Q4 2022 CNFinance Holdings Ltd Earnings Call
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Speaker 2: Good day and welcome to the CN Finance fourth quarter and fiscal year 2022 unaudited financial results conference call.
Speaker 2: All participants will be in listen-only mode.
Speaker 2: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.
Speaker 2: To ask a question, you may press star then 1 on your telephone keypad.
Speaker 2: ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2.
Speaker 2: Please note this event is being recorded.
Speaker 2: I would now like to turn the conference over to Ms. Jane, Manager of Capital Markets. Please go ahead.
Speaker 2: Good morning and good evening and welcome to CN Finance fourth quarter and fiscal year of 2020 financial response conference call. In today's call, our director and vice president, Mr. Chen Jun will walk us through the operating results.
Speaker 2: followed by the financial results from our acting CFO , Ms. Lee.
Speaker 2: After that, we will have a Q&A session. Before we start, I would like to remind you that this conference call contains further looking statements within the meaning of Section 21e of the Securities and Exchange Act of 1934 as amended and as defined in the U.S. Private Securities and Exchange Act of 1984 as amended.
Speaker 2: The decision will form act of 1995.
Speaker 2: This forward-looking statement can be identified by terminology such as view, inspect, anticipate, feature, incense, plan, beliefs, estimate, target, going forward, outlook and similar statement.
Speaker 2: Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve non- or unknown risks, uncertainties, and not affectors.
Speaker 2: All of which are difficult to predict.
Speaker 2: and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from both in a forward-looking statement.
Speaker 2: Further information regarding this and other risks, uncertainties or factors is included in the communist violence with the US Securities and Exchange Commission.
Speaker 2: The company does not undertake any obligation to update the full looking statement as a result of new information, future events or otherwise except as required under law. Now, please welcome Mr. Chen Jun.
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Speaker 3: 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 a full-time session.
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Speaker 2: The company generated interest income of RMB 1.7 billion and net revenue under the Commercial Bank Partnership model of RMB 58 million for the fiscal year of 2022. Automatically, achieving a net profit of RMB 140 million.
Speaker 2: an increase of 111% of the same period of last year. Given the strict pandemic prevention and control policies maintained in 2022, the company still achieve year-on-year growth in business growth as well as probability.
Speaker 2: Thank you to the accomplishments of the following.
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Speaker 2: We rigorously promoted the new product and expanded our customer base through it. Since it launched in 2021, the Commercial Bank partnership model has gradually gained recognition from the market and our partners.
Speaker 2: After depending cooperation with private banks including Shenxiang Bank and Yilian Bank in 2022, the commercial bank partnership model began to grow rapidly in the second half of 2022 and took shape at the end of the year.
Speaker 2: In 2022, the company recommended a total of RMB 2.5 billion of long-term banks, meeting the target set at the beginning of the year. The net revenue under the commercial bank partnership model also increased.
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Speaker 2: Management made a judgment at the beginning of the year that small conditions may change this year. In that there would be a rocket.
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Speaker 2: The subsequent developments were in line with the management's expectations at the beginning of the year, and therefore, in order to take full advantage of the fee reductions by financial institutions.
Speaker 2: The company continued to negotiate with its 12 company partners through the year and reached an agreement to reduce bombing costs in the second half of 2022.
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Speaker 2: The company began to participate more actively in the capital market during the year. The company continued to push forward for secondary offerings in 2022 and actively engaged with domestic and international investors.
Speaker 2: Through this context, we feel that both domestic and international investors continue to have a positive view of China's inclusive financial industry, and this has reinforced the company's confidence.
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Speaker 2: Of course, while fully recognizing the achievement of our business, it is important to note that there is still room for improvement.
Speaker 2: Due to the impact of the pandemic prevention and control policy on this on followers, solvency as well as the overall efficiency of this post the NPL, our delinquent ratio has increased and the sales corner has been under greater pressure to repurchase default loans.
Speaker 2: Under the circumstances, the company allowed more partners to fulfill their repurchase obligations in 2022 using instillment payments, with fair finance charging of currencies.
Speaker 2: This policy has eased the liquidity pressure of the partners and enriched the company's revenue mix.
Speaker 2: We also plan to continue to refine our installment research policy in 2023 to further reduce the abundance of self-ponders. I will elaborate the details later.
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Speaker 2: continue the transformation to a service platform in order to achieve high quality development. Our specific work objects
Speaker 2: to a service platform in order to achieve high quality development. Our specific work objects include
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Speaker 2: We will continuously devise new products, upgrade our models, expand our customer base and grow our skills.
Speaker 2: In this end, we will continue to deepen our cooperation with commercial banks.
Speaker 2: other than negotiate with the current commercial banks' partners on the ratio of the deposits.
Speaker 2: and seeking cooperation with more banks. We also plan to introduce Sales Punish into the Commercial Bank Polisher Model.
Speaker 2: Our goal is to let the sales partner provide credit enhancement for the commercial banks with BN Finance act as a service provider.
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Speaker 2: Keep upgrading the funding model. In 2023, other than keep refusing the funding costs, we will actively negotiate with the venture capital institutions on refinancing with non-performing assets and use such capital to fill the repurchase of the self-ponders.
Speaker 2: By doing that, we are hoping to allow more self-commerce to fulfill their obligations by installment payments.
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Speaker 2: We will continue to invest in technology and drive digital transformation.
Speaker 2: The company plans to further increase investment in technology in 2023 to promote the construction of an intelligent risk control system.
Speaker 2: We will collect data through research and analysis to build a screening model suitable for the company.
Speaker 2: Thereby, empowering comes the business development by optimizing the entire long-term flow process.
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Speaker 2: We will take more attention to asset quality by better cooperating growth and asset quality. Firstly, we will optimize our credit approval model. Secondly, we will use market nature as a base to provide guidance on which region we should put more results in.
Speaker 2: and therefore improve the quality of our profile. Our initial plan right now is to focus on expanding our business in Taiwan and new Taiwan cities.
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Speaker 2: So recently released 2023 report on the work of government for again emphasize on encouraging and supporting the development and growth of the private economy and private enterprises and supporting the development of small, medium and micro enterprises in the world.
Speaker 2: and individual enterprises, which proves the management estimation.
Speaker 2: of China's inclusive financial institute will continue to be in a period of strategic opportunity. This applies to the current situation.
Speaker 2: At the same time, the management believes that with the adjustment of the pandemic prevention and control policy and the government's efforts to simulate domestic demand as one important task for national economic development in 2023, China's economy has the potential to take up.
Speaker 2: And we will also seize the opportunity to continue to deepen our own reforms.
Speaker 2: We want more micro and small business owners with better financing services.
Speaker 2: and also contribute our share to the cause of inclusive finance in China.
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Speaker 2: With that, I'd like to hand the call over to Ms. J. Lee, marketing CFO of the company, who will work to fill the fourth quarter and fiscal year of 2022 financials.
Speaker 2: Thanks, Mrs. Chien. And thanks again to everyone joining us today. Hi, I'm Wu-Yin Fu, the fourth quarter and fiscal year of 2022 Financials.
Speaker 2: We believe year-over-year comparison is the best way to review our performance. Unless otherwise established or percentage change on going to PIP will be on that basis.
Speaker 2: And also, unless otherwise established, all number I'm going to get will be in R&D.
Speaker 2: We will start with fourth quarter of 2021 and followed by the result of the fiscal year.
Speaker 2: During the first quarter of 2022, total loan origination volume was 3 billion, and the total volume of loans recommended to commercial banks was only 2 million. Total interest and fee income were 465 million. Interest income, tragedy first, or no?
Speaker 2: which represents the fee charged to sales partner who choose to repurchase the default loans and installments. Collaboration course for sales partner represents the sales incentive paid to sales partner decreased to $18 million from dual funding.
Speaker 2: RMB 120 million in the same period of last year. This primary attribute goes to a lower average rate, the commonly paid 2-year sales partner, and the fourth quarter of 2022, as compared with last year.
Speaker 2: The net revenue under the Commercial Plan Partnership model over something feet stretched to a commercial plan for service including
Speaker 2: introducing borrowers, initial credit assessment, facilitating loans from banks to borrowers, and providing technical assessment to borrowers and banks. The net of fees paid to third-party insurance companies.
Speaker 2: was $66 million. The company has started to collaborate with commercial banks since last year, and such collaboration grew and scale in the second half of this year.
Speaker 2: The net income was $39 million compared with a net loss of only $100 million in the same period of last year. Now let's move to the results for the fiscal year of 2022.
Speaker 5: The total interest fee to an income was 1.7 billion and the total interest fee to an Excel was $785 million.
Speaker 5: The interesting contrast to sales partner represents the percentage fees compared to sales partner who choose to repurchase default loans in installment increase to 122 million from 33 million in the same period of last year.
Speaker 5: The collaboration course for sales partner representing the sales and sound to pay to sales partner decreased to $321 million from $436 million from the same period of 2021.
Speaker 5: Network for new under the Commercial Bank Partnership model.
Speaker 5: We'll be sending feeds charged to commercial banks for introducing borrowers' initial credit assessments, facilitating loans from the banks to borrowers, and providing technical assessments to the borrowers and banks. Let us speak to you.
Speaker 5: paid to the third-party and chain companies was $58 million in this year. The net interest in income-output collaboration costs was $693 million, with an increase of 11% compared with $615 million in the same year.
Speaker 5: The reversal in last year was finally due to the fact that the company transferred loans under a traditional facilitation model to third parties in bulk.
Speaker 5: during the fourth quarter of 2021 and a lot of such loans were through us. The increase in pollution for COVID losses in this year was mainly due to the economic uncertainty caused by the COVID-19 pandemic and the prevalence, prevention and control measures.
Speaker 5: as well as the downward purchase faced by the China's real estate market during 2022. The net loss on sales of loans was 35 million for the fiscal year of 2022 compared to 451 million in the same period of last year.
Speaker 5: Partly attributable to this fact that the commonly transfer loans under the traditional facilitate models to throw parties in blocks during the first portion of last year. Such loans were all facilitated prior to 2019.
Speaker 5: and the majority of them were both off-duty.
Speaker 5: The other gains are net of $19 million compared with RMB's $19 million in the same period of last year. This binary is available to the increase of credit rate mitigation provision for fit by self-pilots.
Speaker 5: Total operating expenses decreased by 11% to 339 million as compared to RE381 million for same period of last year.
Speaker 5: Net income increased by 111% to 138 million for the fiscal year of 2022 compared to 65 million for the same period of last year. Net income ratio is increasing long-term for sales for loans originated by companies.
Speaker 5: was 18.3% as of December 31, 2031, 2032. And the NPL ratio, excluding loans held for sale for loans, originate by company equipped from 2.1% as of December .
Speaker 5: 31-2031 to 1.1 as of December 31, 2022. With that.
Speaker 5: We now like to open up the call for Q&A. Please.
Speaker 2: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad.
Speaker 2: If you are using a speakerphone, you will need to pick up your handset before pressing the keys.
Speaker 2: To withdraw your question, please press star then 2.
Speaker 6: Once again, that was star, then one to ask a question. And at this time, we will pause momentarily to assemble the roster.
Speaker 6: And our first question will come from William Grezozeski of Green Ridge Global. Please go ahead. Thanks Anna.
Speaker 7: Hi. Could you talk about your expectations for origination for the current year, especially between the split between trust and commercial, because you did so much commercial origination in the fourth quarter. What is that percentage going to look like across this current year? Hello, thank you for hanging with us. Good afternoon.
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Speaker 3: So, our targeted total loan origination volume in 2023 is around 20 billion RMB, which is about 40% increase and that of 2022. And we're hoping 40% of that 20 billion.
Speaker 7: It comes from loans recommended to commercial banks. Okay, great. And then on the
Speaker 7: Given the general economic uncertainty and property market uncertainty, are you guys seeing any more sales partners coming to the platform because of the additional...
Speaker 7: services you guys provide in terms of the risk management and the installment plan compared to doing it on their own as they may have been doing before.
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Speaker 3: Okay, so based on the data, we're happy to see that the number of active sales partners as of the end of 2022 actually increased about 100, which is a 10% increase as compared to the same period as compared to the end of 2021.
Speaker 3: And also I want to mention that
Speaker 3: Besides the better services we can provide them, the better risk management and external funding, I think there are two major reasons why the sales partners are more willing to join our platform. The first thing is their confidence in our partners.
Speaker 3: how China's economy is going to pick up. And I think the second reason is that the repurchase by installment policy we rolled out in 2022. I think that really could help them ease their liquidity pressure and also help them to better manage their own risks.
Speaker 7: Okay, great. As far as your current loan to value, do you guys have that ratio where it's stood at the end of the year compared to the year ago period?
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Speaker 3: So, at the end of 2022, the average LTV ratio is around 60%, which remained rather stable.
Speaker 7: to the past three years. Okay. Given the – you know, you guys are now breaking out the income charge to sales partners for these installment loans. Is this a number that you guys are expecting will rise over the course of the year, or will it start to tail off as, you know, the economy and everything improves over the course of the year? How should we look at that?
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Speaker 3: So, what we have seen how the economy is picking up and recovering, I think the overall asset quality of the loans originated by us is going to be better and which is going to drive down the overall delinquency ratio.
Speaker 3: Therefore, I think the total scale of how much the sales partners have to repurchase is going to go down. Therefore, I think the interest income chart to sales partners is going to remain rather stable in 2023 with a little going down.
Speaker 7: Okay. Last question is more just general, you know, given the current environment, what do you guys see as the biggest risk for the company and biggest opportunity for the current environment?
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Speaker 3: contain the increase of the delinquency ratio, given the adjustment, post the adjustment of pandemic prevention and crucial policies. That means we have to focus more on the asset quality.
Speaker 3: So to address this challenge, we're going to take a couple measures, including, kind of want to focus more on expanding our businesses in Tier 1 and new Tier 1 cities.
Speaker 3: address this challenge, we're going to take a couple measures, including, we kind of want to focus more on expanding our businesses in tier 1 and new tier 1 cities.
Speaker 3: just to lower the proportion we're doing in tier 2 and tier 3 cities. And also we want to just use technology to refine the whole loan approval process and just to manage risks better. And also I think...
Speaker 3: The opportunities presented to us including that the first thing is how China's economy is going to pick up, going to recover post the adjustment to the pandemic provision and control.
Speaker 3: And also the second thing is, so after the past two years, we have finally seen the trading volume and property price in core areas start to recover. And since the majority of our business was conducted in such regions, and I think that's another good news to us.
Speaker 9: Okay, great. Thank you.
Speaker 9: Okay, great. Thank you. Thank you.
Speaker 6: Once again, if you would like to ask a question, please press star, then 1.
Speaker 6: This concludes our question and answer session. I would like to turn the conference back over to Ms. Jane for any closing remarks.
Speaker 2: Thank you for joining us today. If you have any questions, please feel free to contact us at IR at catch-trial.cn. Thank you.
Speaker 6: The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.
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