Q4 2024 Qifu Technology Inc Earnings Call
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Speaker Change: Ladies and gentlemen, thank you for standing by, and welcome to the Keifu Technology fourth quarter and full year 2024 earnings conference call.
Speaker Change: All participants are in a listen only mode. There will be a presentation followed by a question and answer session.
Speaker Change: If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad.
Please also note that today's event is being recorded.
Speaker Change: At this time, I'd like to turn the conference call over to Ms. Karen Ji, Senior Director of Capital Markets. Please go ahead, Karen.
Karen Ji: Thank you, operator. Hello, everyone, and welcome to QiFu Technology's fourth quarter 2020 for Erning's conference call. Our earnings release was distributed earlier today, and it's available on our IR website.
Karen Ji: Joining me today are Mr. Wu Haisheng, our CEO , Mr. Alex Xu, our CEO , and Mr. Zheng Yan, our Xiaoxiong [inaudible]
Karen Ji: Before we start, I would like to refer you to our safe harbor statements in the early press release, which applies to this call as we will make certain forward-looking statements.
Also, this court includes discussions of floating non-guts financial measures.
Karen Ji: Please refer to our earnings release, which contains the reconsideration of the amount of financial measures to get financial measures.
Karen Ji: Also, please know that unless otherwise stated, all figures mentioned in this call are in
Speaker Change: Before we start, we would like to let you know that today's prepared remarks from our senior will be delivered in English using an AI-generated voice. Now, I will turn the call over to Mr. Hu Haisheng, please go ahead.
Hello, everyone. Thank you for joining us today.
2024 was an exceptional year for our company.
Speaker Change: Despite the macroeconomic headwinds, we focused on driving high quality development and evolving our business, consistently hitting new quarterly milestones to close out the year on a strong note.
Speaker Change: As our business model gradually shifts to a platform model our organizational capabilities have been upgraded alongside it.
Speaker Change: As we look to the future, we will adopt a more open and collaborative approach to engaging and empowering our users and partners, further enhancing the health and resilience of our business.
Speaker Change: By the end of 2024, our platform empowered a total of 162 financial institutions to serve more than 56 million users with approved credit lines on a cumulative basis.
Speaker Change: Throughout 2024, we maintained a disciplined approach, optimizing risk management and enhancing operational efficiency.
[inaudible]
Speaker Change: In Q4, our C2M2 metric representing the delinquency rate after 30-day collection for our overall loan portfolio declined further sequentially, reaching its lowest level of the year and approaching a historical best.
Speaker Change: With our risk metric stabilizing, we strengthened our ability to address user needs through differentiated
Speaker Change: Total loan facilitation and origination volume on our platform have grown for two consecutive quarters, with Q4 loan volume increasing by 9% sequentially to RMB 89.9 billion.
Speaker Change: Lone volume in the second half of the year regained positive growth, increasing by approximately 15% compared to the first half.
With operational efficiency continuing to improve, [inaudible]
Speaker Change: Our Q4 profitability hit a new record high with non-GAAP net income, increasing 71.5% year-over-year to RMB 1.97 billion. A non-GAAP net income per diluted ADS surging 91.3% year-over-year to RMB 13.7.
Speaker Change: Despite macroeconomic headwinds, we have consistently improved upon our results over the year and outperformed our market commitments through the ongoing evolution and enhancements to our business.
In 2024, with our cake rate continuing to improve,
Speaker Change: Full-year non-GAAP net income rose 44% year-over-year to reach an all-time high of RMB 6.42 billion. Additionally, we successfully executed USD 410 million share repurchase, buying back approximately 12% of our share count of the beginning of the year.
Speaker Change: This also contributed to improve non-GAAP net income per diluted ADS for 2024, which increased 55.7% year-over-year to RMB 42.4.
Speaker Change: Coupled with ongoing improvements in profitability and capital allocation efficiency, our ROE for 2024 increased further to 27.9%, significantly outperforming most financial services and internet companies in China.
Speaker Change: Now I'll walk you through the progress we made in 2024.
First, we remain committed to driving quality growth.
We enhance user acquisition efficiency by proactively diversifying acquisition channels.
Speaker Change: The number of new borrowers in 2024 increased by 16.2% year-over-year, while average acquisition costs per credit line user declined by 5.3%. Reflecting a significant improvement in user acquisition efficiency.
Speaker Change: Through a 26% increase in new credit line users, and a remarkable 98% increase in loan volume from the embedded finance channels with users acquired through this segment, now accounting for 41%.
Speaker Change: Additionally, our embedded finance model further expanded its reach and now covers the majority of leading internet traffic platforms in China with penetration rates also increasing.
Speaker Change: Simultaneously, we deepen the collaboration with financial institutions to engage with their existing customer bases, leveraging their proprietary traffic, and our precise user identification capabilities, and differentiated risk strategies to extend our credit product offerings.
This is the first time I've ever seen this. I've never seen it before. I've never seen it before.
Speaker Change: As we expand into more channels and strengthen our presence across platforms, we expect loan volume from our embedded finance business to maintain rapid growth momentum in 2025.
Speaker Change: 74% of the graphics and 27% of the videos we deploy are now generated by AIGC technology, resulting in a 25.1% improvement in user outreach efficiency.
Speaker Change: and an approximately 10% reduction in average cost per credit line user. Furthermore, with 40% of our ad placements now automated, we achieve the 9% improvement in ROI compared to manual placements.
Speaker Change: Second, our asset quality improves significantly in 2024, following the decisive initiatives we implemented to optimize our loan portfolio and prioritize high quality growth.
Speaker Change: We upgraded our application scorecard or A scorecard by integrating AI to enhance credit data analysis.
Speaker Change: This allowed us to lower risk metrics back to target levels and establish a foundation for continuous improvements.
Speaker Change: Within our post-lending processes, we enhance overall collection efficiency by upgrading our collection scorecard or C-scorecard, with large language models for real-time analysis of user communication data and refining partner management and case assignment strategies.
Speaker Change: In the second half of the year, despite a moderate recovery in market demand,
Speaker Change: We maintained a disciplined risk strategy and focused on differentiated user operations.
Driving further improvements in our risk indicators.
Speaker Change: In Q4, our D1 delinquency rate decreased by 0.21 percentage points year over year, while 30-day collection rate increased by 3.23 percentage points.
Speaker Change: This robust asset quality has laid a solid foundation for our 2025 strategic planning and with optimized risk strategies now firmly in place. We expect risk performance to remain stable in the coming quarters.
Speaker Change: Our ABS issuance for the year increased by 21.6% to RMB 15.2 billion, further optimizing our funding structure.
Speaker Change: We also issued the first domestic exchange traded ABS with a AAA International Rating, which attracted subscriptions from multiple international institutional investors and expanded our funding channels globally.
Speaker Change: Our leadership in ABS issuance has given us a distinct competitive advantage in funding.
Speaker Change: In 2025, we plan to ramp up ABS issuance and increase the share of ABS in our funding mix.
Speaker Change: Although there has been a slight uptick in interest rate uncertainty this year,
Speaker Change: We are confident in our ability to drive a moderate decline in our funding costs in the coming year.
Speaker Change: The proportion of loan volume from our capital-light segment increased by approximately 10 percentage points to 53% throughout 2024.
Speaker Change: We are the first mover to adopt this model and now boast the highest ratio when compared to our industry peers.
Speaker Change: A direct result of our strong asset quality and precise asset allocation capabilities. Our flexible asset structure ensures that our loan portfolio remains significantly more resilient during market cycles.
Speaker Change: Over the past year by onboarding funding partners with more diverse risk appetites, we have strength into our ability to serve various loan segments and further optimize our asset allocation strategy.
Speaker Change: This has driven continuous improvements in our R.O.A. under the capital light model.
I'm sorry. I'm sorry.
Our Technology Solution Business reached meaningful scale in 2024.
Speaker Change: We continue to enhance and upgrade our credit tech solution, Focus Pro, to meet the diverse needs of financial institutions.
Speaker Change: Over the year, we added 11 new partner institutions, bringing the total to 16, with 11 already live on our platform.
Speaker Change: Lone volume under the focus pro model grew at a compound monthly growth rate of 17% in 2024.
Speaker Change: By extensively engaging with our partners, we have seen strong demand from financial institutions for AI-driven solutions.
I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: In response, we plan to develop an AI-plus-bank agent platform to help banks address pain points in their core business processes and improve operational efficiency.
Speaker Change: AI is deeply embedded in our DNA, empowering every stage of our operations.
Speaker Change: Over the past year, AI has driven significant efficiency improvements across our business.
Speaker Change: From AI co-pilot models in loan collection and telemarketing to automating the development of marketing materials with AIGC technology and assisting developers with coding.
Speaker Change: As large language models increasingly mature, and deep seek significantly improves inference efficiency, we will allocate more resources to the application of AI across credit scenarios going forward.
Speaker Change: First and foremost, risk management is the cornerstone of our business.
Speaker Change: We have gained valuable insights from over 200 million users and developed more than 2,400 models with 590,000 data dimensions.
Speaker Change: In 2024 alone, we iterated our models more than 670 times.
Speaker Change: It's powerful reasoning capabilities will enable us to further enhance user profiling and improve the accuracy of end-to-end risk identification.
Speaker Change: Second, we are fully committed to advancing our AI plus strategy.
Speaker Change: We plan to build an agent platform that will empower core lending processes.
Speaker Change: Leveraging the memory, planning, and collaboration capabilities of AI agents, this platform will fundamentally reshape how we operate, boosting efficiency, while unlocking greater potential within our teams to drive even more business value.
Speaker Change: We have assembled a dedicated team to execute this strategy and expect one third of our core business processes to be powered by this agent platform in the next one or two years.
Speaker Change: This initiative has already gained strong traction among our financial institution partners and we believe AI plus bank will become a key pillar of our technology solution business moving forward.
Speaker Change: The 2025 Government Work Report emphasised a commitment to supporting technological innovation, boosting consumption, and advancing the AI-plus initiative, including the widespread adoption of large language models.
Speaker Change: We will continue to observe the impact these initiatives will have on our business.
Speaker Change: From a long-term perspective, our vision is to become a globally respected FinTech company.
Speaker Change: To achieve this vision, we are executing a one core two-wing strategy, where our domestic credit business serves as the core, and our technology solutions business and international expansion serve as the two wings.
Speaker Change: This strategy will allow us to continuously expand business boundaries and drive digital financial inclusion on a larger scale.
Speaker Change: Looking ahead to 2025, we remain cautiously optimistic and expect our core credit business to maintain high quality development, while our technology solutions business will expand the depth and breadth of our partnerships with banks through our AI plus strategy.
For International Expansion, we will maintain a disciplined approach.
focusing on markets with stable regulatory environments and solid infrastructure.
Speaker Change: We will start small, move quickly and iterate continuously as we progress.
Speaker Change: We look forward to sharing more updates on our journey in the future.
Speaker Change: In 2024, we further optimized capital allocation to enhance shareholder returns, executing our share repurchase plan at a pace significantly ahead of market expectations.
Speaker Change: Our dividends and buybacks for 2024 amounted to USD $180 million and USD $410 million respectively, with total shareholder returns reaching 100% of our 2023 GAT net income.
Speaker Change: As of the end of 2024, we had repurchased a total of 24.5 million ADSs and have begun executing a new repurchased plan of up to USD 450 million in 2025.
Speaker Change: We are confident in the future of our company and remain dedicated to delivering long-term value to our shareholders. Moving forward we will continue to prioritize efficient capital allocation and shareholder value creation through recurring share buybacks and dividends. With that I will now turn the call over to Alex.
Thank you for your time.
Good work today, and see you soon.
I'm sorry. I'm sorry.
Speaker Change: Thank you, Haisheng. Good morning and good evening, everyone. Welcome to our fourth quarter earnings call.
Speaker Change: We close the year with a strong Q4 as my co-environment start to see tentative indication of modest improvement in user activities.
Speaker Change: Our continuous effort to optimize operation improve efficiencies and manage risk exposures to generate healthy financial results and operating metrics.
Speaker Change: The total net revenue of Q4 was 4.48 billion versus 4.37 billion in Q3 and 4.5 billion a year ago.
Speaker Change: A year-on-year decline was mainly due to significant decline in off-balance sheet loans, despite strong contribution from all-balance sheet loans and other value added services.
Speaker Change: The overall funding cost was stable Q&Q in the seasonally-timing funding environment.
Speaker Change: The year-on-year growth was mainly due to strong contribution from ICE and other weather-added service, more than offsetting the decline in capitalized loan facilitation.
Speaker Change: For the full year, 2024, Prapum's surveys account for roughly 53% of a total loan volume and 58% of the year-end loan balance.
Speaker Change: We expect the ratio to be roughly stable in the near term.
Speaker Change: During the quarter, average IRR of loans we originated and or facilitated was 21.3% compared to 21.4% in prior quarter, looking forward we expect pricing to be fluctuated around this level for the coming quarters.
Speaker Change: 1,000 marketing expenses increased 25% Q and Q, but declined 5% in your own year. The sequential increase was made due to increase the customer's activity and the typical Q4C
Speaker Change: We added approximately 1.69 million new pipeline users in Q4 versus 1.58 million in Q3.
Speaker Change: We will continue to make timely adjustment to the pace of a new user acquisition based on microconditions from time to time and further diversify our user acquisition channels and improve user engagement and retention.
Speaker Change: Meanwhile, we will also continue to focus on re-energizing existing user base as repeat bar wars historically contribute vast majority of our business.
Speaker Change: 98 delinquency rate was 2.09% in Q4, compared to 2.7% in Q3, day one delinquency was 4.8% in Q4 versus 4.6% in Q3.
Speaker Change: 30-day collection rate was 88.1% in Q4 versus 87.4% in Q3.
with higher low volume.
Speaker Change: We are comfortable with our current risk exposure and we expect to see relatively stable risk metrics in the coming months.
Speaker Change: Under current market conditions and geopolitical uncertainties, we continue to take a prudent approach to book provisions against potential credit losses.
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: Total new provision for risk-bearing loans in Q4 were approximately 2.07 billion versus 1.63 billion in Q3.
Speaker Change: The increase in new provision was mainly due to increase in risk-bearer loan volume Q&Q, and higher provision booking ratios.
Speaker Change: Right-backs of previous provisions were approximately 1.02 billion in Q4 versus 910 million in Q3.
Speaker Change: Provision coverage ratio, which is defined as total outstanding provisions divided by total outstanding development with very long balance between 90 and 180 days.
Speaker Change: were 617% in Q4, a historical high compared to 482% in Q3.
Speaker Change: Now that net profit was 1.97 billion in Q4 compared to 1.83 billion in Q3, the significant improvement in probability was mainly due to favorable year-and-tax adjustment.
Speaker Change: As strong earning growth and the proactive share repurchase create a significant E.P.A.D.S. [inaudible]
Speaker Change: Effective tax rate for Q4 was 1.0%, compared to our typical ETR of approximate rate 15%.
Speaker Change: With solid operating result and higher contribution from capitalite model, our leverage ratio, which is defined as risk bearing loan balance, divided by shareholder's equity, was 2.4 times
Speaker Change: Near Historical Low, we expect to see Vibraturatial fluctuated round this level in the near future.
[inaudible]
Speaker Change: We generate approximately 3.05 billion cash from operations in Q4 compared to 2.37 billion in Q3. The sequential increase in operating cash flow was mainly due to better operating results and lower tax payout.
Speaker Change: Total cash and cash equivalent and the short term investment was 10.36 billion in Q4 compared to 9.77 billion in Q3
Speaker Change: As we continue to generate strong cash flow from operations, we will further optimize our tactical allocation to support our business initiatives and to return our shareholders.
Speaker Change: During the Q4, we in aggregate re-purchased approximately 3.1 million ADS in open market for a total amount of approximately $1.107 million, inclusive of commissions at the average price of $34.5 per ADS.
Speaker Change: As such, we have completed substantially all of the 350 million share repartist plan. We announced on March 12, 2024.
Speaker Change: Furthermore, on November 19th, 2024, our Board of Directors approved a new share with Participant to buy back up to 450 million worth of ABS over a trauma-spirits, starting January 1st, 2025.
Speaker Change: For a total amount of approximately US$86 million, inclusive of commissions, at the average price of US$39.7 per ADS under the new shared repurchased pet.
Speaker Change: The Proactive Execution or Chair Repurchase Plan demonstrates management confidence and commitment to the future of the company. And the management intend to further use Chair Repurchase to accelerate
in accordance
In accordance with our current dividend policy,
Speaker Change: Our board has approved a dividend of US dollar 35 cents per class A ordinary share.
Speaker Change: or US dollar 70 cents per ADS for the second half of 2024 to hold a record of Class A holding their shares and ADS as of the close of the business on April 23, 2005, Hong Times and New York Times respectively.
Speaker Change: We intend to gradually increase the dividend per ADS on a semi-annual basis.
Finally, regarding our business off-look [inaudible]
Representing a year-over-year gross between 49 and 58%.
Speaker Change: This outlook reflects the company's current and preliminary view which is subject to material changes.
Speaker Change: With that, I would like to conclude our prepared remarks, operated, we can now take some questions.
Speaker Change: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speaker phone, please pick up the handset to ask your question.
Speaker Change: For those who can speak Chinese, please start your question in Chinese, followed by an English translation. To allow enough time to address everyone on the call, please keep to one question and one follow-up. And return to the queue if you have more questions.
Thank you.
Speaker Change: Your first question comes from Richard Xu with Morgan Stanley . Please go ahead.
感谢观众朋友们给我这个提问的机会,我是摩根三维分析学院的学长。
Speaker Change: I just want to first ask about the progress in the AI field, because recently everyone is indeed quite concerned. So, could you please tell me which areas we are currently...
可以利用這個DeepSeek或者其他
Speaker Change: The functions of AI bring about some obvious effects. In the future, in which areas might efficiency improvements be more noticeable, and how is the progress now?
Another question I'd like to ask is, last year...
journey from 1992 to today.
Speaker Change: Two questions from me. Number one on the A.I. I could manage and discuss what areas we're seeing the most potential to integrate it, maybe DTC and other A.I. modules and what type of decisions it could be achieved.
and any progress so far. Second of all.
Speaker Change: There's been some obviously policy support in September of last year. Are we seeing any credit demand recovery at the moment? And what's the credit demand at the moment? I'll look for 2025
Thank you.
Okay, Richard, thank you.
Actually, it's really hard, it's public for now.
Speaker Change: Over the past year, we are happy to see the great improvement in large language model technology, especially in its
We believe credit is a perfect scenario for AI application.
Speaker Change: because this industry has a strong data foundation and a high degree of digitalization.
Speaker Change: Last year, we had a lot of AI practice on efficiency work like sales, loan collection, intelligence, marketing, and ID.
Speaker Change: For example, we launched the compiler system to empower our collection team.
by analyzing our historical following course.
Speaker Change: The system can effectively read users' intent and suggest how to effectively communicate with the users.
Speaker Change: So far, the adoption rate of the cobalafist and a man now collecting team.
have reached about 84%.
Will you leave? It's roughly 30 times for a person.
Speaker Change: And this year we will allocate more resources to applying AI into our credit assessments.
Speaker Change: leveled in the AI reasoning capabilities to enhance our ability to analyze credit reports.
Speaker Change: One example, when will you feature recognition during the loan application process?
AI will recognize additional information from the pictures or videos.
such as user closing all their surroundings.
Speaker Change: This information can be brought to check with the identity information provided by the users.
to reduce the fraud risk.
Thank you for joining us today.
Speaker Change: This year, we have put a small portion of our traffic into the end-to-end AI driven with the decision-making process.
Thank you for joining us today.
Speaker Change: We are really looking forward to the result of this test.
In addition,
We are fully committed to advancing now.
AI Class Strategy.
Speaker Change: We plan to build an engine platform that will empower our whole company.
Speaker Change: This AI agent could become our digital employees working together with us.
Speaker Change: We have viewed that committee team to execute this AYAC class strategy and at the end of the year.
We expect this team to grow to around 150 people.
In the next one years, we expect one third of...
I will call business processives.
We will be powered by this engine platform.
Speaker Change: We have seen strong interest for the engine class from a man or a financial institution partners.
and we believe in your class bank.
We will make our technology solution business more competitive.
I'm sorry. I'm sorry.
And I want to say, over the past decade,
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: We have captured the growth opportunities in the next class era.
Speaker Change: We are confident that based on our scenario, technology and data, we are also at a good position to capture the AI class opportunities.
[inaudible]
Next, we are on the first question.
and for the second question about today.
Customer Demand.
Speaker Change: Yes, we did observe some improvements in user activities after the 10th of March 21st.
For example, [inaudible]
The Loan Application Ratio.
was 10% higher in Q4, worth of Q3.
Thank you. Thank you.
Speaker Change: We also notice a system of pickups and credit demand ahead of Chinese New Year.
especially from the many users.
Then, credit demand declined in February due to the holiday.
Padre Baon gave it in March.
Speaker Change: Based on the current situation, we expect Q and Leng volume to grow by more than 10th
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As it stage...
Speaker Change: I think it is still too early for us to call.
on macro recovery.
We still want to adopt a Putin approach.
to plan our business for this year.
But if the market environment improves me for you.
We will adjust our strategy timely.
to capture the growth of tunicists.
Speaker Change: So what's your ideal type? Is it a man? What is your ideal type? Indeed. Because the body of a man has the originality. Identity, right? Identity is a dream, as needed by the Andromeda. Identity is nearest to logic,
Thank you.
I'm sorry. I'm sorry.
Speaker Change: Your next question comes from Alex Ye with UBS. Please go ahead.
Alex Yee: This coming week, I appreciate the opportunity given by the management to ask questions. I have two questions. The first one is about the indicators of our early asset quality. We see two different directional changes in Day 1 and 30-day recovery rates. What are the main reasons for this, and what is the trend from Q1 to the present, as well as the outlook for the future? The second question is about the management. Previously, there was guidance given for the full year 2025, indicating that the Net click rate would be slightly above 5%.
Based on the latest business developments, is there a need to adjust expectations in this area?
Alex Yee: So my first question is about what's the drivers for the movement of the two early Asakurini pages in Q4, including day one, dealing with racial and salinity collection racial, what's the latest trend in Q1 so far and the outlook going forward. And second question is about the next territory outlook.
Alex Yee: which was guided by a manager previously at around 5% for a few years. So based on your related results and your operation into this year so far. So what's the, is there any adjustment to this guidance?
[inaudible]
Thank you. Thank you. Thank you.
Let me answer the question about the risk first.
OK.
Thank you, Mr. Xu. Thank you. Thank you.
Speaker Change: Okay, first of all, I would like to clarify that we look at the internal monitoring risk indicators by combining the landing rate and the three-day recovery rate. This is because there are various reasons that can cause fluctuations in a single indicator, so we place more emphasis on this combination.
Speaker Change: That is, the residual gas rate after 30 days of blowing. It equals the company's land blowing multiplied by 1 minus the 30-day recovery rate. Currently, this SIGOMR indicator is very stable.
Speaker Change: Secondly, let me explain the change of day 1.1%. The reason why the autumn market shows a difference compared to the autumn rise is because...
Speaker Change: The slight increase in the recovery rate is due to the optimization of our predictive strategy for customer repayments. Without affecting the loss rate, we have optimized the customer experience by adjusting the coverage ratio of customers with expected repayments.
Relatively decreased by 30%
In this way, some high-quality customers might miss a repayment on the due date without prior reminders, leading to an increase in exposure rate. However, these customers will also quickly make a normal repayment.
Speaker Change: This has resulted in a slight increase in the road blowing rate and recovery rate, but this does not have a substantial impact on the actual losses.
Speaker Change: The risk situation in January and February is relatively similar to that in autumn, and the overall risk level is still relatively stable.
Speaker Change: However, we want to emphasize that we do not pursue the lowest possible risk, because the lowest risk does not necessarily mean the maximization of the company's interests.
Speaker Change: So our current level of cooperation is relatively high, which gives us enough safety margin to try new things and achieve a better balance between scale and risk.
Let's ask Keller to speak
Speaker Change: Okay, let me do the translation for Mr. Chen. First, let me explain how we monitor our risk internally. We usually look at both the day one bidding currency rate and the 30-day collection rate together, because individual matrix can fluctuate for various reasons. What we focus on more is the C2M2 ratio, which is the bidding currency rate after 30-day collection period.
Speaker Change: Based on this matrix, our wrist level is very stable.
Speaker Change: Now about the slight increase of our day-want in-inquency rate and the collection rate compared to Q3, it was mainly due to the optimisation we made to our repayment reminders questions.
Speaker Change: We reduced the coverage of our early reminder by about 13% to improve human experience without compromising our loss rate.
Speaker Change: As a result, some of our high-quality users missed the repayment on the due date, but today quickly caught up.
Speaker Change: That's why you will see a small increase in both day one didn't consider it and the correction rate, but it didn't have any meaningful impact on our actual credit losses.
I'm not sure. I'm not sure.
Speaker Change: Our risk performance in January and February was pretty much in line with Q4 with overall risk levels remaining stable.
Speaker Change: I also want to emphasize that we are not aiming to reduce our risk to the absolute lowest level, as it doesn't serve the best interest of the company.
Speaker Change: Right now, with a decent level of takes rate, we have a solid margin of safety to experiment with new strategies and find a better balance between growth and risk.
Thank you very much.
I'm sorry. I'm sorry.
Speaker Change: Thank you. Thank you. Okay. And, Alex, I will respond to your second part of the question about the take rate.
Speaker Change: As you know, the Israel 2024 has been on a steady improvement trend in take rate as we reduce the risk and with the funding costs continue to trending lower around last year. So by the end of the last year, in Q4, you know, our take rate network rate approach to 6%.
Speaker Change: So, that's the trend for last year and obviously there are some one-off factors as you guys know for example the year.
Speaker Change: The mixed change is already in a revenue recognition different between the second half and first half. But excluding all these kind of a one-off factors, I think.
We're looking at for this year. It's a reasonable assumption.
Speaker Change: As you mentioned, we achieved a sort of a practice in the bug.
Kind of a take rate for the year.
and...
around the margin.
Speaker Change: If we see the opportunity, we will take that and try on the margin to see whether we can bring the incremental marginal probability on top of our base case.
Speaker Change: So that will be the process we will continue to pushing.
Speaker Change: The end result or the ultimate goal is to really drive a higher profit, a total profit on top of the sort of the base case there. So that's the our approach to looking at this year's profitability and this year's kind of a take rate.
I'm sorry, I'm sorry, I'm sorry.
Speaker Change: Thank you, Yonex. Question comes from Cindy Wang with China Renaissance. Please go ahead.
Thank you for your time.
Cindy Wang: Thank you to the management for giving me the opportunity to ask this question. I have a question regarding regulation. Last week, the Financial Regulatory Authority issued a notice requiring financial institutions to develop consumer finance to help boost consumption. What impact does this document have on the industry and the company?
Speaker Change: Thank you for taking my question. I have a question related to the regulation side.
Speaker Change: So last week, National Financial Regulatory Administration issued a notice requiring financial institutions to promote consumer finance.
Speaker Change: and to boost consumption in China. So how do you see the new policy impact to the overall industry and the company? Thank you.
Okay, Cindy.
Cindy Wang: I'm glad you mentioned this. It's really a big news for our industry.
We believe they are talking about it.
send a very positive signal.
and we are very encouraged.
Cindy Wang: It is very clear that the government's attraction is to boost consumption by encouraging the development of consumer credit industry.
Cindy Wang: and I think there will be a series of policies to support that direction.
The first...
Cindy Wang: Increasing the supply of consumer loans, which means support in terms of monetary policy and liquidity.
Cindy Wang: And secondly, they encourage financial institutions to increase loan volume and sell reasonable terms for loan products.
Cindy Wang: which means that the regulator will provide more flexible space for financial institutions.
Cindy Wang: Thirdly, they emphasize the consumer protection and providing support for users who have difficulty in repayment.
Thank you.
Cindy Wang: And no word. The regulators have fully recognized the value of consumer finance in both [inaudible]
Cindy Wang: Therefore, we expect that the regulator environment will remain relatively stable, leaving in that more room to innovate and serve our customers.
Thank you.
[inaudible]
Speaker Change: Next question comes from Emma Xu with Bank of America Securacies. Please go ahead.
Emma Su: Thank you for giving me the opportunity to ask this question. Congratulations to the company for achieving very strong performance once again. I have a question regarding funding costs. I would like to ask whether the funding costs in the fourth quarter and the first quarter are still continuing to decline, or if they will be affected by liquidity issues, which might slow down the rate of decline. Also, I would like to know to what level the funding costs can be reduced at the lowest.
Wu's Channel.
Speaker Change: I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Emma Su: Okay, thank you Emma. In terms of the funding cost, over the past few years, our funding cost have continued to decline.
Even much faster compared to the LCR.
In the future, its macro improves.
The supply and demand situation will also change.
and we always amplify that.
Financial institutions have their operating costs.
Emma Su: The current cost of funds has already approached the bottom line of financial institutions.
Instutions.
and so there is a limited room for further decline.
Thank you for joining us today.
and in addition to the funding provided by Financial Institutions.
for the significant portion of our funding comes from ADS.
Emma Su: We will continue to issue more ideas this year to further optimize our funding structure.
Emma Su: So, hope we can achieve further decline in overall financial costs.
Thank you.
Emma Su: Yeah, just Emma just won't add a couple points. So basically you can see there are three factors to really drive the funding cost.
Two external and one internal [inaudible]
Emma Su: The two external ones, you know, the LPR obviously is that, you know, if you see the...
Emma Su: Reduction in LPR. It will more or less kind of a...
kind of a pass through to us a little bit.
Thank you.
then you may run into a...
You know, short of a fund.
Emma Su: Kind of an environment overall, that certainly will put some pressure on our funding house there. So that's two external factors. The internal one on the EBS side, you know, last year we did about 115 billion.
A little bit of work that could have been in the ABS issuance.
Emma Su: and which represented about 20-some percent increase over the year before. I think at least from our planning perspective, we try to maintain this kind of a year-to-year rose pace.
Emma Su: Xu, for this year. If we can achieve that, that will certainly help us from a mixed perspective reduce the overall funding has a little bit.
Emma Su: But the net net, given we are how low we are already be, so there's limited space in terms of downward movement will still be quite limited.
Thank you.
I'm sorry. I'm sorry. I'm sorry. I'm sorry
Emma Su: Your next question comes from Yada Li with CICC. Please go ahead.
[inaudible]
Yada Li: The relationship level is good. Congratulations to the company for achieving outstanding performance, and thank you for giving me the opportunity to ask a question. Today, I would like to inquire whether the company will maintain the current high level of shareholder returns, how it considers the sustainability of future shareholder returns, and whether there is still room for improvement in the future. Thank you, relationship level.
Speaker Change: Thank you for taking my questions. A question is about the shareholders' return. I was wondering do he's back to deliver more value to the shareholders and how to view the sustainability and their still potential for future growth. That's all, thank you.
Thank you for your time.
I'm sorry. I'm sorry.
Speaker Change: Sure, thank you. I will take this one. We have been very committed to return values to our shareholder in the past couple years.
Speaker Change: We are looking at, if you look at the 2024, the actual payout almost represent 100% of our earnings for 2023. Going forward, we have been saying that we try to maintain a 70% payout ratio for the next few years. And given that we also have a target.
Speaker Change: to kind of shrink our sharebase by a significant percentage. So, we put the current priority and also maybe the next year's priority into the share buyback side.
Speaker Change: And we have the current 450-minute share by that program running so far in the first quarter, even though our share price has been moving up quite significantly, we still maintain a very consistent pace in terms of executing the current 450-million by-back program.
Speaker Change: and we intend to continue to do so for the remainder of the year.
Speaker Change: If there's opportunity arise, we also may consider to accelerate the by-back program down the road.
Speaker Change: On the dividend side, given the priority for now, it's on the buyback, we try to achieve a continued increase per share dividend.
Speaker Change: on the semi-annuit basis. For example, this quarter, we declared a 70 cents per ADS dividend.
the event
Speaker Change: that the dividend per share number to continue increase over the course of next few dividends, given that we are shrinking our share base quite significantly and we also have to meet the board authorized.
Speaker Change: At least 20% dividend pay-out ratio. So the mathematically you have to see increased DPS in the in the going forward basis.
There. And in a long run, once we achieved our...
Thank you.
Speaker Change: You know, which may be about, you know, two-year down the road, we will at that time reconsider the mix between the buyback and the dividend, but that's still a little bit a long time away. So for now, the power is still beyond the buyback side.
Thank you.
Speaker Change: Thank you. There are no further questions at this time. I'll now hand back to management for closing remarks.
Speaker Change: Okay, thank you, everyone, to join us for today's conference. We are very efficient to make the call going very quickly when we stop, but if you have any additional questions, please feel free to contact us offline. Thank you.
Speaker Change: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Speaker Change: Ai Qingcun, Ning Whee holds a party. Eh, it's already the 1st of February.... Hey,ți Tușcu. keep your mouth shut... sniff sniff Hey, already the time is spot on! It's a hot spot here.
Chiu Huiniang, Cheng Chiu Huiniang, Cheng
Speaker Change: Shen Zhen, take some medicine and go home. Press your legs. You can't push too hard, it didn't hurt when much pressure was built up before. Press hard! Now, grab the 34-oz fish fillet Now, grab the 3-oz fish fillet Now, grab the 44-oz fish fillet
Emma Xu, Haisheng Wu, Xiaoxiong
Speaker Change: [music].
Speaker Change: Yes.
[music].
Speaker Change: Yes.
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Speaker Change: Yes.
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