Socket, our cooperative collaborations with new two new trucks.
Separately originated loans of 13 9 million during the quarter, we have lowered the interest spread all summer long products this quarter.
Second we continue to promote our partnership with commercial banks.
And recommend their loans of 400 million to them.
We have also started to consider paying loans under our collaboration with <unk>.
So I called it some of them in well maintenance, we are pushing to close off on coach on the Tampa, Joe shower gel and also the new <unk> pump on the phone should partially true.
Maybe Qi Jong hee do you send people kind of ship second half control, we maintain dialogue with major pharma partners and have reached content on refusing financing cost and optimizing their repayment.
Prepayment and policy.
The objective of babies in fact, it will be adopted in the third quarter of 2022.
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Industry in order to see such strength.
To expand our business and provide affordable and.
Assessable financing services to more MSE owners, we will work on enhancing service, reducing funding costs and improve cultural management our plans are.
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First with the change of the market condition. The company, we will focus more on the demand side and build a system that is a SaaS oriented we will establish an all around sales upon our system based on the data collection and resource cohort coordination.
And use technology as a tool to improve the overall efficiency.
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Second we will continue to promote our partnership with commercial banks and with TICC.
We believe such partnerships will be important supplement to our collaboration with trust companies as it could improve our product mix and the customer coverage in the future. We will not only is that promotion plans to incentivize the sales staff.
The commercial banks with TICC.
But also but also cooperate with third party sales channels to jointly expand the customer base and increase the sales volume.
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Reducing financing costs will continue to be one of our long term strategic goals, we will maintain dialogue with founding partners, mainly focus on addressing the mismatch between funding supply and loan applications.
Our goal is to cut the overall cost of our loan products by road.
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Will deepen our collaboration with third party institutions to accelerate the disposal of delinquent loans and recover cash by doing that we hope to release the liquidity offset partners. So that they can use more resources in the business expense expansion.
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We figure out yourself go through on the R&M DRG to somebody else, what's wrong with that I would like to hand, the call over to Ms. Jami.
<unk> CFO of the company, who will walk you through the second quarter and first half 2022 financial.
Sure.
Thank you Mr. Kim and thanks, again to everyone joining us today.
For our second quarter and first half 2022 financials, we believe year over year comparison is the best way to review our performance.
Unless otherwise stated or the percentage change I'm going to get will be on that basis.
So unless otherwise the state or nimbus I'm going to get will be in RMB.
We have a oil for the figures for second quarter of 2022 first followed by that for the first half.
June 13, 2022, the total outstanding loan principal decreased to nine 4 billion compared to $10 4 billion RMB. So December 31 31.
Total loan origination one that was $3 1 billion compared to $3 a barrel in the same period of two eight I think one.
Interest financial service fees on loans.
$408 million.
<unk> of 9%, primarily due to the decrease of our daily outstanding loan principal in the second quarter illustrated two as compared to the same period of two one.
The decrease in our daily outstanding loan principal was due to the lower loan facilitation and one well in the second quarter result from the lockdown due to the local outbreak of COVID-19 in multiple cities within China.
Interest expense was 181 million compared to $1 5 million in.
Sorry, you're cutting one primarily due to the decrease in the principle of other borrowings.
Collaboration cost for sales partners. The question was is there was mainly in the second quarter of 2022.
Compared to 107 1 million in the same quarter of 2110 to one <unk>.
Due to the lower fee rate the company paid to the SaaS partner in the second quarter of 2010 two.
Yes.
Provision for credit losses was 18 million compared to 15.
In the same period of last year. The decrease was due to the increasing economic uncertainties.
Caused by Lockdown and reaction to local outbreak of COVID-19.
Well as to downward pressure faced by China.
Ethane market during the second quarter of this year.
The total operating expense.
Were 19 1 million.
An increase of 5% compared to 80000 Mailer in the same period of last year.
Income tax expense was $3 million.
A decrease for our Amelia in same period of 2013 was.
Net income was $18 million, a decrease of $72 million from 65 minutes in the prior year.
Now we are moving on our financials for the first half 2022.
The total loan origination warning was $5 4 billion compared to six <unk> in the same period of last year.
Interest and financing fees on loans.
823 million a decrease of 6% due to the decrease Elfa average daily use.
And then long term proposed in the first half for retention as compared with the same period last year.
In the average daily outstanding loan principal was due to the lower for sanitation, one well in the first half if you were sell from the lockdown due to the local outbreak of COVID-19 in multiple cities within China.
Interest expense was 388. Meanwhile.
Compared to 300.
51 million in the same period of last year.
Due to the increase of funding cost from the chest company.
Collaboration cost for sales partner increased to 115 specs mainly.
Mainly in the first half of this year compared to 205 million in the same period of last year.
Primary attributable to the increase alone.
Loan balances.
The collaboration model.
Solutions for credit losses at Wassa.
Provision of 100 and stuff.
Mainland compared to the recovery of $3 million in the same period of 2013 once the.
The increase was due to the increasing canonic uncertainties caused by the lockdown in reaction to the local outbreak of COVID-19, as well as the tongue downward pressure faced by China re assay market during the first half 2022.
Total operating expenses was 171 million a decrease of 6% compared with $182 million in the same period of 10 days or two one.
Income tax expenses was 19 million compared to 38 million in the same period of last year.
However, due to the increase in taxable income in the first half.
Turning to slide two.
As compared to the same period of last year net income was $61 million compared to 115 1 million in the same period of last year.
As of <unk>.
June 13.
Turning 21, the company had cash and cash equivalents of $1 4 billion compared to two 2 billion as of December 31st turning them into one.
Okay.
The delinquency ratio excluding loans held for sale for loans originated by the company with decreased from 16% as of December 31, 31 to 14, 9% as of June 13th Toyota at issue.
And the NPL ratio, excluding the held for sale.
Excluding the loans held for sale for loan origin originate by company decreased from 2.1 percentage as of December 31 2021.
219 as of June 13th Toric, I think too.
With that.
We'd now like to open up the core for Q&A.
Operator please.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two and at this time, we will pause momentarily to assemble our roster.
Okay.
Okay.
Oh.
Okay.
And the first question will come from William Greg.
Those all ski with Green Ridge Global Please go ahead Sir.
Hi, you talked about trying to do different things to help the sales partners.
You, obviously need the sales partners to grow the loan origination.
You talked about some of the bringing the asset management company, what's the financial health of your sales partners are the liquid enough to source new loans or are they just trying to manage what they have now.
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Okay. So.
Under the current condition the liquidity pressure of our sales partners have.
In.
A bit higher than before.
I think that's mainly because of the increase of the delinquency ratio because under our collaboration with the sales partners. They will have to bear the obligations to repurchase the default loans. So that has put a lot of pressure on their liquidity.
So im going to earn.
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Ever since the beginning of 2022, we have remained very supportive supportive to our sales partner.
And I think the first thing with it is to allow them to.
Fulfilled our repurchase obligations by installments.
And also entering the second quarter of 292, we have been given them.
Extension, so that they can pay a smaller installment every every month.
And also we have been negotiating with a third.
Third party asset management companies.
To see if they could provide.
Postal services for the sales partners, so that way they could have their cash recovered faster.
And so that way they could also released their liquidity and.
Spend among the business expansion.
Okay.
Does that answer your question.
Yes could you could you also.
Just talk about the quantity of sales partners you have I mean are you seeing more interest or our sales partners shrinking down.
The quantity they are trying to source.
You mean the quality for.
Yeah. So the total number of sales partners do you have is that number increasing or decreasing in or are you seeing them being more active or less active.
Okay.
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And also in terms of the numbers I can't give numbers of sales partners here's the data.
So the sales partners, who have signed the collaboration agreements with us has.
Went up slightly to 19000.
As of the end of the second quarter and we have also seen a.
<unk> number of active sales partners and that would be.
Around 1200.
As of the end of the second quarter of 192, which is a 9% increase as compared to the same quarter of 2021.
As for your question. The number has been has gone up.
As well as the number of active sales partners.
Yeah.
Okay perfect.
Theres been a lot of.
No news in the media about the real estate market.
<unk> developers.
Having cash shortfalls, the number of unfinished and lived in homes.
The interest rate cuts, how do you guys view, the real estate market as a whole and how.
CNS going forward.
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Okay. So after nearly 20 years of high speed growth of China's real estate market I think it seems like it went into in that end and I think that mainly affected peoples, especially the consumer's view towards.
The housing market.
And as for US like you mentioned there are a number of.
Problems in the real estate market, including insufficient in the cash of the developers and I as well as the <unk>.
And finish at homes and stuff and.
Particularly to US I think that first of all the development of the <unk>.
Home equity loans depends on the.
Five of the properties and that's for sure and that mainly effects, our in our business volume and stuff.
And also for us if they if the liquidity of the houses went down and the housing.
Market is less active and might influence our efficiency of disposing delinquent loans and the collateral.
But we are still positive towards the future development of the.
As the market as well.
We believe that.
Our government is going to put more in a micro measures to stimulate and control.
The.
Real estate market in China, and in the long run the price and liquidity of houses will.
Be more and more stable.
And also we have observed the one thing even in the fluctuation of the of the real estate market.
The houses in the major blocks in tier one tier two cities remained rather stable in terms of prices and liquidity.
<unk>.
Our collateral are mainly.
Located within such areas.
So we think our collateral and our business is.
More resilient to the fluctuations of the capital of the real estate market.
Yes.
Okay.
Okay.
Yes can you just you said most of the bonds are in tier one tier two cities what percent of your portfolio is in tier one tier two.
On the Avalanche at all in double through the outward over value or general insurer or challenge.
The counting of Golar coming onto the <unk>.
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Welcome everyone.
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Okay. So.
We're lucky that because of our experience in the home equity loan industry. Our collectors are mainly located in the major blocks in tier one tier two cities.
As for the.
Detailed percentages.
So over 90% of our collectors are in tier one and tier two cities.
And in that about 30% of the.
Collaterals are in tier one cities.
And.
That's in terms of the loan origination.
And.
That's under the collaboration with trust companies and I also want to give you the numbers.
Associated with our partnership with commercial banks.
So.
That is rather the loans under the <unk>.
Commercial bank partnership which is.
Located with vivid.
Which is 70 around 7% that is facilitated in tier one cities, which is a rather lower than that of.
Our partnership with trust companies, but there are around 70% of the collateral that is located in tier two cities and our partnership with commercial banks.
Okay.
Okay Perfect and last question is you've talked in the past both from technology upgrades you wanted to make can you just outline where you are on that process. What are you. What's the focus for the remainder of this year and next year and what's the cost is going to be for that.
How are you going to issue an interim change at all and also the you could see the channels that are accredited hurdle.
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So in the past three years.
Under the.
The COVID-19 pandemic, we have seen that.
How important it is for a company could do their business online.
As our business volume chips kept going up.
We have been investing more into the technology and I think I want to make one thing clear that technology to improve our technological capability.
As to support the sales.
By coordinating data so that we can provide better services to the sales sales partners and.
And the borrowers.
So as.
So as of this moment as of today.
The cost was not very significant.
We are.
The major project was done by our in House staff.
But as for the future, we do not really have.
Certain plan for right now but.
Our thought is that to make the investment towards technology.
Certain percent of revenue.
That means if the if the revenue goes up with the investment in the tax net technology. We will also go up.
And our long term goal is to make senior finance a company that could promote business both online and in our site.
Yeah.
Okay perfect. Thank you.
Again, if you have a question. Please press Star then one.
This will conclude our question and answer session as well as our conference call for today, you can view the Companys information at IR Dot cash China Dot CN. Thank you for it.
Joining today's presentation you may now disconnect.
[music].