Q3 2023 Lufax Holding Ltd Earnings Call
Speaker 1: Ladies and gentlemen, thank you for standing by and welcome to the LUFAX Folding Limited third quarter 2023 earnings call.
Ladies and gentlemen, thank you for standing by and welcome to <unk> holding limited third quarter 2023 earnings call.
Speaker 1: At this time, all participants are in a listen-only mode.
At this time all participants are in a listen only mode.
After the managements prepared remarks, we will have a question and answer session.
Speaker 1: After the management's prepared remarks, we will have a question and answer session. Please note this is a
Please note this event is being recorded.
Speaker 1: Now I'd like to hand the conference over to your speaker host today, Ms. Lu Xing Yan, the company's head of board office and capital markets. Please go ahead, madam.
Now I'd like to hand, the conference over to your speaker host today.
This solution does.
He is head of Florida office and capital markets. Please go ahead Madam.
Speaker 2: Thank you, operator. Hello, everyone, and welcome to our third quarter 2023 earnings conference call. Our quarterly financial and operating results were released by our Newswire services earlier today and are currently available online.
Thank you operator, Hello, everyone and welcome to our third quarter 2023 earnings Conference call, our quarterly financial and operating results were released by our Newswire services earlier today and are currently available online today, you will hear from our chairman and CEO. Mr Y S. Cho who are pro.
Speaker 2: Today, you will hear from our Chairman and CEO , Mr. Y.S. Cho, who will provide an update of our latest business strategies, the macroeconomic trend, and the recent developments of our business.
An update of our nature of the business strategies, the macroeconomic trends and the recent developments of our business our co CEO Mr. Greg keep well then go through our third quarter results and provide more details on our business priorities afterwards, our CFO, Mr. David Troy well offer a.
Speaker 2: Our co-CEO, Mr. Greg Gibb, will then go through our third quarter results and provide more details on our business priorities.
Speaker 2: Afterwards, our CFO , Mr. David Choi, will offer a closer look into our financials before we open up the call for questions.
Closer look into our financials before we open up the call for questions before we continue I would like to refer you to our safe Harbor statement in our earnings press release, which also applies to this call as we will be making forward looking statements with that I'm now pleased to turn over the call to Mr. Juan <unk> co chairman.
Speaker 2: Before we continue, I would like to refer you to our safe harbor statement in our earnest press release, which also applies to this call, as we will be making forward-looking statements.
Speaker 2: With that, I am now pleased to turn over the call to Mr. YS Cho, Chairman and CEO of Lufax. YS, please.
And the C O R. Floof ex wife's please thank you for joining today's call Rigel macro economy should recover gradually in the first quarter.
Speaker 3: Thank you for joining today's call, Why the Macroeconomics Recovered Gradually in the Third Quarter.
Speaker 3: The small bee segments still face a complex landscape and needs more time to recover.
The small business segment to face a complex landscape and needs more time to recover.
Speaker 3: We continue to pursue our strategy of de-risking and diversification, maintaining our asset quality with the goal of improving our asset quality overall for long term, healthy and sustainable growth.
We continue to pursue our spiritual de risking and diversification, maintaining our asset quality with a goal of improving our asset quality overall for long term healthy.
And sustainable growth.
Speaker 3: During the third quarter, while high-quality loan demand from SBO remained weak, our consumer finance business recorded a healthy growth.
During the third quarter why high quality loan demand from SVU remained weak.
Our consumer finance business recorded a healthy growth.
Speaker 3: with a neuron sales volume increase of 15.3% sequentially and 48.5% from the same period last year.
Needless stage volume increased 15% sequentially and 48, 5% from.
From the same period last year.
Speaker 3: We are also taking steps to further diversify our operations by acquiring a virtual bank in Hong Kong.
We are also taking steps to further diversify our operations.
Having a virtual bank in Hong Kong.
Let me now provide some updates for the third quarter.
On the regulatory front the state policy released guidance on promoting high quality development of increase you finance the.
Speaker 3: The guidance recognizes the value of non-bank institutions such as guarantees, consumer finance, and small lending companies, and encourages market participants to take steps to serve the financial needs of SCBOs as well as enhance consumer protection.
The guidance like one idea is the value of non bank institutions, such as guarantee claims small finance and small lending companies and encourage market participants to take steps to serve the financial needs of <unk>.
As well as enhanced consumer protection.
We believe the guidance and listened to lead to a development, we pull more to KC development of the industry.
Speaker 3: We believe the guidance and recent rail toy development will promote healthy development of the industry and benefit leading players that operate businesses in a compliant manner and with proper licenses.
And benefit leading players that operate businesses in a competitive manner and with the proper licenses.
As for the macro economy conditions.
Speaker 3: Recent data has shown that China's economy is gradually recovering.
<unk> recent data has shown that China's economy is gradually recovering.
Speaker 3: GDP in the third quarter increased by 4.9 percent from the same period last year, putting the economy on track to meet the annual growth target of 5 percent.
GDP in the fourth quarter increased by four 9% from the same period last year, putting the economy on track to meet our annual growth target of 5%.
Speaker 3: During the third quarter, larger enterprises demonstrated the strongest signs of recovery, while SMEs continued to face pressure from the broader macro situation.
During the third quarter large enterprises demonstrated the strongest signs of recovery.
While <unk> continued to face pressure from the broader macro situation.
Speaker 3: The SME Business Conditions Index published by the Chung Kong Graduate School of Business declined from 50.2 in June to 49.9 in September .
So SME business conditions index published by the ton cone graduate school business declined from 50.2 in June to $49 nine in September.
The small and medium enterprise Isabella much index published by the China Association of small and medium enterprises was also below the critical threshold of 100 in the third quarter.
Speaker 3: The Small and Medium Enterprises Development Index, published by the China Association of Small and Medium Enterprises, was also below the critical threshold of 100 in the third quarter, indicating that the SBO segment will likely recover more slowly than the rest of the economy.
Indicating that the segment will likely cover more slowly than the rest of the economy.
Speaker 3: Let's explore the impact of these factors on our business.
Let's explore the impact of these factors on our business.
Speaker 3: Under the pressure from complex macroeconomic environment, de-risking is crucial for the stability, sustainability of our business.
Under the plan under the pressure from complex macroeconomic environment.
The risking derisking is crucial for a stable at the sustainability of our business.
Speaker 3: In the third quarter, we continued our strategy of prioritizing asset quality over quantity.
The third quarter, we continued our strategy will prioritizing quality over quantity.
We have completed the strategic just months initiated in the beginning of the year by reducing our footprint in less economically resilient regions with relatively high risk and optimizing our direct sales force.
Speaker 3: We have completed the strategy adjustment initiated in the beginning of the year by reducing our footprint in less economically resilient regions with relatively high risk and optimizing our direct sales force.
Speaker 3: We believe these difficult but necessary steps will establish the foundation for long-term sustainable growth.
We believe this difficult.
But necessary steps will establish the foundation for long term sustainable growth.
As high quality demand <unk> fuel.
Speaker 3: loans remained weak and we continue to prioritize prudence in our strategic execution. New Zealand sales decreased slightly from 53.5 billion RMB in the second quarter to 50.5 billion RMB this quarter.
Launch remained weak.
And we continue to prioritize put us in our strategic execution.
Utilization decreased slightly from.
$53 5 million RMB in the second quarter to 55 billion, let me be this quarter.
Speaker 3: In terms of asset quality, risk performance of the old book, which are launched in April of 2023, has stabilized. Meanwhile, all indicators suggest that asset quality of neurons enabled in 2023 is in line with our expectation, although not yet recovered to pre-COVID levels. Next.
In terms of asset quality risk performance of the order book, which our launch enabled both 2023 has stabilized <unk>.
All indicators suggest that asset quality of new laws enabled in 2023 is in line with our expectation.
Though not yet recovered to pre COVID-19 levels.
Yes.
Next let me just from a strategic update.
Speaker 3: We have completed our transition to a business model under which our guaranteed subsidiary provides 100% of our credit enhancement.
<unk> completed our transition to a business model under which our guarantee subsidiary provides 100% of our creating last month at.
Speaker 3: as CGI premiums remains elevated due to the impairment losses suffered by CGI partners.
C. J P. Most remains elevated due to the impairment losses suffered by CGI potash.
At present, we have secured sufficient credit lines from our funding partners to support our 100% to moderate for the remainder of 2023 and throughout 2024.
Speaker 3: At present, we have secured sufficient credit lines from our funding partners to support our 100% year model for the remainder of 2023 and throughout 2024.
Speaker 3: We are able to make this shift in large parts due to our strong capital position.
We're able to make this shaped in large part due to our strong capital position.
Speaker 3: At the end of third quarter, the leverage ratio of our guarantee subsidiary was only 1.6 times, well below the maximum regulatory limit of 10 times.
At the end of third quarter, our leverage ratio of our guarantee subsidiary was only one six times well below the maximum regulatory limit of 10 times.
Speaker 3: Switching to our 100% guarantee model will play an important role in alleviating the impact of elevated CGI premiums.
Switching to our 100% guarantee model, we play an important role in LTV LTV elevating the impact of elevated our CCI premiums.
Speaker 3: resulting in a 13% to 14% take rate from a long-term perspective, but exerting pressure on medium-term profitability as upfront problems are recorded for new businesses.
Resulting in a 14, 13% to 14% take rate from a long term perspective, but exerting pressure on medium term profitability and upfront projects are recorded for new business.
Speaker 3: Last quarter, we mentioned our strategy to grow our consumer finance business by leveraging the advantages of our consumer finance license and synergies with the pooled business, and we continued to implement it.
Last quarter, we mentioned our strategy to grow our consumer finance business by leveraging the advantages of our customer funnel to license and synergies with the business.
And we continued to implement this strategy.
Speaker 3: During the third quarter, the neuron stage of our consumer finance business was 20.6 billion, representing a 15.3% quarter on quarter and 48.5% year over year goal.
During the third quarter.
New loan sales of our consumer finance business was 26 billion, representing a 15, 3% quarter on quarter and 48, 5% year over year growth.
Speaker 3: The NPL of our consumer finance business decreased to 1.9 percent in the third quarter, from 2.2 percent in the second quarter.
The NPS of our consumer finance business decreased to one 9% in the third quarter from two 2% in the second quarter.
Speaker 3: The competitive advantages of our consumer finance business have made it an increasingly important part of our business.
The competitive advantages of our consumer finance business have made it an increasingly important part of our business.
Speaker 3: Without a consumer finance license, we can operate this business in full compliance with regulations and benefit from lower funding costs enabled by interbank money markets.
Without principal finalizes, we can operate this business in full compliance with the regulations and benefit from lower funding cost.
Able to by interbank money market.
Speaker 3: With the SEBO segment likely to face continuing challenges from the macro environment in the near term, the consumer finance business serves as a good supplement to the pooled business.
With as you said, the most likely to face continuing challenges from the macro environment in the near term.
Principal finance business serves as a good supplement to the pool business.
Speaker 3: enabling us to further mitigate risk and diversify product offerings.
Enabling us to further mitigate risk and diversified product offerings.
Speaker 3: Together with our transition to the 100% Guaranteed Model, we will be able to provide more comprehensive products to our target customers with a simpler and better customer experience.
Together with our transition to the 100% guarantee model, we will be able to provide more comprehensive products for our target customers with a simpler and better customer experience.
Now, let's turn to our new initiatives, we are undertaking to further diversify our business.
Speaker 3: Now let's turn to a new initiative we are undertaking to further diversify our business.
Speaker 3: Subject to approval from the Hong Kong Monetary Authority and OneConnect shareholders, we acquire 100% of the shares of Ping An OneConnect Bank, or PAOB, from OneConnect, at a cash consideration of HK$933 million, representing 2.2% of our cash at bank as of the end of September .
Subject to approval from the Hong Kong Monetary authority and one connects to shareholders, we'll hire 100% of the shares of Ping, an one connect bank Wab P a or b from one connect at a cash at a cash consideration of <unk>.
933 million, Hong Kong dollars, representing 2% of our cash at bank.
As of the end of September.
As one of the eight virtual banks in Hong Kong will be fully licensed bank with a service corp, similar to traditional banks, but without fiscal operating branches.
Speaker 3: As one of the eight virtual banks in Hong Kong, PAOB is a fully licensed bank with a service scope similar to traditional banks but without fiscal operating branches.
Speaker 3: As of June 30, 2023, PAOB's loan balance was HK$1.8 billion, and its capital adequacy ratio was 100%, which was substantially higher than relevant regulatory requirements.
As of June 32023.
Obese loan balance was $1 8 billion Hong Kong dollar and is capital adequacy ratio was 100%, which was substantially higher than relevant regulatory requirement.
Speaker 3: All of its loans were SME loans in Hong Kong, and a significant portion of outstanding balance is backed by Hong Kong government's SME Financing Guarantee Scheme. We believe the business and target customers of KAOB think well with our existing operations, enabling us to leverage our operational experience and technological expertise in its business development.
All of his loss, while SME launch in Hong Kong and a significant portion of our standing balance is backed by a Hong Kong government SME financing guarantee scheme.
We believe the business Empire customers or <unk> will be <unk> with our existing operations.
Enabling us to leverage our operational experience and technological expertise and his business development.
Speaker 3: From a long-term perspective, the prospects of the Greater Bay Area also bring upside potentials via this banking license.
From a long term perspective.
Aspects of Greater Bay area also bring upside upside potentials. We are this banking license.
Speaker 3: Overall, we took a number of steps in the third quarter to carry forward our efforts on de-risking and diversification.
Overall, we took a number of steps in the fourth quarter to carry forward our efforts on the Derisking and diversification.
Speaker 3: including the completion of our transition into 100% guarantee motor.
Including the completion of our transition into 100% guarantee model.
Speaker 3: further developing our consumer finance business and acquisition of a virtual bank in Hong Kong, aiming to create foundations for long-term sustainable growth.
Further developing our principal finance business and acquisition of the virtual bank in Hong Kong aiming to create foundations for long term sustainable growth in the short term as most of our strategic Air Force on Derisking had been concluded by the end of the third quarter, we expected volume.
Speaker 3: In the short term, as most of our strategic efforts on de-risking had been concluded by the end of the third quarter, we expect volume in Neuron sales to be stabilized and we are on track to meet our Neuron sales guidance for the full year of 2023 to be in the range of 190 billion RMB to 210 billion RMB.
In new launches to be stabilized and we are on track to meet our utilization guidance for the full year 2003 to be in the range of.
190 billion RMB.
$410 billion in EMEA.
Speaker 3: I will now turn the call over to Greg for more details on our operating results.
I will now turn the call over to Greg for more details on our operating results.
Speaker 4: Thank you, YF. I will now provide more details on our third quarter results and our operational focus for this year. Please note, old book refers to unsecured loans enabled before January 1, 2023, and new book refers to unsecured loans enabled afterwards. All figures are in Remy B. unless otherwise stated.
Thank you I will now provide more details on our third quarter results and our operational focus for this year. Please.
Please note all book refers to unsecured loans enabled before January one 2023, and new book refers to unsecured loans enabled afterwards, all figures are in renminbi unless otherwise stated.
Speaker 4: During the third quarter of 2023, our performance remained under pressure from the complex macro environment and challenges faced by SBOs.
During the third quarter of 2023, our performance remained under pressure from the complex macro environment and challenges faced by Sps.
Speaker 4: Total new loan sales during the third quarter was $50.5 billion, amongst which approximately 40% was contributed by the consumer finance business. Now let's dive into the detailed performance of the Puhui business and the consumer finance business. First, let's take a closer look.
Total new loan sales during the third quarter was $50 5 billion.
Mongst, which approximately 40% was contributed by the consumer finance business now, let's dive into the detailed performance of the <unk> business and the consumer finance business.
First let's take a closer look at our <unk> business.
Speaker 4: During the third quarter, we enabled $29.9 billion of new loans under the Poohwe brand.
During the third quarter, we enabled $29 9 billion of new loans under the <unk> brand. Despite the pressure on new loan sales the productivity of our direct sales team further improved during the third quarter average productivity for our direct sales team rose by 25, 4% quarter over quarter.
Speaker 4: Despite the pressure on new loan sales, the productivity of our direct sales team further improved during the third quarter. Average productivity for our direct sales team rose by 25.4 percent quarter over quarter. Continuing the positive trend we noted in the second quarter, 68 percent of new loans enabled during the third quarter came from our direct sales team, compared to 61 percent in the second quarter.
The positive trend, we noted in the second quarter, 68% of new loans enabled during the third quarter came from our direct sales team compared to 61% in the second quarter.
Speaker 4: The overall pricing by balance of loans enabled under the PUJE business remains stable at 20 percent. We have not encountered any pressure to decrease price, and we have the flexibility to adjust our prices to the extent commercially sensible.
The overall pricing by balance of loans enabled under the <unk> business remained stable at 20%, we have not encountered any pressure to decrease price and we have the flexibility to adjust our prices to the extent commercially sensible.
Speaker 4: As we have completed the transition into the 100% guarantee model, we expect to improve our take rate by alleviating the negative impacts of elevated CGI premiums in the long term. Our profitability, however, will suffer in the medium term due to the impact of upfront provisions under the 100% guarantee model.
As we have completed the transition into the 100% guarantee model, we expect to improve our take rate by alleviating the negative impacts of elevated CGI premiums in the long term our profitability. However will suffer in the medium term due to the impact of.
Front provisions under the 100% guarantee model.
Speaker 4: Now, let's look at the risk performance of Pouhuei Business during the third quarter. The risk bearing by balance of Pouhuei Business at the end of the third quarter increased to 25.7 percent from 22.4 percent as of the end of second quarter, mainly due to greater portion of loans enabled under our 100 percent guarantee model. By the end of this year, we expect our total risk bearing, including consumer finance, to increase to above 40 percent.
Now, let's look at the risk performance of <unk> business during the third quarter, the risk bearing by balanced <unk> business at the end of the third quarter increased to 25, 7% from 22, 4% as of the end of second quarter, mainly due to a greater portion of loans enabled under our 100% guarantee model by the end of this year.
We expect our total risk bearing including consumer finance to increase to above 40%.
Speaker 4: The C to N3 flow rate of the Pouvet business increased from 1% as of the end of June to 1.1% as of the end of September , partially due to the 16.1% decrease in outstanding loan balance of the Pouvet business.
The seta entry flow rate of the <unk> business increased from 1% as of the end of June to one 1% as of the end of September partially due to the $16. One decrease in outstanding loan balance of the <unk> business chasing it and taking a closer look into the <unk> portfolio asset quality of our old book was.
Speaker 4: Taking a closer look into the PUHUI portfolio, asset quality of our old book was stabilized. As the amount of the old book decreased as a percentage of total portfolio, the absolute amount of old book that would become overdue will continue to decrease, although the C to M3 ratio remains at an elevated level.
Stabilized as the amount of the old book decreased as a percentage of total portfolio. The absolute amount of old book that would become overdue will continue to decrease although the <unk> III ratio remains at an elevated level.
Speaker 4: On the other hand, though not yet recovered to pre-COVID levels, asset quality on the new book is in line with our expectation, and we continue to operate with tighter credit standards and focus on higher quality demands from stronger SBOs based in economically resilient regions. In light of the macro environment, we plan to maintain our emphasis on quality over quantity for the foreseeable future. Now let's move on to our
On the other hand, though not yet recovered to pre COVID-19 levels asset quality on the new book is in line with our expectation and we see we continue to operate with tighter credit standards and focus on higher quality demands from stronger Sps based and economically resilient regions in light of the macro environment, we plan to plan to maintain.
Our emphasis on quality over quantity for the foreseeable future.
Now, let's move on to our consumer finance business.
Speaker 4: Our consumer finance continued to record a healthy growth during the third quarter. New loan sales in the third quarter amounted to $20.6 billion, increased by 15.3 percent sequentially, and 48.5 percent from the same period last year. The total outstanding balance of consumer finance loans at the end of the third quarter was $36.1 billion, up 9.9 percent from the end of the second quarter, and up 29.4 percent year over year.
Consumer finance continued to record a healthy growth during the third quarter, new loan sales in the third quarter amounted to $20 6 billion increased by 15, 3% sequentially and 48, 5% from the same period last year. The total outstanding balance of consumer finance loans at the end of the third quarter was 36.
1 billion up nine 9% from the end of the second quarter and up 29, 4% year over year. The NPL ratio of consumer finance business was one 9% in the third quarter as compared to two 2% in the second quarter.
Speaker 4: The NPL ratio of consumer finance business was 1.9% in the third quarter as compared to 2.2% in the second quarter.
Speaker 4: Providing smaller ticket size, shorter tenure consumption loans helps to enhance our product line as well as diversify our business operations. In addition, with the increased amount of consumer finance loans as a percentage of new loan sales, the lower funding cost of the consumer finance business will help bring down our overall funding cost. We plan to continue our efforts to grow the consumer finance business while the SBO segment remains under pressure.
Providing smaller ticket size.
Short tenure consumption loans helped to enhance our product line as well as diversify our business operations. In addition, with the increased amount of consumer finance loans as a percentage of new loan sales the lower funding cost of the consumer finance business will help bring down our overall funding costs. We plan to continue our efforts to <unk>.
So the consumer finance business, while the Spo segment remains under pressure.
Speaker 4: Due to the aforementioned factors, our total income decreased from $9.3 billion in the second quarter to $8.1 billion in the third quarter, mainly due to a decline in our outstanding loan balance and new loans enabled to SBOs.
Due to the aforementioned factors our total income decreased from $9 3 billion in the second quarter to $8 1 billion in the third quarter, mainly due to a decline in our outstanding loan balance in new loans enabled to Sps on the express expense front, we maintain our emphasis on optimizing our operational efficiency.
Speaker 4: On the expense front, we maintain our emphasis on optimizing our operational efficiency and decreased our operating expenses by 6.1 percent from the previous quarter and 31 percent from the same period last year.
And decreased our operating expenses by six 1% from the previous quarter and.
And 31% from the same period last year credit impairment losses remained at $3 billion for the quarter, mainly due to the impairment losses arising from the old book as a result, we recorded a 131 million of net profit for the third quarter.
Speaker 4: Credit impairment losses remained at $3 billion for the quarter, mainly due to the impairment losses arising from the old book. As a result, we recorded $131 million of net profit for the third quarter.
As <unk> mentioned earlier, we plan to acquire 100% of the equity interest of <unk>.
To bring additional diversity to our business subject to regulatory and <unk> shareholders' approvals, we hope to close the deal in the first half of 2024.
Speaker 5: Finally, we are pleased to announce that we have paid out the first half 2023 dividends in October with an aggregate amount of US$89 million. We'd like to thank our shareholders for their continued support, and we'll continue to use our best efforts to deliver value to our shareholders. I will now turn the call over to David, our CFO , for more details on our financial performance. Thanks, Greg. I will now provide a look into our third quarter refund plan.
Finally, we are pleased to announce that we have paid out the first half 2023 dividends that October with an aggregate amount of U S dollar $89 million wed like to thank our shareholders for their continued support and we'll continue to use our best efforts to deliver value to our shareholders I will now turn the call over to David our CFO for more details on.
Our financial performance.
Thanks, Greg.
I'll now provide close looped into our third quarter results. Please note all numbers are in brokerage firms and all comparisons on a year over year basis, unless otherwise stated.
Speaker 5: Please note that all numbers are in random terms and all comparisons are on a year-over-year basis unless otherwise stated.
Speaker 5: In the first quarter, total income was $8.1 billion, total expenses were $7.7 billion and net profit was $131 billion.
In the third quarter totaled three our total income was $8 1 billion toward expenses were seven 7 million and net profit was $141 million.
Speaker 5: As Y.S. and Brad mentioned before, performance was impacted by the macroeconomic situation affecting the SBO segment and of course the negative growth in the loan balance.
As <unk> mentioned before our performance was impacted by the macro situation macroeconomic situation effectively that steel sector.
And of course, the negative growth in the loan balance this resulted in a 39% decrease.
Speaker 5: This resulted in a 39% decrease in our top line this quarter.
Top line this quarter.
Speaker 5: During the first quarter, our technology platform-based income was $3.3 billion, representing a decrease of 51.2%.
During the first quarter, our technology platform based income was $3 3 billion, representing a decrease of 51, 2%.
Speaker 5: Our net interest income was $3.3 billion, a decrease of 28.4%, and our guaranteed income was $3.3 billion.
Net interest income was $3 3 billion.
A decrease of 28, 4%.
Our guarantee income was.
Speaker 5: 941 million, a decrease of 49.5%.
<unk> hundred $41 million a decrease of 49.
5%.
Speaker 5: Furthermore, primarily due to the decline in the loan balance, guaranteed income was $941 million compared with $1.9 billion a year ago.
Furthermore, primarily due to the decline in the loan balance guarantee income was light.
<unk> four 1 billion up nine.
We reported $1 million compared with $1 9 billion a year ago.
For our other income, which mainly includes account management fees collections and other value added services charged to our credit and hospital partners as part of their retail credit and enable that process.
Speaker 5: For our other income, which mainly includes account management fees, collections and other value-added services charged to our credit enhancement partners as part of the retail credit enablement process.
March was.
Speaker 5: $291 million in Q3 of 2023 compared to other loss of $129 million in the same period of 2022.
$291 million per quarter of 12% to three compares to the loss of 129 million in the same period of two to two.
Turning to our expenses.
Speaker 5: We are committed to cost optimisation for sustainable growth whilst preserving our core capability.
We are committed to cost optimization cost.
Sustainable growth, while preserving our core capability.
Our total expenses, excluding credit asset impairment losses, finance costs, and others decreased by 31, 1% year over year to $4 7 billion this quarter.
Speaker 5: Our total expenses, excluding credit and assets and impairment losses, finance costs and others, decreased by 31.1% year-over-year to $4.7 billion this quarter, as we continue to enhance our operations.
We continue to enhance our operational efficiency.
Speaker 5: In the third quarter, our total expenses decreased by 38.1% to $7.7 billion from $11.1 billion a year ago. This decrease was primarily due to the decreases in sales and marketing expenses and credit income losses.
First quarter or.
<unk> expenses decreased by 41% to 77th pillar.
One.
<unk> 1 billion a year ago. This decrease was primarily due to the decreases in sales and marketing expenses and credit losses.
Our total sales and marketing expenses, which mainly include expenses for Auris and investor acquisition costs as well as general sales and marketing expenses decreased by 43, 7% to $2 3 billion.
Speaker 5: Our total sales and binding expenses, which mainly include expenses for borrowers and investor acquisition costs, as well as general sales and binding expenses, decreased by 43.7 percent to 2.3 billion in the third quarter.
The third quarter.
Speaker 5: The decrease was mainly due to decreased borrower acquisition costs as a result of the decrease in new loan sales and decrease in investor acquisition and retention expenses and referral expenses from platform services attributable to the decreased transaction volume.
The decrease was mainly due to decreased four episodes cost as a result of a decrease in the new loan sales and decrease in acquisition and retention expenses and refurbished vessels from our platform services attributable to the decrease in transaction volume.
Our general and administrative expenses decreased by 15, 6% to $500 million third quarter, mainly due to our expense control measures and deep resist Texas surcharges.
Speaker 5: Our general and administrative expenses decreased by 15.6% to $500 million in the third quarter, mainly due to our expense control measures and decreases in tax and surcharges.
Speaker 5: Our operation and subsidy expenses decreased by 7.6 percent, $1.5 billion a quarter, mainly due to our efforts in expense control and decrease of loan balance, partially offset by increasing resources invested in collection services.
Our operation and associated expenses decreased by seven 6%, one 5 billion third quarter, mainly due to our efforts in cultural a decrease of loan balance partially offset by increasing resources invested in collections surfaces.
Our credit impairment losses decreased by 24, 1% to 3 billion in the third quarter, primarily due to the decrease in provisions of lower receivables as a result of the increased loan balance.
Speaker 5: Our credit impairment losses decreased by 24.1% to $3 billion in the third quarter, primarily due to the decrease in proficiency of loan receivables as a result of the increased loan balance.
Speaker 5: Our finance costs increased by 86.9% to $40 million in the third quarter, from $36 million in the same period of 2022. Mainly due to the increase of interest income from bank deposits.
Our finance costs increased by 86, 9% to $14 million in the third quarter from purchased 6 million in the same two of tool Q2, mainly due to the increase of interest income from bank deposits.
Speaker 5: plus the decrease in interest costs resulting from our repayment of our CB and our other U.S. dollar debt.
Plus the decrease in interest costs, resulting from a repayment of our CB at all.
Yes, all of that.
Speaker 5: As a result, the net profit for the third quarter was $131 million compared to the net profit of $1.4 billion in the same quarter of 2022.
As a result, that's protocol of third quarter was $131 million compared.
Compared to the net profit of $1 4 billion the same quarter of two two.
Speaker 5: Meanwhile, our basic and diluted earnings per ADS during the third quarter were both relatively 0.4 or USD 0.1.
Meanwhile, our basic and diluted earnings per ads during the third quarter.
We're both whether it be so were supported or U S dollars.
Sure.
Turning now to our balance sheet, our balance sheet remains strong and solid cash advance partners.
Speaker 5: Turning now to our balance sheet, our balance sheet remains strong and solid as our cash at bank balance has increased since the end of our last fiscal year.
<unk> increase.
Increased since the end of our last fiscal year.
As of September 30th.
Speaker 5: As of September 30th, 2023, we have a cash balance of $39,000.
202, three we have are cash buyers.
$39 8 billion.
Speaker 5: as compared with 43.9 billion of last year.
As compared with $43 9 billion as of last year.
Speaker 5: And as of the end of September 2023, our guaranteed subsistence leverage ratio was only 1.6 times, as compared to the maximum regulatory limit of 10 times. All of these factors offer substantial backing for the company to navigate through the changing macroeconomic landscape, maintaining our resilience and creating options to deliver value to our shareholders in the future. That concludes our prepared remarks for today.
As of the end of September to free our guaranty subsidiaries leverage ratio was only one six times as compared to a maximum regulatory limit of 10 times.
All of these factors sulfur substantial package for the company to navigate through the changing macro.
On the landscape.
Maintaining our students and creating options to deliver value to our shows in future.
That concludes our prepared remarks for today.
Speaker 1: Operator, we're now ready to take questions. Thank you. We will now begin the question and answer session.
Operator, we're now ready to take questions.
Thank you we will now begin the question and answer session.
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Speaker 1: Today's first question comes from Emma Hsu with B of A Securities. Please go ahead.
Today's first question comes from Emerald shoe with Bofa Securities. Please go ahead.
Hmm.
Speaker 2: Thank you for giving me the opportunity to ask the first question. Actually, I have two. The first one is about the loan demand and new loan pricing. So previously you mentioned that you are on track to meet your four-year loan growth target now, but we just want to get more details about the overall loan demand in fourth quarter so far, including the SME loans and the consumer finance loan, and how it will impact the loan pricing for different loan products. And the second one is about the unique economics under the full guarantee model. So we understand that you have been progressing with this model for a while, and we probably get some more data now. So could you please run us through the unique economics under this new model? Thank you.
Thank you for giving me the.
The opportunity to ask the first question.
Actually I have two the first one is about the loan demand and new loan pricing. So previously you mentioned that you are on track to meet our full year loan growth target now.
We just want to get more details about the over or loan demand in the fourth quarter. So far.
In the SME loans and the consumer is now and how it will impact our loan pricing.
Different analog products and the second one is about you.
Unit economics and data regarding guarantee nowadays so we understand that you have been progressing with this model for a while are we probably get some more data now so could you. Please run us through that unit economics under this new model. Thank you.
Thank you. Thank you for your question.
Speaker 3: Thank you for your question. We see that macroeconomy is surely gradually recovering, but our major target segments, small business segments, they need more time. So as a result, long demands of especially prime SBO segments remain quite weak. Their confidence level, we think, hasn't restored back to the previous level.
We see the macro economy is surely is gradual.
Recovering but.
Our major target segments small business segments, they need more time, so as a result.
Loan demands of essentially time SBS segments remain weak.
A week the confidence level, we are seeing pension risk towards back to the previous level.
So we see our current demand, but but.
Speaker 3: So we see a weak loan demand, but regardless, as we said in the previous announcement, we believe we will deliver.
Regardless as.
As we said in the previous.
<unk>.
We believe we will deliver.
Tissues illustrates guidance as planned.
Speaker 3: this year's New Year's sales guidance as planned. Regarding overall APR, our overall APR level on portfolio remains stable at around 20%.
Regarding <unk>.
Way to lever on portfolio remained stable at around the 20%, 30% and then we do not see any further pressure to reduce our loan price light.
Speaker 3: 20% and then we do not see any further pressure to reduce our loan price, YEPR, through our continuous communication with regulators. We see that. They are also gradually getting aware that
Through our continuous communication with regulators, we see that.
So gradually.
<unk>.
Speaker 3: Christ cannot be simply Lord again and again. Otherwise...
Product cannot be simply Lord again, and again otherwise.
Speaker 3: This cannot ensure the financial service coverage for the whole SBO segment, so we believe we have more flexibility in the future than before to adjust our loan price as necessary.
And can I ensure the financial service coverage for <unk> segments. So we believe we have more flexibility in the future than before to adjust our own price as necessary.
Speaker 3: And your question about our U.E.
And.
To your question about <unk>.
UE.
Speaker 3: on the full guarantee model, now we fully switch it to 100% self-guarantee model. So this model, in a mix of our guarantee plus bank funding, we don't have CGI partners anymore.
Under a full guarantee model.
Now, we fully switched it to 100% self guarantee model so is moderate.
The mix of our guarantee plus bank funding and we don't have Pgi Portsmouth anymore.
So as normal seats at premium paid our take rate will be higher than before.
Speaker 3: So as normal CGI premium pays, our take rate will be a lot higher than before, to around 14%, 1.4, 14% level. And going forward, we still will continue to optimize or reduce our funding cost.
<unk> percent, 140% lever and going forward.
Sure, we continue to optimize while reduce our funding cost.
Speaker 3: But upfront prohibition on the 100% self-guaranteed model will affect our bottom line in short of one year term. Thank you.
But often times.
Seth 104, Susceptance motor will affect our bottom line in a short term one year com.
Thank you.
And our next question today comes from Victor <unk> with Morgan Stanley. Please go ahead.
Speaker 1: And our next question today comes from Victor Hsu with Morgan Stanley , please go ahead.
Yep.
Well, thank you I think.
Speaker 6: Thank you. This is Richard from Morgan Stanley . A question on the cost side, given obviously the loan size has been shrinking and the company has
Richard from Morgan Stanley.
A question on the cost side.
Yes.
But it had been shrinking the company had been.
Speaker 6: you know, optimizing the loan size and the client base in the risky environment. Is there any room to optimize the sales force? Because, you know, at the moment, I guess, cost control is also a very important aspect that we can probably analyze and see the profitability of the business. Any thoughts on that?
Optimizing the loan side and the client base and the risk environment is there any room to optimize the sales force because you know at the moment I guess cost control. It's also very important.
Aspect that we can probably analyze and see the profitability of the business.
Thank you.
Speaker 3: Okay, thanks for your question. By now, we have completed the adjustment of our safe team.
Okay. Thanks for your question.
By now we have completed.
Among all of our sales team really used our.
Speaker 3: Our sales team, especially in the regions, the local economy is not resilient and we don't see much development potential.
Our sales team, especially in the regions.
The local economy is not resilient and then we don't see much development potential.
Speaker 3: So, as a result, we have a lot less number of teams, but our plan has been all completed, and now our focus is...
So as a result, we have a lot less number of teams but.
The.
Our our plan has been completed and now our focus is we.
Speaker 3: We don't have any further optimization plan for sales team. Our focus is more about how to retain our remaining, the best quality, a lot better than before, quality sales team.
We don't have any further optimized plan for sales team our focus is more about how to retain our remaining.
The best quality, a lot better than before quality sales team.
And then they are part of it has been.
Speaker 3: We see that their productivity has been continuously improving after optimization, although we all know that we tightened underwriting policy very much from this year, but still the remaining direct sales team, their productivity has been improving. And then we understand the productivity enhancement is the best way to optimize our cost ratio.
We see that your content has been continuously improving EFT optimization, although we all know that we tightened underwriting policy very much from this year, but still the remaining debt existing different antibody has been improving and then we understand the parchment enhancement is the bed.
First is the best way to optimize our cost ratio.
Speaker 3: But also, we continue our effort to further optimize our funding costs and other operation costs.
But also we will continue to.
Contrail effort to further optimize our funding costs and other operational costs.
So just just Richard Greg here to add to <unk> comment if you look at the.
Speaker 4: So just Richard Gregg here to add to Wyeth's comment, if you look at the.
Speaker 4: third quarter, quarter and quarter operation expenses down 6% and year on year operation expenses down 31%. So actually starting...
Third quarter quarter on quarter operation expenses down, 6% and year on year operation expenses down 31.
So actually starting in.
Speaker 4: In the fourth quarter last year and then progressively up until about July August this year we went through quite substantial restructuring and that restructuring included a frontline mid and back office So pretty far-reaching And as Wyatt said
In the fourth quarter last year, and then progressively up until about.
July August this year, we went through quite a substantial restructuring and that restructuring included frontline mid and back office.
So pretty far reaching.
And as <unk> said I think.
Speaker 4: given that we have made those adjustments and that we're starting to see.
Given that we have made those adjustments and that we're starting to see improved productivity in the frontline. The key now is really to capture the benefits from the ongoing change in the mix of our business right. So if you look at for example, Yf's mentioned funding cost.
Speaker 4: improve productivity in the front line.
Speaker 4: Our funding costs through the Pu-Hui guarantee model, where we partner with banks and other trust companies, is still ranging around 5.5% on average.
Right our funding costs.
Through the two way guarantee model when we partner with banks and other trust companies is still raging around five 5% on average, but when you look at the consumer finance business that funding cost is about 353, 6% and then if you look at the new business.
Speaker 4: But when you look at the consumer finance business, that funding cost is about 3.5-3.6 percent. And then if you look at the new business...
Mix in the third quarter, where consumer finance made up about 40% of all new business you can see as that debt.
Speaker 4: in the third quarter, where consumer finance made up about 40% of all new business. You can see as that
Speaker 4: of the business occurs, it creates an overall lower funding cost as well.
<unk> in the mix of the business occurs it creates an overall lower funding costs as well. So there is still more room, we believe.
Speaker 4: in the current interest rate environment here in China to optimize funding costs on the guarantee model and we'll be working to do that with our bank partners. But the key now really is to take advantage of the fact that
In the current interest rate environment here in China too.
To optimize funding cost on the guarantee model.
And we'll be working through that with our bank partners, but the key now really is to take advantage of the fact that the.
Speaker 4: the old book, which has really been the source of our challenges.
The old book, which has really been the source of our challenges. The book written before 2023 that that that old book as a percentage of our total business right. So if you take let's say.
Speaker 4: the book written before 2023, that that old book is a percentage of our total business, right? So if you take, let's say, unsecured loans written prior to 2023 versus the total, which includes also unsecured business generated post-January 1 this year, secured business, consumer finance business, that old book is roughly...
Unsecured loans written prior to 2023 versus the total which includes also unsecured.
Unsecured business generated post January one this year secured business consumer finance business that old book.
Is roughly about half of our of our outstanding today.
Speaker 4: of our outstanding today. And by the next 12 months out, that percentage will drop to low double digits.
And by the next 12 months out that percentage will dropped to low double digit. So we have a situation where that that the old runs off the new is performing in line with expectation productivity for the direct sales has been lifting consistently in both Q2 and Q3.
Speaker 4: So we have a situation where the old runs off, the new is performing in line with expectation. Productivity for the direct sales has been lifting consistently in both Q2 and Q3. So we think that the right-sizing things that we have done in terms of the front line are now largely completed. And it's really just now to sort of work through the remaining part of the old book, continue to improve our.
So we think that the right sizing things that we have done in terms of the frontline are now largely completed and it's really just now to sort of.
Work through the remaining part of the old book.
Continue to improve our mix and continue to be prudent in our new loan growth and we think that.
Speaker 4: and continue to be prudent in our new loan growth. And we think that with those steps, I wouldn't say that we are at the end of all challenges at this point, but we've certainly worked through a large part of it. And we think we've right-sized for our future steps.
With those steps I wouldn't say that we are at the end of all challenges at this point, but we've certainly worked through a large part of it and we think we've right sized for our future steps.
Speaker 1: Thank you. And our next question comes from Alex Yee with UBS. Please go ahead.
Thank you and our next question comes from Alex <unk> with UBS. Please go ahead.
Speaker 5: Good morning. Thanks for taking my question. I have two questions. First one is on asset quality. So where are we in terms of the legacy asset quality risk?
Good morning, Thanks for taking my questions.
Two questions first one is on asset quality.
Where are we in terms of the legacy adequately risked.
Speaker 3: you know, did the company see any early indicators that the asset quality on this part could actually improve and what driver will be needed for that improvement? And second, regarding your PAOB deal, can you also share some color on that?
Risks.
The company see any early indicators that.
That's according to you on this one could actually improve.
But it will be needed for that improvement.
Second regarding your <unk> can you also share some color on that.
Speaker 5: including any initial thoughts on the future strategy on that bank. For example, what kind of a growth prospect should we be expecting? How is the profitability now? And, you know, when do you expect it to break even? And also any color on the asset quality of this SME loan book.
Including any initial thoughts on the future strategy on that bank for Tim, but what kind of growth prospects should we be expecting.
How is the profitability now and when do you expect it to breakeven and also any color on asset quality.
Thank you.
Speaker 4: Sure. On asset quality for the domestic Puhui-branded SBO business, as we've highlighted, the C to M3 ratio, which is the
Sure.
Asset quality.
For the.
Domestic.
<unk> branded spo business right.
We've highlighted the <unk> ratio.
Which is that lead indicator.
Still remains at an elevated level right. So for Q3 it was at one 1% versus about 1% in Q2. So it has remained at an elevated level.
Speaker 4: still remains at an elevated level, right? So for Q3, it was at 1.1% versus about 1% in Q2. So it has remained at an elevated level.
Speaker 4: But, if you factor in that our, you know, this is a numerator-denominator issue when you do the ratio, actually the denominator, for example, has shrunk about 16% if you look at just a quarter-on-quarter change, right? So if you were to factor that in, you would actually start to see gradual improvement.
But.
If you factor in that or this is a numerator denominator issue when you do the ratio.
Actually the denominator for example has shrunk about 16%.
If you look at just a quarter on quarter change right. So if you were to factor that in you would actually start to see gradual improvement.
Speaker 4: And if we look through the overall book, because that old business written prior to 2023, as I said, is now approaching to be about half of the total portfolio, and that will continue to decline over the next 6 to 12 months. So the absolute loss that comes from the old book will continue
And we look through.
The overall book because that that old business written prior to 2023 as I said is now approaching to be about half of the total portfolio and that will continue to decline.
Over the next six to 12 months. So the absolute loss that comes from the old book will continue to decline.
Speaker 4: And then what will drive these figures going forward is the portion of the overall portfolio which is coming from new business.
And then what will drive these figures going forward is the portion of the overall portfolio, which is coming from new business and the performance of that part is in line with our expectation.
Speaker 4: And the performance of that part is in line with our expectations.
Speaker 4: You know, I think Wyeth has outlined that if you look at the quality of new business written since January 1st of this year, it is actually better than new business written in 2022 and 2021.
I think wireless has outlined that if you look at the quality of new business written since January 1st of this year. It is actually better than new business written in 2022 and 2021.
Speaker 4: It's not back to 2019 levels because we would expect an improved quality because we are focusing on a higher quality customer base. We've narrowed our focus on to the best credit quality groups, but we do see that it is generating a profitable outcome. We believe that the new business that we are doing today.
<unk> back to 2019 levels because we.
We would expect it improve quality because we are focusing on a higher quality customer base, we've narrowed our focus onto the best credit quality groups, but.
We do see that it is generating a profitable outcome, we believe that the new business that we are doing today through its lifetime will be a positive contributor to the company.
Speaker 4: through its lifetime, will be a positive contributor to the company in 2023 and beyond on a per-account basis. So we think the asset quality, well, it is.
2023 and beyond.
On a per account basis, so we think.
The asset quality well it is still challenging the environment is still challenging we are seeing a gradual improvement one other indicator.
Speaker 4: still challenging. The environment is still challenging. We are seeing a gradual improvement. One other indicator that we've seen recently is that the amount that we're able to recover post-indemnity, post, you know, 90 days where it's been charged off, that recovery, is actually gradually improving as well this year and in the third quarter. So that we believe will bring some room going forward. So I don't think it...
We see recently.
Is that the amount that we're able to recovery recover posted indemnity post.
90 days.
Where it has been charged off that recovery is actually gradually improving as well this year and in the <unk>.
Third quarter, so that we believe will bring some room going forward. So I don't think its time to celebrate that everything has returned to normal but I think it is time that we know that we probably have seen the worst and we will see gradual improvement in overall quality.
Speaker 4: time to celebrate that everything has returned to normal, but I think it is time that we know that we probably have seen the worst.
Speaker 4: and we will see gradual improvement in overall quality going.
Forward.
Speaker 4: In terms of POB, the Digital Virtual Bank License in Hong Kong,
In terms of.
P O b.
Digital virtual bank license in Hong Kong.
Speaker 4: We've actually, Lou Holdings has been looking at this.
We've actually.
Lew Holdings has been looking at this market for some time when the initial licenses were issued eight of them.
Speaker 4: market for some time. When the initial licenses were issued, eight of them back in 2019, we did consider at that point looking into it, but then didn't pursue it for other reasons.
Back in 2019, we did consider at that point looking into it but that didn't pursue it for other reasons.
Speaker 4: Given the opportunity to fully acquire this license today at roughly about 1.2, 1.3 times book value, we think it's actually quite a good medium-term growth option, a very affordable medium-term growth option for us.
Given the opportunity to fully acquire this license today.
At.
At roughly.
1213 times book value, we think is actually quite a good <unk>.
Medium term growth option very affordable medium term growth option for us.
Speaker 4: If you look at POV in the context of the AT&T
If you look at <unk> in the context of the eight.
Speaker 4: of virtual banks in Hong Kong by loan assets and total assets, it's roughly ranked third.
Virtual bank in Hong Kong.
By loan assets and total assets roughly ranked third.
Speaker 4: And if you look at its relative profitability, it actually has the least losses of any player in the market. And the focus of POB, while it's still relatively small, of about 1.8 billion Hong Kong outstanding loans, with about a majority of those backed by the Hong Kong SME Government Guarantee Program, it's quite low risk.
And if you look at its relative profitability. It actually has the least losses of any player in the market and the focus of <unk>, while it's still relatively small.
Of about $1 8 billion, Hong Kong outstanding loans.
With about.
A majority of those backed by the.
Hong Kong SME government guarantee program, it's quite low risk.
Speaker 4: If you look at the losses that it incurred last year, it's about 160 million Hong Kong, and we would expect losses this year to be in that range. We would expect to grow the business in the context of Hong Kong by, on the loan side, diversifying its products.
If you look at the losses that it incurred last year is about $160 billion of Hong Kong.
And we would expect losses this year to be in that range.
We would expect to grow the business.
In the context of Hong Kong.
On the loan side diversifying.
Its products, a little bit more diversify its acquisition channels a little bit more.
Speaker 4: a little bit more, diversify its acquisition channels a little bit more, taking our experience in technology risk and sales force deployment and bringing those into the mix.
Taking our experience in technology.
<unk> and sales force deployment and bringing those into the mix.
Speaker 4: And we will also look at opportunities, if you look out over the next one to two years, in addition to lending opportunities, which may extend into the Greater Bay. We have to continue to watch the policy on that closely, but we do think that is the general direction that people want to go.
And we will also look at opportunities if you look out over the next one to two years. In addition to lending opportunities, which may extend into the greater Bay, we have to compete and watch the policy and that closely but we do think that is the general direction that people want to go well.
Speaker 4: We'll also look at non-lending businesses where the bank has the ability, obviously beyond deposits, to also do a number of other products, and so those are areas that we will look to develop.
We will also look at non lending businesses.
Where the bank has the ability obviously beyond deposits to also do a number of other products and so those are areas that we will look to develop so.
Speaker 4: You know, over the next two to three years with investment and development, we believe this will become a profitable venture for us. And I think if you take the broader perspective of Lou Holdings, and I think if you look at the words that YS used today, he mentioned several times diversification.
Over the next.
Two to three years with investment in development.
We believe this will become a profitable venture.
Venture for Us and I think if you take the broader perspective of Leu Holdings I think if you look at the <unk>.
Words that Wyeth used today I've mentioned several times diversification. So the focus really for the last two plus years in the.
Speaker 4: So the focus really for the last two plus years in the current environment has been to de-risk.
The current environment has been to de risk.
Speaker 4: to reduce our exposure to the SBO segment while focusing on the high quality customers.
Two to reduce our exposure to the Sps segment, while focusing on the high quality customers and start to diversify our business domestically with consumer finance and also I think through Hong Kong.
Speaker 4: and start to diversify our business domestically with consumer finance.
Speaker 4: And also, I think, through Hong Kong, with this full banking license, it gives us long-term opportunities in Hong Kong, Greater Bay, but also could be a launch point for other markets over time. So we look at it as an important and affordable option for us to continue to pursue diversification strategies.
This full banking license it gives us long term opportunities.
Hong Kong Greater Bay, but also could be a large point for other markets over time.
So we look at it as an important.
An affordable option for us to continue to pursue diversification strategies.
Thank you and our next question today comes from Nevada.
Speaker 1: Thank you. And our next question today comes from Yara Lee with CICC. Please go ahead.
Please go ahead.
Hello management, Thanks for taking my question.
Yes.
Speaker 7: and I have two questions for today. The first one is about our consumer finance segment.
I have two questions for today. The first one is about our consumer finance segments.
Speaker 7: I was wondering how we shifted the strategic focus towards the consumer finance and looking forward how much it will contribute to the whole loan book.
Was wondering how we should see the strategic focus towards the consumer finance and looking forward how much it will contribute to the whole loan book.
Speaker 7: and compare with the consumer finance peers, what are the unique advantages that we have to develop such business?
Compared with.
Consumer finance peers, what are the unique advantages that we have to <unk> search business and the second one is I noticed you have almost a 40 billion cash in bank.
Speaker 7: And the second one is that I noticed you have almost 40 billion cash in bank as of this quarter's end. And besides the normal dividend payout, will management consider share repurchase or some special dividend to deliver more value to the shareholders? And that's all, thank you.
This quarter's end and be sandstone normal dividend payouts will management consider share repurchase or a special dividend to give you more and more value to the shareholders and that's all thank you.
Speaker 4: Sure. I'll take your first question on consumer finance. So I think we have to first define what is consumer finance for us. How does it add to what we already have been doing for many years?
Sure.
Take your first question on consumer finance, So I think we have to.
First defined what is.
Consumer finance for Us how does it add to what we already have been doing for many years.
Speaker 4: So, if you look at our traditional focus on the small business owner segment, over time, we've enabled lending to more than 6 million small business owners. And as you know, those loans have always been granted in the form of, to the individual, mostly for use in their business.
So if you look at our.
Traditional focus on the small business owner segment.
Over over time.
Enabled blending to more than 6 million small business owners.
And as you know those loans have always been granted in the form of to the individual.
Mostly for use in their businesses. So actually we have quite a large installed base of customers that we have interacted with the continue to interact with.
Speaker 4: So actually we have quite a large installed base of customers that we have interacted with and continue to interact with.
Speaker 4: Now, most of the lending that we have done traditionally has been larger ticket, two to three hundred thousand renminbi, and has typically been for a duration of two to three years.
Now most of the lending that we have done traditionally has been larger ticket.
Two to 300000 renminbi and has typically been for a duration of two to three years.
Speaker 4: With our consumer finance license, we have an opportunity to provide a higher frequency service to customers that we have served for many years.
With our consumer finance license, we have an opportunity to provide a higher frequency service to customers that we have served for many years.
Speaker 4: So we have the ability to understand those customers, to understand beyond some of their longer-term needs, particularly as they've repaid over time, they may have shorter-term requirements as individuals as well. And those requirements could be in the form of consumption of their own personal needs.
We have the ability to understand those customers to understand beyond some of their longer term needs, particularly as they repaid over time. They may have shorter term requirements as individuals as well.
Those requirements could be in form of consumption.
Other of their own personal needs. So.
Speaker 4: So we have been developing a product set that serves these individuals. We've also been developing a product set which allows us to partner with a number of other online platforms so that we're also reaching out into new customer segments.
So we have been developing.
<unk> set that serves these individuals' we've also been developing our product set which allows us to partner with a number of other online platforms. So that we're also reaching out into new customer segments.
Speaker 4: Today, the business is developing around half with the ability to serve, you know, small business owners and their individual needs, and the other half through partnerships that extends our reach into the customer base. We continue to invest in this business to generate more and more scenarios which are closely linked to customers' consumption behavior.
Today, the business is developing around half with the ability to serve.
While business owners and their individual needs.
The other half through partnerships that extend our reach into the customer base. We continue to invest in this business to generate more and more scenarios, which are closely linked to our customers' consumption behavior I think what's very important if you look at consumer financing.
Speaker 4: I think what's very important if you look at consumer finance in the context of Blue Holdings is that it increases our frequency of interaction for those customers we serve. It also gives us a broader
Context of Blue Holdings is that it increases our frequency of interaction for those customers. We serve it also gives us a broader data set to.
Speaker 4: to understand some of their needs and behaviors, which allows us to better judge their overall credit risk in their various needs.
To understand some of their needs and behaviors, which allows us to better judge the overall credit risk in their various needs. So it's a great opportunity to leverage what we have to also broadened who we serve to deal with a broader set of products with shorter durations, which gives us more flexibility and adds to data that we can use.
Speaker 4: opportunity to leverage what we have, to also broaden who we serve, to do it with a broader set of products with shorter durations, which gives us more flexibility, and adds to data that we can use to assess customer needs.
To assess customers more broadly today as we said in the third quarter.
Speaker 4: Today, as we said, in the third quarter of total new loan sales enabled through the company, about 40 percent were for consumer credit.
Total new loan sales enabled through the company about 40%.
For consumer finance it makes up about 11% of the total outstandings today.
Speaker 4: It makes up about 11% of the total outstandings today.
Speaker 4: If you roll forward over the next 12 to 18 months, we would expect that it will still be a very large share of new sales.
If you roll forward over the next 12 to 18 months.
Would expect that it will still be a very large share of new sales and.
Speaker 4: and will increasingly make up a larger part of the portfolio.
And we will increasingly make up a larger part of the portfolio right. So we're now low double digits as a percentage of portfolio and we believe that will continue to increase over the next 12 to 18 months. So it is an important diversification initiative, but it also helps reinforce our overall position in terms of cut.
Speaker 4: So we're now low double digits in percentage of portfolio, and we believe that will continue to increase.
Speaker 4: over the next 12 to 18 months. So it is an important diversification initiative, but it also helps reinforce.
Speaker 5: our overall position in terms of customers and risk and service. David, do you want to address the second question? Thanks, Jada, for your second question. Yes, we have been exploring all the ways to deliver fairly to our shareholders ever since our listing, as you may be aware. We did some buybacks in the previous years and we continue to pay out dividends in recent years.
<unk> at risk and service David do you want to address the second question first the auto for a second question.
Yes.
We have been exploring all the ways to deliver favorable shows emphasis our listing issue, where we did some buybacks in the previous years and we continue to.
Payout dividend in recent years.
Speaker 5: We will continue to do so, of course, and as you may be aware, we just paid out the first half of 2023, the dividends in October , with an amount of about 89 million U.S. dollars. It's just a relatively small amount in terms of relative to our cash position.
We will continue to do so of course and as you may aware, we just paid out the first half tool to free dividends in October began a manageable out.
89 million U S dollars, it's just a relatively small amount.
In terms of.
Related to our cash position.
Speaker 5: And I think, after all, we won't exclude any means or ways that we can deliver value to our shareholders as a whole from the perspective of total shareholders' returns.
And I think after rule, we wont exclude any means of ways that we can deliver.
Value to our shareholders as a whole.
Full perspective of total shows returns.
Speaker 5: And we also find ways to preserve cash or deploying capital in a way to support
And we will also find ways to preserve cash or deploying capital in a way to support.
Speaker 5: the sustainable growth for business model in the future or to create options for future business model and growth.
Sustainable growth for our business model in the future.
Or to create options.
For future business model and growth.
Thank you Adam.
Thank you Doug.
Speaker 1: That concludes our question and answer session for today. I will now turn the call back over to our management for closing remarks.
That concludes our question and answer session for today I will now turn the call back over to management for closing remarks.
Okay.
Speaker 2: Sure, thank you. This concludes today's call. Thank you for joining the conference call. If you have any more questions, please do not hesitate to contact the company's IR team. Thanks again.
Sure. Thank you. This concludes today's call. Thank you for joining the conference call. If you have any more questions. Please do not hesitate to contact the Companys Iot. Thanks again.
Speaker 1: Thank you. That concludes the call today. Thank you everyone for attending and you may now disconnect.
Thank you that concludes the call today. Thank.
Thank you everyone for attending and you may now disconnect.
Yeah.
[music].
Yeah.