Q3 2024 LexinFintech Holdings Ltd Earnings Call
<unk> mode. After the speaker's presentation, there will be a question and answer session.
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Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the call over to your first speaker today Ms. Mandy Dong. Thank you. Please go ahead.
Mandy Dong: Thank you, Matt good morning, and good afternoon.
Speaker Change: One will come back.
Speaker Change: Third quarter 2024.
Our results were issued earlier today and can be found on our IR website. Joining me today are our CEO Jay Yeah.
Speaker Change: Arvind Kal.
Speaker Change: CFO James John.
Speaker Change: We will get started I'd like to remind you of our safe Harbor statement in our earnings press release, which also applies to this call. During the call. We may refer to business outlook and the forward looking statements, which are based on our current plans estimates and projections.
Speaker Change: Actual results may differ materially and we undertake no obligation to update any forward looking statements.
Speaker Change: Unless otherwise stated all figures mentioned are in RMB.
Speaker Change: Jay will first provide an update on our overall performance.
Speaker Change: Robyn will discuss risk management update.
Speaker Change: Lastly, James will cover the financial statements in more detail.
Speaker Change: I will now turn the call over to Jay. Please kindly note in today's agenda, Jay will give his whole remarks in Chinese.
Speaker Change: Then the English version will be delivered by the Jays AI based voice Jay go ahead. Please.
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Speaker Change: All of our finance Uhm, let's say all tissue.
Speaker Change: Good morning, and good evening, everyone. It is my pleasure to share with you our performance for the third quarter of 2024 in the third quarter, we remain committed to a prudent and steady operational strategy driven by risk management upgrade and deep data analytics.
Speaker Change: This approach has allowed us to reduce our overall portfolio risk and improve our asset quality.
Speaker Change: As low risk new loans continued to grow our overall asset structure is gradually improving.
Speaker Change: In the third quarter loan originations reached 51 billion RMB outstanding loan balance stood at 111.3 billion RMB revenue was $3 7 billion RMB. Our net profit was 310 million RMB with both revenue and net profit.
Speaker Change: Returning to a steady growth trajectory.
As a fundamental of our portfolio continue to strengthen we expect to see further improvements in the company's revenue and net profit in the future.
Speaker Change: Our performance in the third quarter includes the following two highlights.
Speaker Change: First our ongoing efforts in risk management have yielded tangible results.
Speaker Change: With continued improvement in asset quality and the turning point in overall portfolio risk.
Speaker Change: Leading risk indicator PD seven of new loans decreased by about 13% compared to the second quarter and day, one delinquency ratio of the overall portfolio declined by around 9% compared to the previous quarter during the quarter.
Speaker Change: We focused on expanding high quality, new loans by fully implementing the loan growth strategy on various business lines.
Posted by the following measures.
Speaker Change: We strengthened our reach and acquisition.
Speaker Change: Target customer market.
Speaker Change: But optimizing key online advertising channels, leveraging our accumulative user base of over 200 million registered users.
Speaker Change: We explore the potential for growing demand.
Speaker Change: And conducted targeted reopen.
Speaker Change: We activate dominant high quality customers.
Speaker Change: Rather than multiple third party data sources and developed a dedicated risk model for small and micro business loans.
Speaker Change: This increase the credit identification accuracy for small and micro business assets by over 10%. Additionally, we upgraded our intelligent anti fraud model, enabling us to more effectively detect incomparable intercept potential fraud further strengthening our anti fraud capabilities as it.
Speaker Change: Quality of new loans continues to improve we expect overall portfolio risk decline laying a solid foundation for performance growth next year.
The second highlight is our improved profitability.
Driven by our continued focus on our refining operations and optimizing our fund and asset matching in the third quarter. Our net profit margin reached 845% representing a quarter over quarter increase of 223 basis points.
Due to the declined risk levels of overall portfolios and enhance asset quality.
Speaker Change: Our asset cut increasing recognition from various financial institutions.
Speaker Change: Leading to a more diverse and healthy funding needs.
This drove down our funding costs by 90 basis points from the second quarter setting a new historical low.
Speaker Change: In the third quarter, we focused on meeting the diverse demands of younger customers through a range of products.
Speaker Change: For high quality small and micro business owner segment, we enhance the operations of <unk>.
Speaker Change: All right.
Speaker Change: Which means working capital loan and expand our acquisition channels, we operated now optimize the strategies.
Speaker Change: Weighted to credit line.
Speaker Change: <unk> and pricing adjustments.
Speaker Change: <unk> retention and dropout prevention et cetera.
Speaker Change: We also connected to dedicated funding channels, specifically for small and micro business loans as a result.
Speaker Change: Achieved a 78% increase in transaction volume quarter over quarter for the Super Prime salary workers segment.
Speaker Change: Started the pricing strategy for lithium card.
Speaker Change: And implemented various measures, including credit lines and pricing adjustments to boost customer borrowing activities.
Speaker Change: With overall risk level remaining stable the number of drawdown customers increased.
Speaker Change: <unk> increased by 24% compared to the previous quarter.
Speaker Change: Based on our new risk based customer segmentation, we adjusted our fund and asset matching model and launched a new product the intelligent credit platform the.
Speaker Change: The intelligent credit platform operates under a light asset.
Speaker Change: Profit sharing model in which the company there is no risk of principal loss and generous technology service revenue to traffic distribution.
Speaker Change: Through this model we can direct.
Speaker Change: Various customer segments to funding partners that have complementary risk appetite from us.
Speaker Change: This approach enables us to reduce customer acquisition costs, and broaden our customer base and increase revenue.
Stable business growth is underpinned by continuous investment in technology and research and development in the third quarter, we invested 149 million RMB in research and development to reinforce our industry leading capabilities.
Speaker Change: <unk> management is comprehensively connected to the anomaly attributions system, which enables real time detection of fluctuations in business and operational metrics and automatically generating quantitative insights in.
Speaker Change: In the quarter the system has covered over 400 key business metrics.
Speaker Change: Time required for anomaly attribution has been reduced to within a few hours or even minutes compared to previous time requirement of a few weeks under the traditional manual model.
Empowering small business and management decision, making.
Speaker Change: Currency of our proprietary AI model and intense recognition has further improved.
Speaker Change: And post loan management scenarios.
Speaker Change: Its accuracy is 17% higher than that of external solutions, which help to reduce costs and enhance operational efficiency.
Speaker Change: With regard to consumer rights protection and long standing priority for US we have continued to enhance our customer communication and service management processes.
Speaker Change: And strengthened digitalization and system development of customer services in the third quarter key initiatives included before.
Speaker Change: Filing our issue grading system, introducing the frontline service authorizations protocol and optimizing customer service workflows. These measures have significantly improved service handling efficiency.
Speaker Change: Leveraging the extensive customer service either from a platform, we analyzed and identified the root causes of customer experience challenges and empowered our frontline teams with enhanced skills in issue identification and resolution.
Speaker Change: Strengthening collaboration with business units to improve the consumer rights protection review mechanism in order to identify and address consumer rights protection issues.
Speaker Change: Earliest stage.
Speaker Change: Looking ahead, we remain committed to a prudent operational approach focused on bringing down the risk level of overall loans and enhancing profitability.
Speaker Change: Also we will properly intensify our customer acquisition efforts and push for steady growth in business scale as the proportion of high quality new loans increases in existing loans mature gradually we expect to see continued accelerated improvement in the asset quality of overall loan book, we remain in full.
Speaker Change: Confidence in our ability to deliver stronger profitability in the coming year.
Speaker Change: To further reward our shareholders, we plan to raise our dividend payout ratio from the current 20% of net profit to 25% starting in 2025.
Speaker Change: Now I would like to hand, the floor over to our C. R O.
Speaker Change: Thank you.
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Speaker Change: First quarter, we continue to adhere to the strategy of Titan.
Profitability.
Speaker Change: Bill touched on generating more high quality.
Speaker Change: Okay.
Speaker Change: Alrighty.
Speaker Change: A high rate.
Speaker Change: Okay.
Speaker Change: We also operate in a real time anti fraud detection capability that the refi. The first party data management system and build a real time interactive risk management capability.
Speaker Change: Leading recently.
Speaker Change: New assets on the older assets continue their downward trend from the previous quarter.
Speaker Change: Actually seven.
Speaker Change: Decreased by about 13% compared to the second quarter and the overall asset day, one delinquency rate decreased by about 9%.
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We expect this downward trend of leading indicators.
We will continue in the fourth quarter.
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Speaker Change: Sometimes some tier two debt.
Speaker Change: Specifically in terms of risk management for new assets from new customers. We have made significant progress with new customer acquisition online advertising channels and Activations with Goldman Sachs.
Speaker Change: I see.
Speaker Change: In terms of new customer acquisition through online advertising channels, we have focused on key high quality channels and accelerating our.
Hi, Rick.
Meanwhile, we have continued to strengthen our risk identification capabilities.
Operator.
Speaker Change: For new customers, resulting in a favorable decline in the risk level of new customers acquired.
Ken: Thank you Ken.
Speaker Change: Compared to the second quarter, the risk level of new customer.
Speaker Change: The reduced China tax difference.
Speaker Change: Perfect.
Speaker Change: By the end of the third quarter, leading indicators of PD seven for new Cott have significantly different by about 50% okay.
In Q4 last year.
Speaker Change: Currently the risk level of new customers.
Speaker Change: On the advertising channel has generally declined to a reasonable range.
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Speaker Change: In terms of reactivation and conversion of Goldman.
Speaker Change: We have deeply fault there.
Speaker Change: Borrowing of over 200 million.
Speaker Change: Thank you.
Speaker Change: Can you with that.
Speaker Change: To fully leveraging nicely large customer. Thank you for the context, we have strengthened our risk identification capabilities.
Speaker Change: And then.
Speaker Change: Secondly to identify high quality users.
Speaker Change: Third positively ofer and coordination with our operational team, we have precisely reef and reactivated high quality Goldman.
Speaker Change: With potential borrowing demand.
Speaker Change: In the first quarter, the number of Reactivating Goldman Conference.
Speaker Change: Nearly doubled compared to the second quarter with a credit drawdown.
Speaker Change: That group.
Speaker Change: Increasing by 47% comparatively.
Speaker Change: Okay.
Moreover, the Carson acquisition call, we activated Goldman.
Speaker Change: And the risk level is about 20% lower than that.
New customers of clients from online advertising channels.
Speaker Change: In the fourth quarter, we will continue to intensify efforts to reactivate existing customers in order to sustain the growth of new customers and low cost low risk.
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Speaker Change: On the front of new loans from existing customers.
Speaker Change: In the third quarter, we forecast on three major project <unk>.
Speaker Change: Any treatment of high risk assets performed.
Speaker Change: Portfolio structure optimization, and tailor risk management for different customers.
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Speaker Change: In terms of managing high risk asset with Johnson controls.
Speaker Change: High risk transaction and further upgrade our anti fraud detection capability.
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In terms of portfolio structure optimization, we continuously improve the proportion of high quality assets by optimizing various elements of our financial products.
Speaker Change: By continuously growing the volume of high quality assets.
Speaker Change: Other income stable supply chain risk level.
Speaker Change: The proportion of prime and Super Prime assets newly issued loans.
Speaker Change: The existing personnel for new customers.
Speaker Change: 75%.
That could change tie up and running from young women defined need to tune the of new wallets encourage enough funding, while maintaining or growing food at home from Washington <unk>.
Speaker Change: No. So we've climbed Shang Fung enthusiasm, Washington, downtown three seller cohort of Taiwan, and one in our knee.
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Speaker Change: So are you comfortable funding.
Speaker Change: In terms of tailoring management different comes from the fact that we focus on optimizing risk management of micro and small business customer in the third quarter.
Speaker Change: Sure dedicate the acquisition model the introduction of micro and small business operation of data and the specialized brief identification model for micro and small business lending that we have strengthened our ability to manage the risk level of micro and small customers.
Speaker Change: This has to also improve the user experience.
Speaker Change: Micro <unk>.
Speaker Change: Business owner confidence with our offering and reduced.
Speaker Change: Associated with these customers.
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Speaker Change: In terms of data management capability, we have established full lifecycle management platform for third party data integration data on boarding data performance evaluation Felicia that relation performance monitoring.
Speaker Change: Commissioning is that innovation into a single management platform.
Speaker Change: This has significantly improved the efficiency.
Speaker Change: I'll ask the standardization and organization of data management.
Speaker Change: Also we have discovery Stifel linkage, enabling real time monitoring automatic alerts.
Speaker Change: Our automated handling across the entire chain of Santa Beatriz model and strategy.
Speaker Change: This greatly improves the effectiveness of these applications.
Speaker Change: The efficiency of potentially ineffective or inefficient third party basis.
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Speaker Change: Yes.
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Speaker Change: Yes, Andy.
Speaker Change: So Q3, you're meeting.
Speaker Change: One of the email.
Speaker Change: Looking ahead into the fourth quarter, we will continue to strengthen our capability of risk management practice, Craig identification racer question me too right.
Hi.
Speaker Change: Our goal is to reduce the proportion of delinquent.
Speaker Change: And increase the generation of high quality assets further optimizing the health of our FX Jackson.
At the same time, we will continue to enhance the performance and stability a brief scarring across all business lines.
Speaker Change: And then with Polycom decision, making tools.
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To improve the efficiency and accuracy of our risk management.
Speaker Change: Through these efforts and to ensure that the risk levels of total assets continue to profit.
Speaker Change: Profitability continuing to keep it.
Speaker Change: In the meantime, we will accelerate the development of risk sharing model among the new risk based customer segmentation increased the proportion of our capital light business and.
Speaker Change: More of the impact of credit cycle on our profitability.
Yes.
James: Hi, This is James now it's my turn.
James: Thank you Evan I will now give a more detailed update on our financial results, noting that all figures are presented in RMB unless stated otherwise.
James: During the past quarter, we adhered to our principles of prudent operation and the continued upgrading of our risk management capabilities and the transformation of overall business.
James: Our efforts yielded satisfying results evidenced by stable loan origination volume in Australia.
James: Oh.
James: Total revenue amounted to approximately $3 7 billion renminbi remaining steady compared to Q2.
James: Net profit showed a significant growth increasing by 36, 7% quarter over quarter to reach 310 billion renminbi.
James: Here are three key highlights explaining our robust financial performance.
James: First.
James: Substantial profit increased driven by higher revenue take rate.
James: The sharp increase in net profit was primarily driven by higher take rate, which reached a record high of 325%.
James: Up by 35 basis points from 291% of Q2, and 81 basis points from two 4% of the same quarter last year.
Speaker Change: And I think recalculation is derived by adding credit oriented income and a tech empowerment income.
Speaker Change: Tracking funding cost on the various provisions.
Speaker Change: Then dividing by new loan origination volumes for the quarter.
A few core drivers supported this increase including the following.
Speaker Change: One the continued improvement in the risk level of new loans in Q3, evidenced by <unk>, seven which decreased by about 13% from Q2.
Speaker Change: Two.
A new record low in funding costs of $4 two 8%.
Speaker Change: Which fell by nearly 100 basis points from Q2 of 5% to 6%.
Speaker Change: And a 636% of the same quarter a year ago.
Speaker Change: We achieved this through ample funding and the partnerships with cost efficient national financial institutions.
Speaker Change: It also underscores the increasing confidence of our funding partners in our assets.
Speaker Change: Three.
Speaker Change: Continued optimization of user loans early payoff ratio and the revenue from some value added preferably services.
Speaker Change: Okay.
Second key highlight is the improved asset quality.
Speaker Change: The asset quality of our total loan book improved in Q3.
Total provision cost the full line in our income statement, including provisions for financing receivables and contract assets and our receivables provision for contingent guarantee liability and fair value change in our financial guarantee derivatives and fair value.
Speaker Change: Decreased by 21 billion to one system.
Speaker Change: Billion really be from Q2.
The day, one delinquency rate of total portfolio decreased by 9% compared to Q2 <unk>.
Speaker Change: Thanks to our ongoing business transformation initiatives, especially in the risk management upgrading project.
Speaker Change: As we are gradually phasing out higher risk existing loans and to generate a better quality new loans, we believe the peak risk level of our total portfolio is behind us.
Speaker Change: The third key highlight is to enhance efficiency and customer acquisition.
Speaker Change: In Q3, we improved customer acquisition efficiency through two major channels.
Speaker Change: Reactivating dormant customers from our over $200 million accumulated registered user base and Iterating the RTA model in online advertising channels.
Speaker Change: New users with improved credit lines increased to 700, which is 56000.
Speaker Change: Up by 44% from Q2, however, the acquisition cost for new users with improved credit lines dropped by 35% compared to Q2.
Moving forward, we will continue leveraging our large user base to reactivate more high quality users at relatively low cost.
To summarize the aforementioned operational highlights.
Despite the macro environment and the stable new loan volumes in Q3, we have achieved strong sequential profit growth through healthy and a sustainable improvement in revenue take rate.
This is by improved asset quality lower funding costs and the optimization of all business operations, including user acquisition efficiency.
Speaker Change: Next I'm going to provide some more detailed overview and explanation of financial statement items.
Speaker Change: First on the revenue side.
Speaker Change: Yes.
Speaker Change: The credit facilitation of servicing income increased by 11, 3% quarter over quarter, mainly driven by the higher facilitation volume growth.
Speaker Change: And higher take rate in off balance sheet loans facilitated.
Speaker Change: Setting the lower volume in off balance sheet loans.
Speaker Change: Test empowered service income fell by 28, 2% to 384 million renminbi quarter over quarter due to the product mix upgrade in Q3 as.
As Jay mentioned, although the newly launched capital light ICP platform is still in its early stage, we are confident in its future market demand and future volume growth.
Speaker Change: E Commerce business revenue jump.
Speaker Change: 29, 5% quarter over quarter due to the higher base of Dnb in Q2 from the 618 shopping festival.
We expect E Commerce business line back to the growth trajectory in Q4.
Speaker Change: Net on the cost and expense items.
Speaker Change: Processing and servicing costs increased by.
Speaker Change: By 16, 1% quarter over quarter due to intensified the loan collection efforts.
Speaker Change: Sales and marketing expenses dropped by six 3% to $438 million <unk> in Q3, as we focused on reactivating reactivating dormant users reducing spending on online advertising business.
Speaker Change: G&A expenses decreased by 11, 4% quarter over quarter due to cost efficiency initiatives.
Speaker Change: As a summary of the above the net income improved by $83 million or 36, 7% quarter over quarter.
Speaker Change: The overall net profit margin improved from six 2% in Q2 to eight 5% in Q3.
Speaker Change: This is primarily driven by higher revenue from the flat quarter to be lower volume lower credit costs.
Speaker Change: Lower operating costs, partially partially offset by the increasing processing and servicing costs due to collection and in mind net losses related to the e-commerce things quarter over quarter.
Speaker Change: This breakdown analysis underscores the healthy profit improvement made in the loan facilitation business, Despite a flat quarterly loan volume growth.
Speaker Change: Okay.
Speaker Change: Here's another way to look at the profitability improvement.
Speaker Change: If we use net income to divide by current quota GMB, we'd get the ratio of 0.61%.
In comparison with four 4% in Q2.
Speaker Change: Similarly, if we measure the net income against the average loan balance.
Speaker Change: It is.
Speaker Change: 1.0% to 9% in Q3.
Speaker Change: Versus 77% in Q2.
Speaker Change: For balance sheet items.
Speaker Change: Q3, our total cash position was approximately 4 billion renminbi impacted temporarily by the maturity of some trust products.
Speaker Change: We maintained solid shareholders equity of over 10 billion renminbi.
Speaker Change: Our provision coverage ratio remained proficiency and approximately 240% at the end of Q3.
Speaker Change: As Jay mentioned, we are committed to sustainable value creation for shareholders.
Speaker Change: The board has approved an amended dividend payout policy, increasing the payout ratio to 75% of total net profit starting January one 2025.
We made further increase this ratio as profitability improves in the future.
Speaker Change: Looking ahead.
Speaker Change: With the government economic stimulus package gradually take effect and to continue the transformation of our business.
Speaker Change: We expect net profit to grow at considerable rate on a year over year basis for 2035.
Speaker Change: Although the profit recovery process may take appetite Q3 has already marked a strong start.
Speaker Change: For Q4, we still remain patient with the macroeconomic conditions.
And we will continue to adhere to and prudent operating principles to lay a solid foundation for growth and profitability next year.
Speaker Change: Based on our current estimates we expect the GMB of loan originations in Q4 to grow at flat to low single digit rate on a quarter over quarter basis.
Speaker Change: This concludes my portion of the prepared remarks, operator, we're now open for questions. Thank you.
We will now begin the question and answer session to ask a question. Please press star one on your telephone and wait for a name to be announced.
Speaker Change: To cancel your request. Please press star one again, please limit your questions to two questions.
Speaker Change: If you'd like to ask the questions diminishment in Chinese please immediately translate the questions in English.
Speaker Change: Please standby for your first question.
Oh first questions will come from the line down Lee from <unk>. Please go ahead.
Speaker Change: Okay.
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Speaker Change: Thank you.
Speaker Change: You don't put your home, but what do you do.
Speaker Change: Okay.
Would you go with it but they don't put it with digital machines from you before.
Speaker Change: No no.
Speaker Change: Okay that's useful.
Speaker Change: I'm not too sure Doug one kilo sort of thing goes up and deal with the road won't be thoughtful teach them the drug in usage among the <unk> joint venture with <unk>. How are you sure Okay gotcha.
Speaker Change: Then I will do the translation Hello management, congrats to the exciting results and thanks for taking my questions. My first one is what's management's view on the growth strategy for the fourth quarter. Following the rollout of government policies do windows and at the end of September and can we see signs of a consumer loan demand recovery based on the current.
Speaker Change: Operational data.
Speaker Change: Can delay what's the whole driver its photo significant profit growth this quarter.
This growing momentum from that program to continue in the following quarters. Thank you very much.
Speaker Change: For the diesel and Kim will cover that.
Speaker Change: Yes.
Speaker Change: Do you have in the lithium form so Jason.
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Speaker Change: Hi, Yeah. This is Matthew let me translate for Jake well since the government no alcohol economic matters and September 15th after some passage in the short term demand. However, whether it can be obtained to long term sustainable recovery failed to pass on the ongoing food Matthew.
Speaker Change: Economic environment in the future.
Speaker Change: So based on our quarter to date Q4 operational data, we see that.
Speaker Change: Total volume of loan origination is generally flattish compared to the same period in Q3, we.
Speaker Change: We think this is due to our continued prudent operational strategy we focus on.
Speaker Change: Ken on asset quality, especially can tell the higher risks.
Therefore, there hasn't been a significant growth in the overall loan origination volume well, although the total volumes remain roughly at the same level there has been.
Speaker Change: Optimization in our asset structure, we have seen a slight increase after a high quality customer with consistent recovery and in house man in.
Speaker Change: High quality demand.
Speaker Change: In time, we are actively looking for.
Our high quality asset continuing to increase the portion of high.
For the asset and improved overall asset quality.
Speaker Change: Finally, our recent upgrades in SaaS customer acquisition strategy has to.
Speaker Change: So we are actively deploy them for the growth of new customers, we think which will lay a solid foundation for it as well next year.
Speaker Change: Okay.
Speaker Change: This is James let me answer your second question.
Thank you for your second question is deeply more details in terms of our net profit for this quarter and also the forecast for next in.
Speaker Change: In Q3, the net profit reached approximately three.
Speaker Change: 310 billion Renminbi is a very significant quarter over quarter growth of 36, 7%.
Speaker Change: Really the growth is attributed to the company's continued focus on strengthening our core competencies, especially in risk management.
Speaker Change: Continued continuous optimization of overall operations over the past two years.
Speaker Change: Specifically really two drivers the first one is the improvement in asset quality as both Jay and as Alan mentioned, a few times and basically we're benefiting from the.
Speaker Change: <unk> focus on risk management overall upgrade new asset quality continued to optimize in Q3.
Speaker Change: <unk>.
Speaker Change: The overall quality in Q <unk> Q3, actually in terms of asset quality it really.
Speaker Change: Reached the turning point it beginning to stabilize and recover as the batch of loans with higher risks that are issued in second half of last year gradually mature.
Speaker Change: So based on our preliminary estimate we would expect a considerable growth in net profit next year on the year over year basis, obviously as you know we're going to provide guidance for next year.
Speaker Change: After we report our Q4 numbers.
Speaker Change: In this quarter the SPD <unk> for the new assets decreased by approximately 13%.
Speaker Change: Quarter over quarter and that they will delinquency rate for the total assets decreased by about 9%.
In comparison with the second quarter, we would expect this downward trend of risk level continue in fourth quarter and into next year as well. So basically that's the first driver in the.
Profit improvement the second driver really is the the record low funding cost is really driven by ample market liquidity and a strong demand for the high quality exclusive look credit assets.
Speaker Change: Funding costs continue to drive in Q3 is about 100 basis points lower than Q4 in Marquis.
Speaker Change: Logistics quarterly optimization in the past couple of years.
Speaker Change: I can dive a little bit more into the details basically looking at the financial statement perspective, if you look at the pre tax pre tax profit increased by $95 million quarter over quarter. Obviously, if you look at the specifics there are pluses and minuses here.
Speaker Change: If we look at the plant site.
Speaker Change: Excluding the e-commerce.
Speaker Change: Revenue there has been increased revenue related to the loan business.
Speaker Change: Amount of about $150 million.
Speaker Change: Also there is a reduction in the total risk provisions and contributing to about $20 million renminbi two the net profit quarter over quarter. Obviously the binding site include the decreased e-commerce gross profit by about $30 million.
In Q3, and also orders increased processing and servicing costs were collections in opex of about $50 million.
Speaker Change: So if you net both the plus and minus side together.
Speaker Change: <unk> contributed to an increased pre tax profit of about $108 million.
And this leads to the net income increase of about 83 billion quarter over quarter.
Speaker Change: A record.
Speaker Change: Quarter over quarter growth of about 37%.
Speaker Change: Again.
Speaker Change: We are happy with this result in Q3.
Speaker Change: And we expect a better profit increase for next year, which will provide more detailed guidance. After we report people.
Speaker Change: Hopefully this answers your question.
Thank you for the question next question comes from Joe <unk> from CLSA. Please go ahead.
Speaker Change: Okay.
Speaker Change: What's your go to you in a few quiet well you'll now go to.
Speaker Change: Stephen just yet.
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Speaker Change: Q2.
Speaker Change: Since it sounds like Youll find plenty, that's essentially I guess, you won't be coming out that helps you. So I'm going to tell you what she's iPhone.
Speaker Change: Before we go to <unk>.
Speaker Change: Your line is open.
Now do you have a win T <expletive>, Oh, Glenn Schorr <unk> intelligent credit platform.
Speaker Change: Thank you Kelly.
Speaker Change: We send up quick White Guy you would think.
Speaker Change: Greg Walker, neither you can count on.
Speaker Change: Let me do the translation that's first question.
Speaker Change: Management mentioned that you was that mix level of new loan has been continuously optimize quota content and overall asset quality has also improved compared to Q2 could you elaborate on the main measures taken in Q3 to optimize the mix of new loans and poolside.
Speaker Change: And I'll look on expiry program itself the opening.
Psychology recovery in the future.
The second question.
Speaker Change: It's about the newly launched intelligence quality platform model could you elaborate more on this as you plan on this new business line and its impact on the company business.
Speaker Change: That's a good thing.
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Speaker Change: Polish Airlines at Tinker that Union, Fujian <unk> seen the loan growth front.
Speaker Change: And finally, let's see the AT&T.
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Well, Matt that are we at.
Speaker Change: And welcome Jim look I can't tell you what tissue.
Speaker Change: Neither children.
Speaker Change: Hi, Tony Let me translate for army. So in Q3 regarding the key areas in risk madmen space, we primarily focused on improving several asset one risk identification to recent decision, making great risk of pricing for different risk bearing model.
Speaker Change: Firstly for the new customer acquired online advertising channels, we put efforts in below four matters number one we focus on the high quality channels and accelerating the phasing out of long tail highest channel. They candidly, we put efforts to build out Duane models, we did leading path.
Speaker Change: With scenario data number three we enhanced our anti fraud detection of action than before we expand our low and grow strategy should all business lines. As a result, we have continuously strengthened our risk identification capability and upgraded risk strategy for a new car.
Speaker Change: Without being stable decline the risk level of new customers in this channel so compared to Q2, the risk level has decreased by 10% by the end of Q3, leading indicators at PB seven for our new Cat has significantly decreased approximately by five zero.
<unk> percent compared to the peak level in Q4 last year at the same time, we are able to apply that to some extent in the approval rates in order to promote the growth of high quality loans for our new customers. So we expect this level of new customers quite do the online advertising channel to catch up with the <unk>.
Speaker Change: Caf one in the industry by the end of 'twenty 'twenty four.
Regarding the latter part of your question for the overall asset quality recovery progress.
Speaker Change: One delinquency rate of the total assets decreased by 9% in Q3 compared to Q2, we estimate this downward trend will continue in Q4. So based on our continued advancement of the overall risk management App. Greg efforts, we are confident that with the ongoing optimization.
<unk> asset chapter, namely well reduce the portion of delinquent asset and promote the generation of high quality assets.
Speaker Change: According to our schedule progression.
Speaker Change: Management initiatives, we expect to see a significant increase in our net profit in 'twenty 'twenty, if I hope that answers your question Kelly.
Speaker Change: Yeah.
Speaker Change: Okay.
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Speaker Change: Let me translate for James' comments.
Speaker Change: Well.
Thanks to our continuous effort to go ahead and turn out nationally with Mad men.
Speaker Change: We have been able to act like a risk.
Speaker Change: <unk> couple of biology that enabled us to conduct a more precise customer segmentation and launched a new model ICP shortfall intelligent credit platform model ICP is capital light profit sharing model.
Speaker Change: <unk> does not bear the risk of principal loss, the new model expands our addressable market, while smooth the potential risk fluctuation across credit cycle.
Speaker Change: The IPP model, we can't identify customers with different risk levels more precisely provide more accurate segmentation and differentiated pricing then is to build these assets to financial institutions with corresponding and the complimentary risk appetite based approach allow us to also cut them a longer.
Psycho surveys, thereby generating more sustainable revenue broth technology savvy.
Although the IPP model, just got launched in Q3 and only a careful there were small portion of our total loan volume. Currently we believe this slide is crucial to adjusting our overall asset structure and 10 of our business model into a more sustainable one.
Speaker Change: We believe ICP model still has a skinny began growth potential we will continue to make product mix address man through expanding this model Joey hope that this address your question. Thank.
Speaker Change: Thank you very much. The next question comes from the line haul you should Chen from <unk> Securities. Please ask your question.
Speaker Change: Considering that can go through.
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Speaker Change: Sure.
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Speaker Change: Hello Shlomo.
Speaker Change: Should be on the side on the tissue.
Speaker Change: Let me do the completion Hello management I have two questions.
The first one is with notice management also mentioned that the funding costs hitting a new record this quarter.
Speaker Change: Could you elaborate how many current factors behind this and provide an outlook on funding costs for Q2.
Speaker Change: Second line is Q3 unit customer acquisition significantly decreased and the.
Speaker Change: A number of new approved pardon my customers increased sequentially quarter on quarter.
Speaker Change: Could you introduce to mainlanders to underwrite.
Speaker Change: The aggregate acquisition costs will continue to drop in the future.
Speaker Change: Okay I will take the first question.
Speaker Change: Funding costs decreased by approximately.
100 basis point to $4 two 8%.
Speaker Change: In comparison with Q2, this really marks the 11th consecutive quarter of reducing funding costs. Since Q1 of 2022, reaching a new historical low and achieving the largest quarter in reduction.
Speaker Change: For the fourth quarter, given that we're already at a historic low funding cost and also considering there is a kind of a seasonality of tightened funding typically before the end of the year right for financial institutions. So we anticipate a relatively modest optimizations in funding cost for Q4.
Speaker Change: Looking ahead for 2025.
Speaker Change: The continued implementation of easy money policy supporting the macroeconomic economic recovery and more recognitions from the funding partners as our asset quality continues to improve so we have the confidence that we will continue to optimize the funding costs and enhance our overall <unk>.
Speaker Change: Stability next year.
Speaker Change: So the political go to anyone else.
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Speaker Change: Is that good enough to spike those out well I mean, it's other can talk border Asia jumped out at you should pay interest avocado oil water contacts and good attendance Sundar, how youre using double talk with I don't mean to each other.
Speaker Change: $2 and go to you've got total hi.
Speaker Change: Hi, Shang translate for James' comments.
Speaker Change: Regarding your question about.
Speaker Change: Pat from obligations. The reduction of this is mainly attributable to several matters number one we have significantly improved our <unk>.
Speaker Change: Energy and efficiency and customer acquisition.
Speaker Change: My advertising channels.
Over quarter basis, given the cost of user with a first question line dropped by 24% Q on Q and the number of user with approved credit line increased by 22%.
Speaker Change: For the portion of this quality and high potential user.
Speaker Change: Remember with approved <unk> rose by 34% and the total amount of the credit toward that increased by three zero virtually.
Speaker Change: Meanwhile, we are able to brought down the unit cost of addition of good quality user fight for DSO of 40% as a result, the risk level of new customer dropped by 10% compared to Q2.
Speaker Change: The proportion of Truecar to users continue to hike and payback period, plus short term.
Speaker Change: With our strengthened customer acquisition capability, well, probably increase investment in customer acquisition front in the future in order to lay a foundation for the business growth next year. The second measure we have intensified efforts to activate and convert it to an end customer.
Speaker Change: Over the past 11 years, Russia has accumulated a large user base roughly more than 200 million users in the future. We will continue to find operation in order to provide more accurate Greg in like one team and our loan pricing for customers to activate tool.
Speaker Change: Calculate.
Speaker Change: In Q3, the total number of active.
<unk> customers nearly doubled from how to kill too.
Speaker Change: The credit line draw down rate of the approved customer increased by 47 comparatively into APAC.
Speaker Change: The customer acquisition cost for the reactive fake pathway is low and the risk level is about 20% lower than that of the new customer online advertising channels.
Therefore in Q4, we will continue to intensify efforts to reactivate and convert existing package in order to stand the growth of new customer at low cost and low rates for.
Speaker Change: For the third ground, we have further strengthened our cooperation with the pay a leading pay channels in Q3, five box volume growth and profitability look too good.
Speaker Change: <unk> increased the investment in this channel in the future.
Speaker Change: Hello, Steve addressed your question Shannon.
Speaker Change: Operator can you check if there is more question on the line.
Speaker Change: There are no more questions on the line. Please continue.
Okay.
Okay. Then thank you everyone again for joining US today. If you have further questions. Please contact my contact information on our IR website. Thank you all have a good day and the other night.
Speaker Change: Today's conference call. Thank you for your participation you may now disconnect your lines.