Q4 2023 Lufax Holding Ltd Earnings Call
Operator: Ladies and gentlemen, thank you for standing by, and welcome to Lufax Holdings Limited's fourth quarter 2023 earnings call. At this time, all participants are in listen-only mode.
Ladies and gentlemen, thank you for standing by and welcome to Loot box Holdings Limited fourth quarter 2023 earnings call.
At this time, all participants are in listen only mode.
Operator: After management's prepared remarks, we will have a Q&A session. Please note this event is being recorded. Now, I'd like to hand the conference over to your speaker host today, Ms. Lu Xian, the company's head of the board office and capital markets. Please go ahead, Mehta.
After managements prepared remarks, we will have a Q&A session.
Please note this event is being recorded.
Speaker Change: Now I'd like to hand, the conference over to your speaker host today.
Speaker Change: She is the company's head of board office and capital market.
Speaker Change: Please go ahead Madam.
Xinyan Liu: Thank you very much. Hello everyone, and welcome to our fourth quarter 2023 earnings conference call. Our quarterly financial and operating results were released by our Newswire services and are currently available online. Today, you will hear from our Chairman and CEO, Mr. Y.S. Chou, who will provide an update on our latest business strategies, the macroeconomic trend, recent developments in our business, and special dividends. Our co-CEO, Mr. Greg Gibb, will then go through our fourth quarter results and provide more details on our business priorities and outlook. Afterward, our CFO, Mr. David Choy, will offer a closing comment.
Speaker Change: Thank you very much Hello, everyone and welcome to our fourth quarter, two OTC earnings Conference call, our quarterly financial and operating results were released by our Newswire services and are currently available online.
Speaker Change: You were here from our chairman and CEO. Mr Y S. Cho, who have provided an update of our lately as the business strategies. The macroeconomic trend reason the developments of our business and a special dividend our co CEO Mr. Greg keep what then goes through our fourth quarter without those items.
Speaker Change: More details on our business priorities and the outlook afterwards, our CFO, Mr. David Choi well offer a 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.
Xinyan Liu: We will now take a forward look at 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 am now pleased to turn over the call to Mr. Y.S. Chou, Chairman and CEO of Lufax.
Speaker Change: To this call as we will make forward looking statements with that I'm now pleased to turn over the call to Mr. <unk> <unk>, Chairman and CEO of Loopnet Keith. Thank you. Thank you for joining today's call during the fourth quarter the economy environment remained complex.
Yong Suk Cho: Thank you. Thank you for joining today's call. During the fourth quarter, the economic environment remained complex, and SBOs continued to come under pressure. Nevertheless, as we prioritized quality over quantity, we have now completed our major de-risking actions, and we continue to carry out a prudent strategy. We are confident that the strategic initiatives we have implemented form a solid foundation for longer-term growth and profitability and believe that the cumulative impact of our strategic upgrades will optimize and recalibrate our risk-return profile to align with the prevailing macro environment in China. Now, let me provide some space for our quarter and the rest of the team.
And as we also continue to come under pressure. Nevertheless, as these cloud high quality over quantity. We have now completed our major derisking exercise and.
Speaker Change: We will continue to carry out a prudent strategy.
Keith: We are confident that the strategic initiatives, we have implemented almost sort of the foundation, along with some balls and clubs stability and believe that cumulative impact of our strategic upgrades with optimized and recalibrate, our risk return profile to align with the <unk>.
Keith: Adding macro environment in China.
Speaker Change: Now, let me provide some updates to our.
Speaker Change: Good quarter.
Speaker Change: For the quarter first the broader macro environment remains challenging twice views. This is reflected in the SME development index published by the China Association of small and medium enterprises.
Yong Suk Cho: This is reflected in the SDME Development Index published by the China Association of Small and Medium Enterprises, which declined slightly to 89.1 in the fourth quarter of 2023. Furthermore, the SME Business Conditions Index published by the Chung Kong Graduate School of Business declined from 49.9 in September to 47.8 in December.
Which declined slightly to $89 one in the fourth quarter of 2023.
Speaker Change: Furthermore, the SME business conditions index published by.
Speaker Change: Cheung Kong Greater school of business.
<unk> from 49, 9% September to 47 eight in December this indicates that if you just take months is likely to recover at a somewhat slower pace.
Yong Suk Cho: This indicates that the ex-business segment is likely to recover at a somewhat slower pace. Next, let's turn to our business. Throughout 2023, we've made five major de-risking and diversification actions, including four mixed changes and one business model adjustment. First, we have changed our segment and product mix. Our heavier concentration in the SGO segment and offerings for SGO business loans generated healthy profit prior to 2022. However, with the change in the macroeconomic environment, such concentration drove a deterioration in both our operational and financial results in the past 18 months. To address this, we have strategically adjusted both product offerings and segments. In terms of prior offerings, we've shifted from a predominant focus on SBO business laws to a more balanced offering of business and consumer laws in our product portfolio.
Speaker Change: Next let's say, let's turn to our business.
Speaker Change: Throughout 2023, we've made five major de risking and diversification excellence.
Speaker Change: <unk> full mixed changes and one business model adjustment.
Speaker Change: First we have changed our segments and product mix.
Speaker Change: Our heavier concentration in the SUV segment and offerings of <unk> launch generated healthy profit prior to 2022.
Speaker Change: However, with a change of <unk> environment.
Speaker Change: Mccormick com environment, such concentration drove a deterioration in both our operational and financial resource in the past 18 months.
Speaker Change: To address this we have strategically adjusted both product offerings and segments.
In terms of cloud offerings, we have shifted from a predominantly focus on aggregate ph noise to a more balanced offering of business and consumption laws.
Speaker Change: <unk> product portfolio, we've expanded our offerings to be more comprehensive income passing both eastern months and revolving payment options.
Yong Suk Cho: We've expanded our offerings to be more comprehensive, encompassing both installment and revolving payment options. Furthermore, within the SBO segment, we refined our focus by targeting customers with better risk profiles, specifically those in the R1 to R3 rating range. Second, we have adjusted our original mix. Since the second half of 2022, we've observed significant variations in credit performance and resilience across different areas. Accordingly, we have completed the reduction in our footprint and are focusing on higher quality geographies with expected greater economic resilience. So we have optimized our channel mix, especially our direct sales channel, which is the most important for our business. We recognize that our rapid historical expansion has resulted in low productivity and higher risk with DirectX's team, and we responded by optimizing the scale of our direct sales team.
Speaker Change: With India, So SUV segment.
Refined our focus by targeting customers with better risk profiles.
Speaker Change: Specifically those into our 123 rating range.
Speaker Change: Second we have adjusted our regional mix since.
Speaker Change: Since the second half of 2022, we've also seen a need to kind of variations in credit performance and resilience of course different areas.
Speaker Change: Accordingly, we have completed the reduction in our footprint and are focusing on higher quality geographies with expected greater economic resilience.
Speaker Change: Thought we have optimized our channel mix, especially our direct channel, which is the most important to our business.
Speaker Change: I will point out that our repeat historically expansion has resulted in lower profitability and higher risk with that express team.
Speaker Change: And responded by optimizing the scale our direct sales team as a result, the number of that existing reduced from 47000 at the end of 2022.
Yong Suk Cho: As a result, the number of direct sales staff reduced from 47,000 at the end of 2022 to around 21,000 at the end of 2023. Of course, we have adjusted our industry mix, reflecting the relative sustainability of industries under the changing macro environment. In our internal risk assessment, we have assigned great importance to preservation of each industry's economic cycle stage within our models and increased KYB and industry factors for enhanced model predictiveness.
Speaker Change: 21000, as Daniel our 2023.
Speaker Change: Fourth we have adjusted our industry mix.
Speaker Change: Reflecting the relative sustainability of industry, although the changing macro environment.
Speaker Change: Ill turn the skill assessments, we have assigned <unk>, Fortunately congratulation of each industry economic cycle stage, we didnt, one within our borders and increased <unk> IV and industry sectors for enhanced the border trade activities.
Yong Suk Cho: Finally, we have completed the migration of our business model. As discussed previously, the high CGI premium charges by our business partners had negatively impacted our revenue and profits. We recognize that high third-party reliance reduces our tactical freedom.
Speaker Change: Finally, we have completed migration will be smoother.
Speaker Change: As discussed previously the high CGI premium charged by our <unk> partners had negatively impacted our revenue and profit.
Speaker Change: We like when I say, a high so the party reliance reduced our technical freedom.
Yong Suk Cho: Therefore, we started negotiations with our funding partners at the end of 2022 and successfully completed the transition into a 100% guaranteed business model by the end of the third quarter of 2023. In the fourth quarter of 2023, all the new loans were either granted by our consumer finance subsidiary as unbalanced loans or enabled by our guaranteed company under the 100% risk-bearing business model, thus eliminating the drag factor of C-Gi. On a single account basis, new loans enabled under 100% unity models are expected to realize lifetime profitability.
Speaker Change: Therefore, we started negotiations with our partners at the end of 2022 and successfully completed transitioning to a 100% guarantee business moderate by the end of third quarter 2023.
Speaker Change: The fourth quarter of 2020 fleet order neurons will either granted by our principal finance subsidiary.
Speaker Change: On balance sheet loans, who are enabled by our guarantee company under the 100% risk failing being smaller.
Speaker Change: Thus, eliminating the drag effect of CGI.
Speaker Change: On a single account basis, new launch enabled on the 100% to models are expected to realize lifetime profitability. However may record net accounting loss for the fourth change that year due to higher upfront provisioning as compared with the launch on the CGI model.
Yong Suk Cho: However, it may record a net accounting loss for the first calendar year due to higher upfront provisioning as compared with the loans under the CGI model. While this strategic shift enables us to capture greater economic value, it has also increased our risk exposures. Therefore, we remain prudent and prioritize quality over quantity throughout 2024.
Speaker Change: While this strategic shift enables us to capture greater economic value. It has also increased our risk exposures. Therefore, we remain prudent.
Speaker Change: And prioritizing quality over quantity throughout 2024.
Yong Suk Cho: In terms of asset quality, compared to the third quarter, the C2M3 flow rate experienced an increase in the fourth quarter. This was mainly driven by the reduction in our outstanding loan balance and the short-term impact from the restructuring of our direct sales team and branches. With the completion of all the restructuring measures, we have seen gradual improvement in the flow rate in the first quarter of 2024. To sum up, during the fourth quarter, with the completion of the de-risking initiative, the downsides of our business are under control, and we have stronger visibility of our business. However, the upside we still need more time due to our prudent strategy and transformation of our business model. Finally, over the past quarters, we have consistently heard our shareholders request for us to improve investor return and capital efficiency. Considering the priorities in our business de-risking and business model transformation, as well as our outlook for growth and capital requirements for the next several years, we believe we have the capability and now is the right time to return value to our shareholders through a special dividend of approximately RMB 10 billion. Thanks. I will now return the call to Greg.
Speaker Change: In terms of asset quality compared to weak compared to the third quarter CTO emslie flow rate experienced an increase in the fourth quarter.
Speaker Change: This was mainly driven by the reduction in our outstanding loan balance and short term impact from the restructuring of our direct sales team and branches.
Speaker Change: With the completion of the restructuring measures, we have seen gradual improvement of the flow rates in the first quarter of 2024.
Speaker Change: To sum up during the fourth quarter with the completion of deal with key initiative. The downsize of our business is under control and we have stronger vis vis that drove out these are businesses.
Speaker Change: However, the upside we still need more time due to our prudent strategy and transformation of our business model.
Speaker Change: Finally over the past quarters, we have consistently heard.
Speaker Change: Our our shareholders request for us to improve investor return and capital efficiency.
Speaker Change: Considering the priority.
Speaker Change: Derisk team and business model transformation.
Speaker Change: Our outlook for the growth and capital requirements for the next several years.
Speaker Change: We believe we have the capability and now is the right time to return value to our shareholders through a special dividend.
Speaker Change: Estimated dividend side of approximately RMB 10 billion.
Speaker Change: I will now return the call over to Greg.
Gregory Dean Gibb: Thanks, Y.S. I'll provide more details on our fourth quarter and full year 2023 results and our operational focus for this year. Please note all figures are in renminbi unless otherwise stated. I'd like to start with an overview of our performance during the fourth quarter.
Greg: Thanks, <unk> I'll now provide more details on our fourth quarter and full year 2023 and results in our operational focus for this year. Please note all figures are in renminbi unless otherwise.
Greg: David I.
Greg: I'd like to start with an overview of our performance during the fourth quarter during the fourth quarter of 2022, our performance remained under pressure from the complex macro environment and challenges faced by Sps. Our overall new loan sales were 47 billion, representing a year on year decline of 39, 6%. This was mainly due to <unk>.
Gregory Dean Gibb: During the fourth quarter of 2022, our performance remained under pressure from the complex macro environment and challenges faced by SBOs. Our overall new loan sales were $47 billion, representing a year-on-year decline of 39.6%. This was mainly due to subdued demand for high-quality loans from SBOs, coupled with our prudent strategy as we transit to the 100% guarantee model. Among total new sales, approximately 40% was contributed by consumer finance as we transition our portfolio mix. Fourth quarter revenue was $6.9 billion, a decrease of 44.3% year over year. This was primarily due to the reduction of our outstanding loan balance, which stood at $315 billion at the end of 2023, a decline of 45% on an annual basis. We recorded a net loss of $832 million in the fourth quarter.
Greg: Demand for high quality loans from Spo's, coupled with our prudent strategy as we transit to the 100% guarantee model.
Greg: Among total new sales.
Greg: Absolutely, 40% was contributed by consumer finance as we transition our portfolio mix fourth quarter revenue was $6 9 billion a decrease of 44, 3% year over year. This was primarily due to the reduction of our outstanding loan balance, which stood at 315 billion at the end of 2023, a decline of 45%.
Greg: On an annual basis, we recorded a net loss of $832 million in the fourth quarter. This was mainly driven by elevated credit losses stemming from frontloaded provisions associated with loans enabled under the 100% guarantee model.
Gregory Dean Gibb: This was mainly driven by elevated credit losses stemming from front-loaded provisions associated with loans enabled under the 100% guarantee model, heightened risk exposure under the model, and certain one-off non-operating losses. Now, let's delve into our de-risking initiatives that we have made progress on in 2023. As YS just explained, we have executed on five major de-risking strategies, which included four significant changes to our business mix and transition to the new business model. First, our segment adjustments have fundamentally shifted the new business mix in favor of R1 to R3 rated customers.
Greg: Our risk exposure under the bottle and certain one off nonoperating losses.
Greg: Now, let's delve into our Derisking initiatives that we have made progress on in 2023 as wireless just explained we have executed on five major de risking strategies, which included four significant changes to our business mix and transition to the new business model.
First our segment adjustments have fundamentally shifted the new business mix in favor of what our one to RSV rated customers in 2023, 73% of unsecured load new customers were rated one two or three compared to 49% in 2022.
Gregory Dean Gibb: In 2023, 73% of unsecured loan new customers were rated R1 to R3, compared to 49% in 2022. In addition, strategic adjustments to our product offerings have resulted in a new business mix that reflects our significant de-risking measures. This has prompted a gradual transformation of our existing portfolio mix. In 2023, consumer finance sales accounted for 34% of new loan sales, up from 12% in 2022. Concurrently, the proportion of unsecured loans and secured loans decreased to 44% and 22%, respectively, from 64% and 24% in 2022. As a result, our balance mix has shifted, with the consumer finance balance as a percentage of total balance rising to 12% at the end of 2023, compared to 5% at the end of 2022. The proportion of unsecured loans decreased from 66% to 73% as of the end of 2022, while the proportion of secured loans remained flat.
Greg: In addition, strategic adjustments to our product offerings have resulted in a new business mix that reflects our significant derisking measures. This has prompted a gradual transformation of our existing portfolio mix in 2023 consumer finance sales accounted for 34% of new low sales up from 12% in 2022 concurrently the.
Greg: Portion of unsecured loans and secured loans decreased to 44, 22%, respectively from 64% and 24% in 2022.
Greg: As a result, our balanced mix has shifted with consumer finance balances as a percentage of total balance horizon to 12% at the end of 2023 compared to 5% at the end of 2022, the proportion of unsecured loans decreased from 66%.
Greg: 66% from 73% as of the end of 'twenty two while the proportion of secured loans remained flat. During 2024, we anticipated continued consumer finance diversification and majority of the unsecured balances will fall under the 100% guarantee model by the end of 2024.
Gregory Dean Gibb: During 2024, we anticipated continued consumer finance diversification, and the majority of the unsecured balances will fall under the 100% guarantee model by the end of 2024. Next, our regional adjustments involved the targeted reduction of our footprint in less economically resilient regions characterized by relatively higher risk. This strategic shift is reflected in our geographic coverage, which decreased from over 300 cities at the end of 2022 to 146 cities at the end of 2023. In terms of channel adjustments, we have concluded the restructuring of our direct sales. The number of direct sales team members was reduced from 47,000 at the beginning of the year to 21,000 by the end of the year.
Greg: Next our regional adjustments have involved the targeted reduction of our footprint and less economically resilient regions characterized by relatively higher risk. This strategic shift is reflected in our geographic coverage, which has decreased from over 300 cities at the end of 2022 to 146 cities.
Greg: At the end of 2023 and.
Greg: In terms of channel adjustments, we have concluded the restructuring of our direct sales the number of direct sales team members was reduced from 47000 at the beginning of the year to 21000 by the end of the year in 2023, the direct sales channel contributed to 63% of new sales up from 57 in the previous year.
Gregory Dean Gibb: In 2023, the direct sales channel contributed to 63% of new sales, up from 57 in the previous year. Turning to our business model, starting in the fourth quarter, we've completed the strategic pivot as we fully transition to the 100% guarantee model. This move has transformed our portfolio mix and increased our risk bearing as vintages run off, and the loans under the new model take shape. As a result, our risk bearing by balance increased to 39.8% at the end of 2023, up from 23.5% at the end of the previous year. During the fourth quarter, our overall C to M3 increased to 1.2% from 1.1% in the prior quarter.
Greg: Turning to our business model starting in the fourth quarter, we completed the strategic pivot as we fully transition to the 100% guarantee model. This move has transformed bar.
Greg: Portfolio mix and increased our risk bearing as vintages runoff and the loans under the new model take shape as a result, our risk bearing by balance increased to 39, 8% at the end of 2023 up from 23, 5% at the end of the previous year.
Greg: During the fourth quarter, our overall <unk> increased to one 2% from one 1% in the prior quarter. This was primarily due to a reduction in our <unk> business outstanding balance and temporary negative impact from our geographic and direct sales restructuring in the past quarter, Although we have seen improvement in the seat to entry ratio in the first.
<unk> given our increased disclosure under the new model, we continue our prudent strategy prioritizing quality over quantity in 2024.
Now, let's turn to our outlook for 2024.
We expect new loan sales of 2020 for it to be in the range of 190 to 220 billion and the ending balance to be between $200 billion and 230 billion. Meanwhile, although we expect loans under 100% guarantee model will be lifetime profitable on a single account basis. It is important to highlight that loans out of this.
Gregory Dean Gibb: This is primarily due to a reduction in our proof of a business outstanding balance and a temporary negative impact from our geographic and direct sales restructuring in the past quarter. Although we have seen improvement in the C to M3 ratio in the first quarter, given our increased risk exposure under the new model, we continue our prudent strategy to prioritize quality over quantity in 2024. Now let's turn to our outlook for 2024. We expect new loan sales in 2024 to be in the range of $190 to $220 billion, and the ending balance to be between $200 billion and $230 billion. Meanwhile, although we expect loans under the 100% Guarantee Model will be lifetime profitable on a single account basis, it is important to highlight that loans under this model may record accounting losses in the first, and the other three are business operations, capital, and liquidity requirements. As a result, at the end of 2023, the leverage ratio of our guarantees subsidiary was 1.8 times, far below the regulatory limit of 10 times. Our consumer finance capital adequacy ratio stood at approximately 15.3%, well above the required 10.5%.
Greg: Modeled may record accounting loss in the fourth.
Greg: This operations capital and liquidity requirements at the end of 2023, the leverage ratio of our guarantee subsidiary was one eight times far below the regulatory limit of 10 times, our consumer finance capital.
Greg: Adequacy ratio stood at approximately 15, 3%.
Greg: Well above the required 10, 5% as for the balance sheet, we hold liquid assets of 84 billion.
Greg: With our cash and bank balance outstanding at $39 6 billion.
Greg: With a strong capital position and visibility into our business growth in the medium term, we are well positioned to further respond to our shareholders consistent feedback to increase shareholder returns and on top of the regular dividend and share buybacks that we have performed over the past three years, our board of directors has approved subject to shareholders' approval.
Greg: Special dividend of U S dollars to 402 for Aes or $1 21 per ordinary share with a total estimated size of approximately renminbi 10 billion.
Greg: To offer our shareholders full flexibility.
Gregory Dean Gibb: As for the balance sheet, we hold liquid assets of $84 billion, with our cash and bank balance outstanding at $39.6 billion. With a strong capital position and visibility into our business growth in the medium term, we are well positioned to further respond to our shareholders' consistent feedback to increase shareholder returns. And on top of the regular dividend and share buybacks that we have performed over the past three years, our board of directors has approved, subject to shareholders' approval, a special dividend of U.S. dollars 2.42 per ADS or $1.21 per ordinary share, with a total estimated revenue size of approximately $10 billion. To offer our shareholders full flexibility, each shareholder may elect to receive the dividend either all in cash or all in script.
Greg: Each shareholder may elect to receive the dividend either all in cash or all in script as.
Greg: As we are dual listed in the U S and Hong Kong stock markets, the shareholders and each market will have to follow the respective procedures for receiving the special dividend.
Greg: More details will be disclosed in our announcements in the statutory circulars in due course, the special dividend is subject to the approval of shareholders at the annual General meeting, which will be held on may 30th with a record date of April nine.
Greg: I will now turn the call over to David our CFO for more details on our financial performance.
David Choi: Thank you Greg.
David Choi: I will now provide close look into our fourth quarter results.
David Choi: Note that all numbers I enrollment be terms and all comparisons are on a year over year basis, unless otherwise stated.
David Choi: That's why isn't grant mentioned before.
Speaker Change: Almost was impacted.
Speaker Change: Pro economic environment in which the small business owner sector has been under pressure throughout the period.
Speaker Change: Through strategic adjustments to 100% guarantee model.
Gregory Dean Gibb: As we are dual listed on the US and Hong Kong stock markets, the shareholders in each market will have to follow the respective procedures for receiving the special dividend. More details will be disclosed in our announcements and the statutory circulars in due course. The special dividend is subject to the approval of shareholders at the annual general meeting, which will be held on May 30th, with a record date of April 9th. I will now turn the call over to David, our CFO, for more details on our financial performance. Thank you, Dirac.
Speaker Change: And prioritizing quality, coupled with Beckman and battle to electrical regions, we expect somewhat of a business scale back a little.
Speaker Change: In the future.
Speaker Change: This strategic transition in the core of our acreage low volume and total income to continue to decrease.
Speaker Change: Well I'll say expected credit loss provision is required to be booked upfront and day one boosting.
Speaker Change: Boosting the accounting loss in early part of the lifecycle.
Speaker Change: Model.
Speaker Change: In the fourth quarter 200 to three out of the income was $6 9 billion, increasing by 44, 3%.
Speaker Change: During the quarter.
Speaker Change: Technology platform based in almost 3 billion, representing a decrease of 49%.
Siu Kam Choy: I will now provide a close look at our four quarter results. Please note that all numbers are in renminbi terms and all comparisons are on a year-over-year basis and as otherwise stated. As Wyatt and Grant mentioned before, our performance was impacted by the macroeconomic environment in which the small business owner sector has been under pressure throughout the period. Group strategic adjustments to the 100% guarantee model and prioritizing higher quality customer segments and better geographical regions. We expect to trade some of our business skills for better low quality in the future. This strategic transition inevitably caused our average loan balance and total income to continue to decrease. While the expected credit loss provision is required to be booked up front on day one, who have seen accounting losses in the early quarter life cycle under the UBITS model.
Speaker Change: Our net interest income was $2 3 billion a decrease of 47%.
Speaker Change: And our guarantee income was $886 million a decrease of 47%.
Speaker Change: All are basically in line the decrease of outstanding loan balance in which guarantee income decrease by a lesser magnitude due to the offsetting impact.
Speaker Change: The increased spending by the company.
Speaker Change: Turning to our expenses.
Speaker Change: We remain committed to cost optimizations.
Speaker Change: Our total expenses, excluding asset impairment losses finance courses and other losses.
Speaker Change: Decreased by 32% year over year to $4 4 billion this quarter.
Speaker Change: We continue to enhance operational efficiency.
Speaker Change: In the fourth quarter total expenses decreased by 35% to.
Speaker Change: $10 9 billion.
Speaker Change: From 2019.
Speaker Change: Cool.
This decrease was primarily due to a decrease in credit impairment losses, and sales and marketing expenses.
Speaker Change: Highlighting just a few of the key expense items here.
Speaker Change: Our total sales and marketing expenses.
Siu Kam Choy: In the fourth quarter of 2023, our total income was $6.9 billion, increasing by 44.3%. During the quarter, our technology platform's revenue was $3 billion, representing a decrease of 49%. Our net interest income was $2.3 billion, a decrease of 47%. And our guaranteed income was $886 million, a decrease of 47%. All are basically in line with the decrease in the outstanding loan balance, where guaranteed income decreased by a lesser magnitude due to the offsetting effect of an increase in the disbaring by the company, and many more. We remain committed to cost optimization. Our total expenses, excluding credit and asset impairment losses, finance courses, and other losses, decreased by 33.2% year-over-year to $4.4 billion this quarter, as we continue to enhance operational efficiency. In the fourth quarter, total expenses decreased by 38.5% to $7.9 billion, from $12.9 billion a year ago. This decrease was primarily due to a decrease in credit impairment losses and sales and marketing expenses.
Speaker Change: <unk> expenses for ecosystem clauses, as well as generate sales and marketing expenses decreased significantly.
Speaker Change: 45, 9% to $2 billion in the fourth quarter.
Speaker Change: The decrease was mainly due to decreased loan related expenses as a result of the decrease in the new loan sales and decreased <unk> expenses.
Speaker Change: <unk> expense from the platforms. It is attributable to the decrease in transaction volume.
Speaker Change: Our credit dependent losses decreased by 43%.
Speaker Change: 60 days in the fourth quarter.
Speaker Change: And not really due to the decrease in personal loans.
Speaker Change: It moves as a result of the decrease of the loan balance.
Speaker Change: Our finance costs decreased by 90.
Speaker Change: 1%.
Speaker Change: <unk> million dollars in the fourth quarter from 501 million same period <unk>.
Speaker Change: Mainly due to the decrease of interest expenses as a result of the repayment of the entities are.
Speaker Change: Convertible promissory notes during the year.
Speaker Change: As a result net loss for the fourth quarter.
132 minutes.
Speaker Change: Basically flat as compared to 806.
Speaker Change: Methanol.
Speaker Change: At the same quarter of two two.
Meanwhile, our basic and diluted loss per avs, either fourth quarter bulk and be one great for you guys.
Speaker Change: Hello.
Speaker Change: So any one quarter.
Speaker Change: Turning now to our balance sheet.
Speaker Change: With abundant cash we had repaid outstanding of $2 1 billion and optionally.
Speaker Change: Lee.
Speaker Change: Promissory note eight 1 billion drove the EDA tool to treat.
Speaker Change: After all these debt payments at December 31st two to three.
Siu Kam Choy: Highlighting just a few of the key extensive items here. Our total sales and marketing expenses, which may include expenses for our ecosystem and general sales and marketing expenses decreased significantly by 45.9% to $2 billion in the fourth quarter. The decrease was mainly due to decreased loan-related expenses as a result of the decrease in new loan sales and decreased retention expenses, as well as referral stress from the platform service attributable to the decreased transaction volume. Our credit and payment losses decreased by 43% to $3.6 billion in the fourth quarter, and this was narrowly due to the decrease in production of loans and receivables as a result of the decrease in loan balance. Our finance costs decreased by 91% to $50 million in the fourth quarter from $501 million in the same period of 2022, mainly due to the decrease in interest expenses as a result of the repayment of Xinyan and Xizhang convertible promissory notes during the year. As a result, net loss for the fourth quarter was $832 million, basically flat as compared to $806 million net loss in the same quarter of 2022.
Speaker Change: Total equity attributable to owners of the company.
Speaker Change: $92 1 billion.
Speaker Change: Cash by itself $49 6 billion financial assets.
Speaker Change: Panther improved P&L.
Speaker Change: Nine units.
Speaker Change: In terms of capital that's off the end of December 20, 223 to two main operating entities are well.
Speaker Change: Capitalized.
Speaker Change: Our guaranty subsidiaries leverage ratio was only one eight times as company, a maximum retrofit and Thats up 10 times and.
Speaker Change: Our consumer Finance company capital adequacy ratio stood at approximately 15, 3% well above the required and quantify.
Speaker Change: Next to climate.
Speaker Change: Hold was speaking.
Speaker Change: In a net cash position of the <unk>.
Speaker Change: Okay.
Speaker Change: Thanks Pat.
All of these factors offer substantial backing for the company to navigate through the challenging macroeconomic environment and the transition period.
Speaker Change: I'm, providing foundations for us to continually rewarding back to all access.
Speaker Change: That concludes our prepared remarks for today.
Speaker Change: Operator, we're now ready to take questions.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: We will now begin the question and answer session.
Speaker Change: I'll ask a question you May press Star then one on your touch time span.
Siu Kam Choy: Meanwhile, our basic and diluted loss per ABS in the fourth quarter was both $71.48 for US dollars $7.21. Turning now to our balance sheet. With abundant cash, we repaid the outstanding bond of 2.1 billion and the auctionally convertible promise of 8.1 billion from the year 2023. After all these bad agreements, we have total equity attributable to owners of companies of the 92.1 freelancers and cash bonds of $39.6 billion, and financial assets at fair value-full P&L of $28.9 billion. In terms of capital, as of the end of December 2023, the two main operating entities are well capitalized. However, our guaranteed subsidiary leverage ratio was only 1.8 times.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: In addition, I'd like to remind you to please mute your self after stating your question. Thank you. Your first question comes from Andrew <unk> with Bank of America Securities. Please go ahead.
Andrew: Thank you for giving me the opportunity to ask the first question I think first and foremost everybody came about this special dividend. So what's the consideration to be behind these RMB 10 billion special dividend what are the key numbers or information that you rely on.
Andrew: Right.
Speaker Change: <unk> special dividend and I have another question about your asset quality. So you have.
Siu Kam Choy: It comes with a maximum regulatory limit of 10 times, and our consumer finance company capital advocacy ratio stood at approximately 15.3%. We are above the required 10.5% next to the requirements. In short, we are in a net cash position after taking into account all the external bank debt. All of these factors offer substantial backing for the company to navigate through the challenging macroeconomic environment and the transition period while providing foundations for us to continually revert it back to our investment. That concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star and then one on your touch-tone phone. If you're using a speaker phone, please pick up your handset before pressing the key.
Speaker Change: <unk>, a leading indicator for like delinquency continue to rise in the fourth quarter to one 2%.
Speaker Change: I also noticed in your report you also mentioned that you actually see improvement off of that probably late first quarter or quarter to date. So could you tell us.
Speaker Change: How much improvement you already see the first quarter and what's your expectation for the overall asset quality trouble in a couple of quarters. Thank you.
Speaker Change: Okay. Thanks for your question, let me answer.
Speaker Change: So let me start with why we believe now is the right time for the special dividend.
Speaker Change: With a successful completion of about five five major deal with King.
Speaker Change: <unk> I mentioned, including foreign exchanges and one is more than just months.
Speaker Change: We believe now the risk is under control and we have a clear visibility of our typical Claremont for the coming next two to three years, two three years and that our stock has been trading at less than.
Speaker Change: Two times PV.
And then we have been continuously pushed by investors to enhanced image recon.
Operator: To withdraw your question, please press star then two. In addition, I'd like to remind you to please mute yourself after stating your question. Thank you. Your first question comes from Emma Ju with Bank of America Securities. Please go ahead.
Speaker Change: They use it at our <unk> price is if you compare.
Speaker Change: Our the.
Speaker Change: Cash call Acs is firewall firewall market has not even reflected the elevated cash on our book in our valuation so we hope.
Emma Xu: Thank you for giving me the opportunity to ask the first question. I think, first and foremost, everybody cares about this special dividend. So what's the consideration behind this RMB 10 billion special dividend? What are the key numbers or information that you rely on to arrive at this RMB 10 billion special dividend? And I have another question about your asset quality. So your flow rate, a leading indicator of delinquency, continued to rise in the fourth quarter to 1.2%.
Speaker Change: She didn't value behind our cash on hand by increasing our shareholder value through this dividend any fly explained why we arrived how we arrived at this amount like.
Speaker Change: $10 billion leg with this number.
Speaker Change: Of course with Forest resources.
Speaker Change: Our future development potential and the how much typically need top 50.
Speaker Change: That development.
Speaker Change: And then also are assumed in this calculation, we also assumed reasonably large buffer.
Yong Suk Cho: But I also noticed in your report that you mentioned that you actually see improvement in the flow rate in the first quarter or quarter today. So could you tell us how much improvement you already see in the first quarter and what's your expectation for the overall asset quality trend in the coming quarters? Okay, thanks for your question. Let me answer it.
Speaker Change: So our stable operation in the future. So this is how we arrived at $10 billion.
Speaker Change: And then the size of dividend it seems maybe it looks like a very big comp.
Speaker Change: With our.
The market cap.
Speaker Change: I want to emphasize.
Speaker Change: Actually it is only just roughly 10% of our net asset. So this is a reasonably good amount I believe.
Yong Suk Cho: Let me start with why we believe now is the right time for this special dividend. With the successful completion of our five major de-risking initiatives I mentioned, including four mix changes and one BIS model adjustment, we believe the risk is now under control. And we have clear visibility of our capital requirements for the next two to three years. Our stock has been traded at less than 0.2 times PV, and we have been continuously requested by investors to enhance investment returns. Now you see that our AGS price is, if you compare it with ours, the cash per AGS is far lower, far lower. So the market has not even reflected the available cash on our book in our valuation.
Speaker Change: And then to answer your last question about asset quality.
Speaker Change: Let me expand for us about what's going on with principal finance business.
Speaker Change: The NPL ratio has been consistent at around one, 5%, one 4% and <unk> side.
Speaker Change: We said the <unk> ratio for poorly loan increased from one 1% in third quarter last year to $1 two 5% in the fourth quarter last year.
Speaker Change: And then.
Speaker Change: This increase is mainly due to.
Speaker Change: Reduction of our with our Standalone, Belarus, and then temporary near term impact from an adjustment in our geography, and delek tax restructuring that but.
Yong Suk Cho: So we hope to unlock hidden value behind our cash on hand by increasing our shareholder value through this dividend. And if I explain why we have arrived, how we have arrived at this amount, why we have arrived at this amount, and many more, about our future three years of development potential and how much capital we need to support that development. And then we also assumed, in this calculation, a reasonably large buffer to ensure our stable operation in the future.
Speaker Change: First quarter, we see we see improvements in natural and we believe we will accomplish all dose restructuring measures.
Speaker Change: We see greater improvement operate in coming quarters and also.
Speaker Change: You understand the all portfolio that we booked before 2023 is or voice quality and that quickly now running off to when it get to the end of 2020 full debt our nellix portfolio like in other words accounts, we booked before 'twenty two 'twenty three we take nearly 10%.
Yong Suk Cho: So this is how we arrived at $10 billion. And then the size of the dividend, it seems maybe, it looks like a very big amount compared with our... The market cap, but I won't emphasize it. Actually, it is only just roughly 10% of our net assets. So this is a reasonably good amount, I believe. And then to answer your last question about asset quality, let me explain first what's going on with the consumer finance business. Their NPL ratio has been consistent at around 1.5% to 1.4%.
The portfolio so in that sense I think our gradual continuous improvement is of no doubt.
Speaker Change: Okay.
Speaker Change: Thank you this is very helpful.
Okay.
Speaker Change: Thank you. Your next question comes from Richard Xu with Morgan Stanley. Please go ahead.
Ran Xu: Thank you.
Ran Xu: Thanks for the opportunity for the question a couple.
Ran Xu: Couple of questions from me first of all on capital again.
Yong Suk Cho: And then if I make some comments about Puhi, we said the C2MC net flow ratio for Puhi loans increased from 1.11% in the third quarter last year to 1.25% in the fourth quarter last year. And then it increased mainly due to a reduction of our Puhi's outstanding loan balance and then temporary negative impact from our adjustment in our geography and direct sales research rate. In the first quarter, we see improvements in net flow. And then, we believe with the completion of all those research measures, we will see gradual improvement of flow rate in coming quarters. And also, you understand the old portfolio that we booked before 2023 is of worse quality, and that portfolio is now running up. So when it gets to the end of 2024, our legacy portfolio, or in other words, the accounts we booked before 2023, will take merely 10% of the total portfolio. So in that sense, I think our gradual, continuous improvement is without doubt. Thank you. This is very helpful.
After the special dividend.
Ran Xu: What do you think the capital needed to support the growth for loans.
Ran Xu: Will there still be enough buffer given obviously.
Ran Xu: Most of the loans will be guaranteed.
Ran Xu: By your own capital at the moment.
Ran Xu: On the flip side, given the projections on the reduced volume.
Ran Xu: Are there is little room to further reduce somewhat maybe maybe the capital base and then do.
Ran Xu: More special dividend.
Ran Xu: When the smaller non balance.
Ran Xu: So.
Speaker Change: Hey, two questions go.
Ran Xu: Go ahead Richard.
Ran Xu: Lastly, we're just cutting off their.
Ran Xu: Could you just repeat the last two sentences.
Ran Xu: Sure I just wanted to say Youre like one are there enough capital to support the volume growth.
Ran Xu: After the special dividend and secondly.
Ran Xu: Or are there still potentially excessive.
Ran Xu: Access to capital.
Ran Xu: The loan volume will be smaller I mean, whether there is opportunity for another special dividends down the road.
And lastly is the funding cost trends.
Ran Xu: What we're seeing at the moment.
Speaker Change: Two on the capital one is on the funding costs. Thanks.
Great Richard.
Greg: Greg speaking here.
Operator: Thank you. Your next question comes from Richard Ju with Morgan Stanley. Please go ahead.
Greg: Overall.
Greg: We have gone through as wireless was just laying out quite a comprehensive process looking out over the next couple of years unexpected industry trend or relative growth trend capital requirements liquidity requirements buffer we operate multiple licenses. We obviously have the guaranteed license we have the consumer finance license and we always keep our.
Richard Ju: Thank you. Thanks for the opportunity for the question. I have a couple of questions for you.
Richard Ju: First of all, on capital again. After the special dividend, what do you think the capital needs to support the growth of loans? Will there still be enough buffer given, you know, obviously most of the loans will be guaranteed? and many more.
Greg: Mind open for other licenses in the future so after going through all of that.
Greg: We arrived at given our significant cash position a view on what we could release today.
Richard Ju: So on the flip side, given the projections on the reduced volume, is there still room to further reduce some of maybe the capital base and then do more special dividends with the smaller loan balance? So, you know, two. Hey, go ahead, Richard.
Greg: It gives us still very substantial buffer.
Greg: Going forward over the next couple of years, obviously, our outlook for the market right now is still quite prudently.
Greg: We're still focusing on quality over over quantity.
Greg: But you know if in a year or two.
Richard Ju: Yep. You were just cutting off there. Could you just repeat the last two sentences? George, I just want to say one. Is there enough capital to support the loan volume growth after the special dividend? And secondly, are there still potentially excessive excess capital if the loan volume will be smaller? I mean, whether there's the opportunity for another special dividend down the road? And the last thing is the funding cost trends that we're seeing at the moment. Thank you. Right. Richard, thanks. Greg speaking here.
Greg: That macro situation were to change.
Greg: There were more opportunities.
Greg: Certainly retained enough capital.
Greg: We can deploy in our current licenses to meet higher growth. So I think that.
Greg: Your question is whether or not there could be additional capital released down the road, we're not considering that for the moment, we want to keep our flexibility for maybe a more positive market outlook, let's say 12 months to 24 months down the road so I think our.
Greg: Our strategy here has been to provide the reward to make it meaningful to deliberate in a way that allows investors to make a choice on whether they want to take some cash or do they actually want to effectively double down with the company and taking shares.
Gregory Dean Gibb: Overall, we have gone through, as YS was just laying out, quite a comprehensive process, looking out over the next couple of years on expected industry trends, our relative growth trend, capital requirements, liquidity requirements, buffer. We operate multiple licenses. We obviously have the guaranteed license.
Greg: To make that a meaningful number today, but while leaving the company flexibility to continue to do the right thing.
Gregory Dean Gibb: We have the consumer finance license, and we will always keep our mind open for other licenses in the future. So after going through all that, we arrived at, given our significant cash position, a view on what we could release today that gives us a still very substantial buffer going forward over the next couple of years. Obviously, our outlook for the market right now is still quite prudent. We're still focusing on quality over quantity. But, you know, in a year or two, that macro situation will be a little bit more of a situation where change happens, and there are more opportunities.
Greg: Capture opportunities going forward with sufficient buffer so that's I think Pete.
The grounding or the or the ranging on this in terms of funding cost we did see funding cost over the last 12 months continue to come down.
Greg: There's been two drivers of that one has been.
Greg: The overall lower rate environment. The second though has been the change in the mix of our new business.
Greg: Between guarantee.
Greg: Super Finance consumer finance.
<unk> to tap the interbank market multiple funding sources has a lower net funding cost then the facilitation model by working with banks and trust companies. So as we continue to see the mix change. So that there is a greater proportion of consumer finance, even though we don't think the rate environment.
Gregory Dean Gibb: We've certainly retained enough capital that we can deploy in our current licenses to meet higher growth. So I think that your question is whether or not there could be additional capital released down the road. We're not considering that for the moment.
Gregory Dean Gibb: We want to keep our flexibility for maybe a more positive market outlook, let's say, 12 to 24 months down the road. So I think, you know, our strategy. Our strategy here has been to provide the reward, to make it meaningful, to deliver it in a way that allows investors to make a choice on whether they want to take some cash or actually want to effectively double down with the company in taking shares, you know, to make that a meaningful number today, but while leaving the company flexibility to continue to do the right thing and capture opportunities going forward with sufficient buffer. So that's, I think, the... The grounding or the ranging on this.
Greg: <unk> will necessarily drop that much in the foreseeable future. We do think that our mix change will continue to optimize slightly the overall cost of funds in the model.
Thank you. Your next question comes from Yodlee with CIC.
Yodlee: Please go ahead.
Yodlee: Okay.
Yodlee:
Yodlee: Hello management. Thank you for taking my question.
Yodlee: We see FCC and my first question is for Q3. The company has completed their transition into 100% guaranteed model, but the bottom line was due on the pressure and I was wondering what are the main causes and how long does it take before profit could be released and what are the main drivers for our profitability recovery.
Gregory Dean Gibb: In terms of funding costs, we did see funding costs over the last 12 months continue to come down. There are two drivers of that. One has been the overall lower rate environment. The second, though, has been the change in the mix of our new business between guarantee and consumer finance. Consumer finance is able to tap the interbank market. Multiple funding sources have a lower net funding cost than the facilitation model by working with banks and trust companies. So as we continue to see the mix... and others.
Yodlee: And secondly for the consumer Finance company, our hardwoods profitability and future development, how we could violence to gross up the spo and consumer finance segments, which one could be the strategic focus.
And lastly, I was wondering are you considering additional buybacks and what is the main call is that we choose the special dividend instead of fighting back.
Operator: Thank you. Your next question comes from Yada Li with CICC. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Thanks, Sarah So let me pick up your first question. This is why speaking.
Yada Li: Thank you. Hello, management. Thank you for taking my question. This is Yada from CICC.
Speaker Change: And because of the hour declined new loan volume and the revenue we generate from Newport cannot offset the decrease caused by order book shrinking.
Yada Li: And my first question is, by 4Q23, the company had completed the transition to a 100% guaranteed model, but the bottom line was still under pressure, and I was wondering what the main causes were and how long it took before profits could be released. And what are the main drivers for the profitability recovery? And secondly, for the consumer finance company, how was the profitability, and in future development, how could we balance the growth of the SBO and consumer finance segments? And which one could be the strategic focus? And lastly, I was wondering whether we are considering additional buybacks? And what is the main cause that we chose the special dividend instead of buying back? That's all. Thank you. Thanks, Yada.
Speaker Change: So in the under 100%.
Speaker Change: <unk> motor New motor.
Speaker Change: You know that we have to accrue a lot higher at a higher upfront provision did delay the profit sequential of our new business, but orsino account basis.
Speaker Change: Neurologists that we enable and they'll want to pushing you to model.
Speaker Change: Is delivering lifetime profitability, but just.
Speaker Change: Record the net accounting loss for the fourth came that year because of the high upfront pathogen. So therefore regional delaying <unk>.
Speaker Change: And if I care about.
Speaker Change: One of the main drivers for profitability to recovering how Kenny understand is ahead.
Speaker Change: And I would say three things the first is <unk>.
Speaker Change: For your credit performance, which we can measure by net flow rates.
And the second energy optimization product Michael.
Speaker Change: But.
Speaker Change: Greg mentioned.
Speaker Change: <unk> cost and also importantly funding cost and lastly, our pace pace of new station on growth, we'll decide three expect US we may decide.
Yong Suk Cho: So let me pick up your first question. This is Y speaking. Because of the out-declined neuron volume, the revenue we generate from new book cannot offset the decrease caused by old book shrinkage. So, and under the 100% Guarantee Model, New Model, you know that we have to accrue a lot higher upfront provision that delays the proper recognition of our new business. On a single account basis, neurons that we enable on the 1% probability model are delivering lifetime profitability, but they just record a net accounting loss for So, that's the reason for delaying probability recognition.
Speaker Change: Our profitability to recovery.
Speaker Change: In coming years, and then if I was to answer your last question it was about.
Speaker Change: Why why special dividend overall.
Speaker Change: Buyback have you considered buyback.
Speaker Change: Compare dividend versus buyback we believe.
Speaker Change: Considering the situation we are in Dominion has.
Several more advantages first the our ability to deliver return to shareholders through buybacks is quite limited because of low liquidity.
Speaker Change: And the second is as your primary listed companies in U S and also in Hong Kong.
Yong Suk Cho: And if I, What are the main drivers for profitability recovering? How can we understand this ahead? Then I will say three things, right?
Speaker Change: We need to maintain at least 25% public float <unk> listing rules and our current public float is only.
Speaker Change: Less than 32% now so we have very very limited space for buyback at this moment and this time our dividend that it comes with an option to choose cash loss creep. So.
Yong Suk Cho: The first is portfolio credit performance, which we can measure by net flow rate. And the second is optimization, further optimization of what Greg mentioned, operating cost and also importantly funding cost. And then lastly, our pace, the pace of new sales loan growth. In the end, three factors will mostly decide our profitability recovery in the coming years. And then if I were to answer your last question, it was about why special dividends are over and Yihong Wang. Considering the situation we are in, dividend has several more advantages. First, our ability to deliver return to shareholders through buyback is quite limited because of low recuitity. As a dual primary listed company in the US and also in Hong Kong, we need to maintain at least 25% public float by the Hong Kong listing rule.
We believe this provides more flexibility than buybacks to our shareholders. So that's the reason why we decided to pre.
Speaker Change: Provide.
Speaker Change: Special dividend or buybacks.
Speaker Change: And then one more question on that yes.
Speaker Change: Here on consumer finance.
Basically 2023 was the third full year of operation.
Speaker Change: For the company.
Speaker Change: It has been scaling up from scratch when the license was acquired so 2023 is a profitable year.
Speaker Change: For consumer finance.
Speaker Change: As the scale of that business continues to increase its relative efficiency. There is still some room there.
Speaker Change: It continues to scale up and we changed the overall mix of the portfolio.
Speaker Change: The question of.
Speaker Change: How do we balance this add what is our main strategic focus going forward. So I think the way.
Speaker Change: To describe this is our main.
Yong Suk Cho: Our current public float is only less than 32% now, so we have very limited space for buyback at this moment. And this time, our dividend comes with an option to choose cash or script, so we believe this provides more flexibility than buyback to our shareholders. So that's the reason why we decided to provide this. Special Dividends, or more on that. And then one more question, Matt. Yeah, Greg here.
Speaker Change: <unk> strategic focus our differentiation in the market remains around serving the small business owner.
Speaker Change: This is still our core element.
Where we see consumer finance playing an important role is really in two ways. One is that we do believe that there are.
Speaker Change: Good consumer finance opportunities to work through multiple channels to diversify our product offering.
Speaker Change: To provide a more smaller ticket shorter term loans that makes us to be more nimble.
Gregory Dean Gibb: On consumer finance, basically 2023 was the third kind of full year of operation for the company, and it had been scaling up from scratch when the license was acquired. So 2023 is a profitable year for consumer finance. As the scale of that business continues to increase, its relative efficiency, there's still some room there as it continues to scale up, and we change the overall mix of the portfolio. The question is, how do we balance this, and what is our main strategic focus going forward? So I think the way for us to describe this is our main strategic focus; our differentiation in the market remains around serving small business owners. This is still our core element. Where we see consumer finance playing an important role is really in two ways. One is that we do believe that there are, and many more.
Speaker Change: Dynamic environment, but also providing these capabilities to small business owners as well because small business owners sometime after the capacity of their company needs, which we cover under the <unk> business model and sometimes they have their individual needs of course, we're looking at these customers from a full.
Speaker Change: All credit view right, but we sometimes find that.
Speaker Change: Small business owners once they have taken a long term loan they may still have smaller interim needs and so we wanted to be in a position to serve these customers kind of on a longer lifecycle with more opportunities to interact with them and through the interaction, creating more data points to understand.
Speaker Change: And their needs. So it is a way in consumer finance as a way to diversify our product offering to provide some nimbleness in terms of ticket size to provide some additional data in terms of behavior as well as additional touch points to our existing customers as well as a deeper reach into the market. So we will continue.
Gregory Dean Gibb: We have good consumer finance opportunities to work through multiple channels to diversify our product offering into providing more smaller ticket, shorter term loans that make us more nimble in a dynamic environment, but also providing these capabilities to small business owners as well, because small business owners sometimes act only in the capacity of their company needs, which we cover under the Puhui business model, and sometimes they have their individual needs. Of course, we're looking at these customers from a full credit view, but we sometimes find that small business owners, once they have taken a long-term loan, may still have smaller interim needs. We want to be in a position to serve these customers for a longer life cycle with more opportunities for them.
Speaker Change: To have <unk> as a core capability, but if you look at the mix between the two way model and the consumer finance, while you've seen that mix changed quite a bit over the last 12 months and that transition to a more balanced development youll probably see continue.
Speaker Change: In the near to medium term.
Speaker Change: Thank you.
Speaker Change: A question and answer session for today I'll now turn the call back over to management for closing remarks.
Speaker Change: Thank you. This concludes today's call. Thank you for joining our conference call. If you have more questions. Please do not hesitate to contact the Companys IR team. Thanks again.
Gregory Dean Gibb: We want to be able to provide more opportunities to interact with them and, through the interaction, create more data points to understand them and their needs. So it is a way, consumer finance is a way to diversify our product offering, to provide some nimbleness in terms of ticket size, to provide some additional data in terms of behavior, as well as additional touch points to our existing customers, as well as a deeper reach into the market.
Speaker Change: This conference is now concluded you may now disconnect.
[music].
Operator: So we will continue to have SVO as a core capability, but if you look at the mix between the Puhui model and the consumer finance model, you've seen that mix change quite a bit over the last 12 months, and that transition to a more balanced development will probably continue in the near to medium term. Thank you. That concludes our question and answer session for today. I'll now turn the call back over to management for closing remarks. Thank you. This concludes today's call. Thank you for joining the conference call. If you have more questions, please do not hesitate to contact the company's IR team. Thanks again. Thank you. This conference is now concluded. You may now disconnect. BF-WATCH TV 2021 BF-WATCH TV 2021 BF-WATCH TV 2021, Lufax Hldg Lufax Hldg
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yeah.