Q2 2026 LexinFintech Holdings Ltd Earnings Call

August 31, 2026

Operator: Good day, and thank you for standing by. Welcome to Lexin's Q2 2026 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers presentation, there will be a question and answer session. To ask a question during the session, you need to press star followed by one one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Head of Capital Markets, Mr. Will Tan. Thank you. Please go ahead.

Speaker #2: Good day, and thank you for standing by. Welcome to the Lexin Q2 2026 earnings conference call. At this time, all participants are in a listen-only mode.

Speaker #2: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you need to press star followed by 11 on your telephone.

Speaker #2: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Head of Capital Markets, Mr. Will Tan.

Speaker #2: Thank you. Please go ahead.

Speaker #3: Thank you, operator. Hello, everyone. Welcome to our Q2 2026 earnings conference call. Our results were released earlier today and are currently available on our IR website.

Will Tan: Thank you, operator. Hello, everyone. Welcome to our Q2 2026 earnings conference call. Our results were released earlier today and are currently available on our IR website. Today, you will hear from our Chairman and CEO, Mr. Jay Wenjie Xiao, who will provide an update on overall performance and the strategies of our business. Our COO, Mr. Arvin Zhanwen Qiao, will then provide more details on our risk management initiatives and updates. Lastly, our CFO, Mr. James Zheng, will discuss our financial performance. Before we continue, I would like to refer you to our Safe Harbor statement in our earnings press release, which will also apply to this call as we will be making forward-looking statements. Last, please note that all figures are presented in CNY terms, and all comparisons are made on a quarter-over-quarter basis unless otherwise stated.

Speaker #3: Today, you will hear from our Chairman and CEO, Mr. Jay Wenqingxiao, who will provide an update on the overall performance and strategies of our business.

Speaker #3: Our CRO, Mr. Aven San Wenqiao, will then provide more details on our risk management initiatives and updates. Lastly, our CFO, Mr. James Dunn, will discuss our financial performance.

Speaker #3: 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.

Speaker #3: As we will be making forward-looking statements, please note that all figures are presented in RMB terms, and all comparisons are made on a quarter-over-quarter basis unless otherwise stated.

Will Tan: Last, please note that all figures are presented in CNY terms, and all comparisons are made on a quarter-over-quarter basis unless otherwise stated. Please kindly note Jay and Arvin will give their whole remarks in Chinese first. Then the English version will be delivered by Jay's and Arvin's AI-based voices. With that, I am now pleased to turn over the call to Mr. Jay Wenjie Xiao, Chairman and CEO of Lexin. Please.

Speaker #3: Please kindly note that Jay and Aven will give their full remarks in Chinese first. Then, the English version will be delivered using Jay's and Aven's AI-based voices.

Will Tan: Please kindly note Jay and Arvin will give their whole remarks in Chinese first. Then the English version will be delivered by Jay's and Arvin's AI-based voices. With that, I am now pleased to turn over the call to Mr. Jay Wenjie Xiao, Chairman and CEO of Lexin. Please.

Speaker #3: With that, I am now pleased to turn over the call to Mr. Jay Wenqing Xiao, Chairman and CEO of Lexin. Please go ahead.

Speaker #4: 好的，大家好。首先由我向各位分享我们2026年二季度的经营情况。二季度以来，行业经营环境持续承压，特别是6月末，行业个别平台出现风险事件，引发了行业资金供给的大面积暂停、收紧，对行业生态和市场信心带来重大影响。公司的线上消费金融、普惠金融等助贷业务受到了较大程度的波及，未有效地降低对公司的影响。我们在近期果断地推进了以下的一些应对举措：第一，降本增效，提升穿越周期的能力。公司快速地调整组织架构，精简优化了部分人员，加快AI技术的应用，有效地降低了公司的运营成本，提升长期持续运营和应对周期变化的能力；第二，收紧风险管理，保持资产质量的稳定。公司主动压降资产规模，审慎控制新增资产，确保新增资产风险稳定可控，提升业务发展的长期安全性；第三，加强财务管控，提高运营效率。我们重点推进应收账款和保证金的回收工作，实现担保、助贷余额、有序平稳下降，保障公司的资金安全与运营稳定；第四，坚定推进多元化的战略，加快推动业务的结构转型，在非助贷的业务上公司具备多年积累的生态业务优势。我们持续加快从担保、助贷向科技富人转型，为未来的恢复打下比较好的基础。公司始终坚持合规经营放在首位，在当前行业的危机之下仍然保持经营韧性，拥有持续的造血能力，长期经营安全可靠。下面我介绍一下公司二季度的具体情况。二季度，公司实现交易额5504.3亿元，营收31.9亿元，净利润1.01亿元，资产风险指标方面，受行业影响，入税率有所上升，但出税率也相应有所改善。面对行业的变化，我们对公司的长期发展仍然坚持信心，主要来自以下几个方面：第一，公司始终深耕场景，科技零售业务独特优势，在政策导向和需求增长下，我们预计未来科技零售业务拥有良好的成长空间。公司将不断完善我们的供应链体系，围绕用户刚需场景消费需求，提升平台的经营效率；第二，2B数字科技业务保持较快增长，持续满足持牌机构优质资产的需求。公司多年深耕数字科技领域，行业优势显著，二季度2B数字科技业务迎来较好的增长，实现了规模化的盈利，这项业务符合未来监管的导向，具备长期商业价值。我们将持续加大投入；第三，AI落地富人业务降本显著，AI在业务全链条已经落地，效果比较显著。以上线100多个AI智能岗位全面覆盖，策略智能化生成，合规校验带货管理，智能客服等业务场景，助力公司完成降本目标。二季度，公司运营成本环比下降17.6%，随着AI技术的持续落地，我们预计三季度公司成本将进一步下降，展望未来，单个事件带来的冲击仍将继续，行业依然存在较大的不确定性。我们将继续审慎经营，第一，我们将继续加强经营管理，优化财务状况，推进电商多元非助贷业务发展，坚定应对行业危机的信心；第二，我们把分红政策调整为一年一次，为业务的转型提供充足的资金储备和安全边际；第三，加快AI投入，邮寄在科技富人领域落地应用，联合合作伙伴加快资金的恢复，伴随行业逐步明朗，我们将结合公司的情况，积极探索多元股东回报政策，让大家更好地分享公司成长的收益。接下来，我把发言时间交给Aven，谢谢大家。

Jay Wenjie Xiao: 好的，大家好，首先由我向各位分享我们2026年二季度的经营情况。二季度以来，行业经营环境持续承压，特别是6月末行业个别平台出现风险事件，引发了行业资金供给的大面积暂停收紧，对行业生态和市场信心带来重大影响。公司的线上消费金融、普惠金融等助贷业务受到了较大程度的波及。为有效地降低对公司的影响，我们在近期果断地推进了以下的一些应对举措。第一，降本增效，提升穿越周期的能力。公司快速地调整组织架构，精简优化了部分人员，加快AI技术的应用，有效地降低了公司的运营成本，提升长期持续运营和应对周期变化的能力。第二，收紧风险管理，保持资产质量的稳定。公司主动压降资产规模，审慎控制新增资产，确保新增资产风险稳定可控，提升业务发展的长期安全性。第三，加强财务管控，提高运营效率。我们重点推进应收账款和保证金的回收工作，实现担保助贷余额有序平稳下降，保障公司的资金安全与运营稳定。第四，坚定推进多元化的战略，加快推动业务的结构转型。在非助贷的业务上，公司具备多年积累的生态业务优势，我们持续加快从担保助贷向科技赋能转型，为未来的恢复打下比较好的基础。公司始终坚持合规经营放在首位，在当前行业的危机之下，仍然保持经营韧性，拥有持续的造血能力，长期经营安全可靠。下面我介绍一下公司二季度的具体情况。二季度公司实现交易额554.3亿元，营收31.9亿元，净利润1.01亿元。资产风险指标方面，受行业影响，入催率有所上升，但出催率也相应有所改善。面对行业的变化，我们对公司的长期发展仍然坚持信心，主要来自以下几个方面。第一，公司始终深耕场景科技零售业务独特优势。在政策导向和需求增长下，我们预计未来科技零售业务拥有良好的成长空间。公司将不断完善我们的供应链体系，围绕用户刚需场景消费需求，提升平台的经营效率。第二，To B数字科技业务保持较快增长，持续满足持牌机构优质资产的需求。公司多年深耕数字科技领域，行业优势显著。二季度To B数字科技业务迎来较好的增长，实现了规模化的盈利。这项业务符合未来监管的导向，具备长期商业价值，我们将持续加大投入。第三，AI落地赋能业务降本显著。AI在业务全链条已经落地，效果比较显著，已上线100多个AI智能岗位，全面覆盖策略智能化生成、合规校验、贷后管理、智能客服等业务场景，助力公司完成降本目标。二季度公司运营成本环比下降17.6%。随着AI技术的持续落地，我们预计三季度公司成本将进一步下降。展望未来，单个事件带来的冲击仍将继续，行业依然存在较大的不确定性，我们将继续审慎经营。第一，我们将继续加强经营管理，优化财务状况，推进电商多元非助贷业务发展，坚定应对行业危机的信心。第二，我们把分红政策调整为一年一次，为业务的转型提供充足的资金储备和安全边际。第三，加快AI投入，尤其在科技赋能领域落地应用，联合合作伙伴加快资金的恢复。伴随行业逐步明朗，我们将结合公司的情况，积极探索多元股东回报政策，让大家更好地分享公司成长的收益。接下来我把发言时间交给阿伟，谢谢大家。

Speaker #1: Hi everyone. Let me start by sharing our business performance for the second quarter of 2026. Since the second quarter, the industry's operating environment has faced ongoing headwinds.

Jay Wenjie Xiao: Hi everyone, let me start by sharing our business performance for the Q2 of 2026. Since the Q2, the industry operating environment has faced ongoing headwinds. Most notably, in late June, risk events involving certain peers triggered a widespread tightening and even suspension of funding supply across the industry, severely impacting the industry landscape and shaking market confidence. As a result, our loan facilitation operations across both online consumer finance and offline inclusive finance were materially affected. We swiftly took the following decisive measures to mitigate the impacts on us. First, driving cost efficiency to enhance resilience through market cycles. We rapidly streamlined our organizational structure, optimized headcount, and accelerated AI adoption. These measures effectively reduced operating expenses and enhanced our long-term sustainability through industry cycles. Second, tightening risk controls to maintain stable asset quality.

[Translator]: Hi everyone, let me start by sharing our business performance for the Q2 of 2026. Since the Q2, the industry operating environment has faced ongoing headwinds. Most notably, in late June, risk events involving certain peers triggered a widespread tightening and even suspension of funding supply across the industry, severely impacting the industry landscape and shaking market confidence. As a result, our loan facilitation operations across both online consumer finance and offline inclusive finance were materially affected. We swiftly took the following decisive measures to mitigate the impacts on us. First, driving cost efficiency to enhance resilience through market cycles. We rapidly streamlined our organizational structure, optimized headcount, and accelerated AI adoption. These measures effectively reduced operating expenses and enhanced our long-term sustainability through industry cycles. Second, tightening risk controls to maintain stable asset quality.

Speaker #1: Most notably, in late June, risk events involving certain peers triggered a widespread tightening and even suspension of funding supply across the industry, severely impacting the industry landscape and shaking market confidence.

Speaker #1: As a result, our loan facilitation operations across both online consumer finance and offline inclusive finance were materially affected. We swiftly took the following decisive measures to mitigate the impacts on us.

Speaker #1: First, driving cost efficiency to enhance resilience through market cycles, we rapidly streamlined our organizational structure, optimized headcount, and accelerated AI adoption. These measures effectively reduced operating expenses and enhanced our long-term sustainability through industry cycles.

Speaker #1: Second, we tightened risk controls to maintain stable asset quality. We proactively scaled back overall loan volume and adopted a prudent approach to new loan originations.

Jay Wenjie Xiao: We proactively scaled back overall loan volume and adopted a prudent approach to new loan originations. This ensures the risk profile of new loans remains well controlled, safeguarding the long-term stability and resilience of our business. Third, strengthening financial discipline to enhance operational efficiency. We prioritized the recovery of receivables and security deposits and drove a measured and steady scale-down of facilitated loan balance, safeguarding our funding security and operational stability. Fourth, advancing our diversification strategy and accelerating business transformation. In our non-loan facilitation operations, we leveraged years of ecosystem advantages to accelerate our transition from a guarantee-backed model to a tech-empowered model, laying a solid foundation for business recovery. We have always placed compliance at the forefront of our operations. Despite current industry headwinds, we continue to demonstrate strong operational resilience, maintain organic cash generation capability, and ensure long-term operational safety and reliability.

[Translator]: We proactively scaled back overall loan volume and adopted a prudent approach to new loan originations. This ensures the risk profile of new loans remains well controlled, safeguarding the long-term stability and resilience of our business. Third, strengthening financial discipline to enhance operational efficiency. We prioritized the recovery of receivables and security deposits and drove a measured and steady scale-down of facilitated loan balance, safeguarding our funding security and operational stability. Fourth, advancing our diversification strategy and accelerating business transformation. In our non-loan facilitation operations, we leveraged years of ecosystem advantages to accelerate our transition from a guarantee-backed model to a tech-empowered model, laying a solid foundation for business recovery. We have always placed compliance at the forefront of our operations. Despite current industry headwinds, we continue to demonstrate strong operational resilience, maintain organic cash generation capability, and ensure long-term operational safety and reliability.

Speaker #1: This ensures the risk profile of new loans remains well controlled, safeguarding the long-term stability and resilience of our business. Third, strengthening financial discipline to enhance operational efficiency.

Speaker #1: We prioritized the recovery of receivables and security deposits, and drove a measured and steady scale-down of facilitated loan balance, safeguarding our funding security and operational stability.

Speaker #1: Fourth, we are advancing our diversification strategy and accelerating business transformation. In our non-loan facilitation operations, we leveraged years of ecosystem advantages to accelerate our transition from a guarantee-backed model to a tech-empowered model.

Speaker #1: Laying a solid foundation for business recovery, we have always placed compliance at the forefront of our operations. Despite current industry headwinds, we continue to demonstrate strong operational resilience, maintain organic cash generation capability, and ensure long-term operational safety and reliability.

Speaker #1: Now, let me walk you through our second quarter business performance. In the second quarter, we achieved a loan volume of RMB 55.43 billion, generated revenue of RMB 3.19 billion, and net profit of RMB 101 million.

Jay Wenjie Xiao: Now, let me walk you through our Q2 business performance. In the Q2, we achieved a loan volume of CNY 55.43 billion, generated revenue of CNY 3.19 billion and net profit of CNY 101 million. On the risk front, while day-one delinquency ratio picked up due to broader industry headwinds, our 30-day collection rate showed an improvement. Despite current industry volatility, we remain confident in our long-term prospects. Let me explain why. First, our deep integration with consumption scenarios gives our e-commerce business unique advantages. Supported by favorable policies and growing consumer demand, we expect our e-commerce business to enjoy healthy growth going forward. We will continue to refine our supply chain system around essential consumer needs and enhance overall operational efficiency. Second, our fintech empowerment business serving corporate clients maintains rapid growth, continuously satisfying licensed institutions' demands for high-quality assets.

[Translator]: Now, let me walk you through our Q2 business performance. In the Q2, we achieved a loan volume of CNY 55.43 billion, generated revenue of CNY 3.19 billion and net profit of CNY 101 million. On the risk front, while day-one delinquency ratio picked up due to broader industry headwinds, our 30-day collection rate showed an improvement. Despite current industry volatility, we remain confident in our long-term prospects. Let me explain why. First, our deep integration with consumption scenarios gives our e-commerce business unique advantages. Supported by favorable policies and growing consumer demand, we expect our e-commerce business to enjoy healthy growth going forward. We will continue to refine our supply chain system around essential consumer needs and enhance overall operational efficiency. Second, our fintech empowerment business serving corporate clients maintains rapid growth, continuously satisfying licensed institutions' demands for high-quality assets.

Speaker #1: On the risk front, while the day-one delinquency ratio picked up due to broader industry headwinds, our 30-day collection rate showed an improvement. Despite current industry volatility, we remain confident in our long-term prospects.

Speaker #1: Let me explain why. First, our deep integration with consumption scenarios gives our e-commerce business unique advantages. Supported by favorable policies and growing consumer demand, we expect our e-commerce business to enjoy healthy growth going forward.

Speaker #1: We will continue to refine our supply chain system around essential consumer needs and enhance overall operational efficiency. Second, our fintech empowerment business serving corporate clients maintains rapid growth, continuously satisfying licensed institutions' demands for high-quality assets.

Speaker #1: Backed by years of expertise in digital technology, we have established a clear, market-leading position. In the second quarter, our fintech empowerment business delivered solid growth and achieved profitability.

Jay Wenjie Xiao: Backed by years of expertise in digital technology, we have established a clear market leading position. In the Q2, our fintech empowerment business delivered solid growth and achieved profitability. As this business well aligns with future regulatory directions and has long-term commercial value, we will continue to increase our investments in this area. Third, AI adoption across our operations has delivered tangible cost savings. AI has been effectively deployed across the entire business processes. Over 100 AI agent roles are currently deployed across key operational scenarios, such as intelligent strategy generation, compliance check, post-loan management, and smart customer services, all contributing to our cost reduction targets. In the Q2, our operating expenses decreased by 17.6% quarter-over-quarter. As AI adoption continues to gain traction, we expect further cost reductions in the Q3.

[Translator]: Backed by years of expertise in digital technology, we have established a clear market leading position. In the Q2, our fintech empowerment business delivered solid growth and achieved profitability. As this business well aligns with future regulatory directions and has long-term commercial value, we will continue to increase our investments in this area. Third, AI adoption across our operations has delivered tangible cost savings. AI has been effectively deployed across the entire business processes. Over 100 AI agent roles are currently deployed across key operational scenarios, such as intelligent strategy generation, compliance check, post-loan management, and smart customer services, all contributing to our cost reduction targets. In the Q2, our operating expenses decreased by 17.6% quarter-over-quarter. As AI adoption continues to gain traction, we expect further cost reductions in the Q3.

Speaker #1: As this business is well aligned with future regulatory directions and has long-term commercial value, we will continue to increase our investments in this area. Third, AI adoption across our operations has delivered tangible cost savings.

Speaker #1: AI has been effectively deployed across the entire business process. Over 100 AI agent roles are currently deployed across key operational scenarios, such as intelligent strategy generation, compliance checks, post-loan management, and smart customer services, all contributing to our cost reduction targets.

Speaker #1: In the second quarter, our operating expenses decreased by 17.6% quarter over quarter. As AI adoption continues to gain traction, we expect further cost reductions in the third quarter.

Speaker #1: Looking ahead, the impact of the standalone event may persist, and industry uncertainties remain significant. We will continue to adopt a prudent operational approach by implementing the following initiatives.

Jay Wenjie Xiao: Looking ahead, the impact of the standalone event may persist, and industry uncertainties remain significant. We will continue to adopt a prudent operational approach by adopting the following initiatives. First, we will continue to strengthen our operational management, improve our financial position, and advance the development of non-loan facilitation business, like e-commerce, to navigate this industry headwind with confidence. Second, we are adjusting our dividend policy to an annual distribution to provide sufficient capital reserves and a financial buffer for our business transformation. Third, we will accelerate AI investment, particularly in the tech-empowered service space, and work with our partners to expedite the recovery of funding supply. When industry certainty gradually emerges, we will actively explore various shareholder return initiatives in light of our own circumstances, enabling our investors to better share in the value created by the company.

[Translator]: Looking ahead, the impact of the standalone event may persist, and industry uncertainties remain significant. We will continue to adopt a prudent operational approach by adopting the following initiatives. First, we will continue to strengthen our operational management, improve our financial position, and advance the development of non-loan facilitation business, like e-commerce, to navigate this industry headwind with confidence. Second, we are adjusting our dividend policy to an annual distribution to provide sufficient capital reserves and a financial buffer for our business transformation.

Speaker #1: First, we will continue to strengthen our operational management, improve our financial position, and advance the development of non-loan facilitation businesses like e-commerce, to navigate this industry headwind with confidence.

Speaker #1: Second, we are adjusting our dividend policy to an annual distribution to provide sufficient capital reserves and a financial buffer for our business transformation. Third, we will accelerate AI investment, particularly in the tech-empowered service space, and work with our partners to expedite the recovery of funding supply.

[Translator]: Third, we will accelerate AI investment, particularly in the tech-empowered service space, and work with our partners to expedite the recovery of funding supply. When industry certainty gradually emerges, we will actively explore various shareholder return initiatives in light of our own circumstances, enabling our investors to better share in the value created by the company. With that, I will now turn the call over to our CRO, Arvin. Thank you.

Speaker #1: When industry certainty gradually emerges, we will actively explore various shareholder return initiatives in light of our own circumstances, enabling our investors to better share in the value created by the company.

Speaker #1: With that, I will now turn the call over to our CRO, Arvin. Thank you.

Jay Wenjie Xiao: With that, I will now turn the call over to our CRO, Arvin. Thank you.

Speaker #2: In the.

Speaker #3: Right, Jidu. 受新规持续影响，住贷行业流动性供给偏紧，存量资产风险有所反弹。存量资产入催率环比上涨9.5%左右，90家余额不良率存3.5%上升到3.6%。三季度共住贷资金供给进一步收紧，新增放款大幅下降。我们预计存量资产风险环比仍将面临上行压力，叠加余额规模持续收缩，90家余额不良率预计仍将上涨。在存量资产风险管理方面，我们持续加强入催管理，差异化还款短信提醒等多种方式来控制存量风险上升幅度，同时加大风险拨备计提，保障存量资产规模有序压降退出。在新增资产风险管理方面，二季度我们针对行业新的风险形势持续收紧新增放款标准，二季度新放款FPD30环比Q1小幅上涨4.6%左右，三季度我们会继续加强审核，以及多头管控，收紧准入标准，拦截高风险资产，确保新增资产风险保持稳定。在风控能力升级方面，我们持续加大AI风控能力探索和建设，并且取得了不错的成效。在信贷审批领域，我们成功推动信审Agent存辅助人工决策走向自主风控决策，其自主拒绝的风险识别能力达到人工审核的3倍，符合建议达到人工的1.2倍，并仍在快速迭代升级。此外，我们正在开发内部风控Agent专家平台，打通底层大数据汇集各种风控角色专业技能，与本地大模型算力的闭环，让大部分风控任务实现AI专家化与标准化。这一举措不仅将通用风险模型和常规策略的产出效率提升了5倍以上，更为我们未来向行业进行科技输出，风控赋能做好能力储备，展望未来。虽然短期受行业影响，风险有所波动，但我们有信心在严控风险的前提下，保障存量资产有序压降，新增资产质量平稳运行，为后续稳健经营打下坚实基础。

Speaker #2: In the second quarter, under the ongoing impact of the new regulations, funding supply across the industry remained tight, leading to a rebound in asset risk within our existing portfolio.

Arvin Zhanwen Qiao: In the second quarter, the impact of new regulations continued, leading to tight liquidity in the lending industry and a rebound in risk assets. The delinquency ratio of existing assets increased by approximately 9.5% quarter over quarter, while the 90+ delinquency ratio rose from 3.5% to 3.6%. In the third quarter, as funding supply tightened further and new loan originations dropped sharply, we expect risk indicators on our outstanding loan portfolio to continue trending upwards on a sequential basis. Compounded by a shrinking loan balance, the 90+ delinquency ratio is expected to rise further. Regarding the risk management of our existing portfolio, we continue to strengthen early-stage collections and implement differentiated SMS repayment reminders, among other measures, to control the magnitude of risk elevation. Meanwhile, we are stepping up provisioning and ensuring an orderly runoff of these existing assets.

Speaker #2: Day 1 delinquency ratio across our total assets rose by roughly 9.5% quarter over quarter, while the 90-day-plus delinquency ratio increased from 3.5% to 3.6%.

Speaker #2: In the third quarter, as funding supply tightens further and new loan originations drop sharply, we expect risk indicators on our outstanding loan portfolio to continue trending upward on a sequential basis.

Speaker #2: Compounded by a shrinking loan balance, the 90-day-plus delinquency ratio is expected to rise further. Regarding the risk management of our existing portfolio, we continue to strengthen early-stage collections and implement differentiated SMS repayment reminders, among other measures, to control the magnitude of risk elevation.

Speaker #2: Meanwhile, we are stepping up provisioning and ensuring an orderly runoff of these existing assets. On the new loan front, we proactively raised our underwriting standards in response to the evolving risk landscape during the second quarter, limiting the quarter-over-quarter uptake in FPD30 to a minor level of around 4.6%.

Arvin Zhanwen Qiao: On the new loan front, we proactively raised our underwriting standards in response to the evolving risk landscape during the second quarter, limiting the quarter over quarter uptick in FPD30 to a minor level of around 4.6%. For the third quarter, we will maintain tight entry criteria, strengthen risk assessment for borrowers with cross-platform debt, and filter out high-risk applicants to maintain a stable risk profile for our new loans. On the technology front, our continued investments and explorations in AI-driven risk control are yielding meaningful results. In credit approval, our credit assessment agent has evolved from merely assisting human reviewers to making autonomous decisions. Notably, its risk detection capability is three times that of manual review for autonomous rejection and 1.2 times for review recommendations, and it continues to iterate rapidly.

Speaker #2: For the third quarter, we will maintain tight entry criteria, strengthen risk assessment for borrowers with cross-platform debt, and filter out high-risk applicants to maintain a stable risk profile for our new loans.

Speaker #2: On the technology front, our continued investment and explorations in AI-driven risk control are yielding meaningful results. In credit approval, our credit assessment agent has evolved from merely assisting human reviewers to making autonomous decisions. Notably, its risk detection capability is three times that of manual review for autonomous rejections, and 1.2 times for review recommendations, and it continues to iterate rapidly.

Speaker #2: Beyond that, we are building an internal risk control agent expert platform. By integrating underlying big data, domain expertise across risk management roles, and localized LLM capabilities into a seamless closed loop, we are enabling AI-driven expertise and standardization across the majority of our risk management tasks.

Arvin Zhanwen Qiao: Beyond that, we are building an internal risk control agent expert platform by integrating underlying big data, domain expertise across risk management roles, and localized LLM capabilities into a seamless closed loop. We are enabling AI-driven expertise and standardization across the majority of our risk management tasks. This initiative has not only boosted the output efficiency of general risk models and routing strategies by over five times, but also positioned us well for future tech empowerment and risk solution offerings to the industry. Looking ahead, while risk may experience short-term fluctuations due to industry headwinds, we are confident that with stringent risk control in place, we can ensure an orderly runoff of existing assets and steady asset quality for new loans, laying a solid foundation for sustainable operations. Next, I will hand over to our CFO, James, to provide a review of the company's financial performance for the second quarter.

Speaker #2: This initiative has not only boosted the output efficiency of general risk models and routine strategies by over five times, but has also positioned us well for future tech empowerment and risk solution offerings to the industry.

Speaker #2: Looking ahead, while risk may experience short-term fluctuations due to industry headwinds, we are confident that, with stringent risk controls in place, we can ensure an orderly runoff of existing assets and steady asset quality for new loans.

Speaker #2: Laying a solid foundation for sustainable operations. Next, I will hand over to our CFO, James, to provide a review of the company's financial performance for the second quarter.

Speaker #3: Thanks, Arvin. I will now provide a detailed overview of our second quarter financial results. Please note that all figures are presented in renminbi terms, and all comparisons are made on a quarter-over-quarter basis unless otherwise stated.

James Zheng: Thanks, Arvin. I will now provide a detailed overview of our Q2 financial results. Please note that all figures are presented in renminbi terms, and all comparisons are made on quarter-over-quarter basis, unless otherwise stated. During Q2, we continued to advance our business transformation and the new regulatory framework that took effect in Q4 last year, achieving progress that largely met our expectations. However, the landscape has shifted notably just before Q2 ended. Before I dive into our Q2 financial details, I would like to briefly address recent developments that have created some uncertainty for the industry. Recently, risk events involving certain industry players have triggered heightened regulatory scrutiny. This raised caution among funding partners, leading to an ongoing sector-wide tightening of funding supply. This has impacted loan volumes across the industry, including Lexin.

Speaker #3: During the second quarter, we continued to advance our business transformation and adapt to the new regulatory framework that took effect in the fourth quarter last year.

Speaker #3: We achieved progress that largely met our expectations. However, the landscape shifted notably just before the second quarter ended. Before I dive into our second quarter financial details, I would like to briefly address recent developments that have created some uncertainty for the industry.

Speaker #3: Recently, risk events involving certain industry players have triggered heightened regulatory scrutiny. This has raised caution among funding partners, leading to an ongoing sector-wide tightening of funding supply.

Speaker #3: This has impacted loan volumes across the industry, including Lexin. That being said, I would like to emphasize two key points to our investors. First, compliance has always been our operational bottom line.

James Zheng: That being said, I would like to emphasize two key points to our investors. First, compliance has always been our operational bottom line. We have never engaged in any similar non-compliant practices, and our business operations stand up to strict scrutiny. Second, we currently have a cash position of CNY 2.5 billion, which provides a financial buffer to help us navigate industry volatility and ensure the steady operations of our business. I will talk more about the impact of these recent developments and our countermeasures later in my remarks. With this context, let's now review our Q2 financial performance. During Q2, total loan origination volume was CNY 55 billion, representing a 4.3% decrease sequentially, due to the continuous decline in our consumer finance business, and partially offset by the steady growth of our fintech empowerment business and e-commerce business.

Speaker #3: We have never engaged in any similar non-compliant practices, and our business operations stand up to strict scrutiny. Second, we currently have a cash position of $2.5 billion, which provides a financial buffer to help us navigate industry volatility and ensure the steady operations of our business.

Speaker #3: I will talk more about the impact of these recent developments and our countermeasures later in my remarks. With this context, let's now review our second quarter financial performance.

Speaker #3: During the second quarter, total loan origination volume was $55 billion, representing a 4.3% decrease sequentially, due to the continuous decline in our consumer finance business, partially offset by the steady growth of our fintech empowerment business and e-commerce business.

Speaker #3: Total revenue came in at $3.2 billion, and net income stood at $101 million. Now, let me dive into the details and walk you through the key numbers.

James Zheng: Total revenue came in at CNY 3.2 billion, and net income stood at CNY 101 million. Now let me dive into the details and walk you through the key numbers. First, the net revenue of the credit business, which is derived by adding up credit facilitation service income and tech-empowerment service income, net of credit costs, which consists of provisions and fair value changes and funding costs, was CNY 981 million, representing a 32.5% or CNY 473 million decrease quarter over quarter. This was due to the decline of both credit facilitation service income and the tech-empowerment service income. Specifically, credit facilitation service income, representing our capital-heavy business, decreased by 43.6% to CNY 508 million, primarily driven by lower loan volumes in our online consumer finance business, rising funding costs, and our prudent decision to maintain adequate provisioning.

Speaker #3: First, the net revenue of the credit business, which is derived by adding up credit facilitation service income and tech empowerment service income, net of credit costs—which consists of provisions and fair value changes and funding costs—was $981 million, representing a 32.5% or $473 million decrease quarter over quarter.

Speaker #3: This was due to the decline of both credit facilitation service income and tech empowerment service income. Specifically, credit facilitation service income, representing our capital-heavy business, decreased by 43.6% to ¥508 million, primarily driven by lower loan volumes in our online consumer finance business.

Speaker #3: Rising funding costs and our prudent decision to maintain adequate provisioning. Meanwhile, our tech empowerment service income, representing our capital-light business, decreased by 14.4% to 473 million.

James Zheng: Meanwhile, our tech-empowerment service income, representing our capital-light business, decreased by 14.4% to CNY 473 million. This was mainly attributable to the revenue decrease from value-added services and the scale down of legacy ICP portfolio. Second, net revenue of the installment e-commerce business, defined as the installment e-commerce revenue, net of cost of inventory sold, increased by CNY 122 million to CNY 329 million. The total net revenue summing the credit business and the installment e-commerce business added up to CNY 1.3 billion, a 21.1% or CNY 351 million decrease quarter over quarter. On the expense side, operating expenses, including sales and marketing, research and development, general and administrative expenses, and processing and servicing costs decreased by 17.6%, or CNY 244 million to CNY 1.2 billion. Tax and others decreased by 9.3%, or CNY 6 million to CNY 62 million. Consequently, total expenses added up to CNY 1.2 billion, a decrease of 17.2%, or CNY 251 million.

Speaker #3: This was mainly attributable to the revenue decrease from value-added services and the scaled-down of the legacy ICP portfolio. Second, net revenue of the installment e-commerce business, defined as the installment e-commerce revenue net of cost of inventory sold, increased by 122 million to 329 million.

Speaker #3: So the total net revenue, summing the credit business and the installment e-commerce business, added up to $1.3 billion, a 21.1% or $351 million decrease quarter over quarter.

Speaker #3: On the expense side, operating expenses—including sales and marketing, research and development, general and administrative expenses, and processing and service income—decreased by 17.6%, or $244 million, to $1.2 billion.

Speaker #3: Tax and others decreased by 9.3%, or $6 million, to $62 million. Consequently, total expenses added up to $1.2 billion, a decrease of 17.2%, or $251 million.

Speaker #3: By deducting the total expenses of $1.2 billion from the total net revenue of $1.3 billion, we arrive at a net income of $101 million, a decrease of 49.7%, or about $100 million quarter over quarter.

James Zheng: By deducting the total expenses of CNY 1.2 billion from the total net revenue of CNY 1.3 billion, we arrive at a net income of CNY 101 million, a decrease of 49.7%, or about CNY 100 million quarter-over-quarter. To sum up, the decrease in this quarter's net income was largely attributable to three combined factors, a revenue decrease resulting from the ongoing scale-down of our loan facilitation business due to regulatory impact, an increase in provisioning driven by our prudent risk approach, and despite our cost optimization efforts, expense reduction lacked top-line contraction, temporarily squeezing our near-term profitability. Now, I would like to walk you through the three key highlights from this quarter. First, the growing diversification of our business mix. While our overall loan origination volume experienced a minor decline of 4.3% in Q2, our Tech-empowerment service successfully bucked the trend with continued growth of 8%.

Speaker #3: To sum up, the decrease in this quarter’s net income was largely attributable to three combined factors: a revenue decrease resulting from the ongoing scaling down of our loan facilitation business due to regulatory impact; an increase in provisioning, driven by our prudent risk approach; and, despite our cost optimization efforts, expense reduction lagged top-line contraction, temporarily squeezing our near-term profitability.

Speaker #3: Now I would like to walk you through the three key highlights from this quarter. First, the growing diversification of our business mix. While our overall loan origination volume experienced a minor decline of 4.3% in the second quarter, our fintech empowerment service successfully bucked the trend with continued growth of 8%.

Speaker #3: As a result, the loan volume contribution from our fintech empowerment and e-commerce business has now reached 45%. As we discussed last quarter, the steady expansion of our fintech empowerment business continues to lay the groundwork for a highly visible long-term revenue pipeline and higher asset quality.

James Zheng: As a result, the loan volume contribution from our Tech-empowerment and installment e-commerce business has now reached 45%. As we discussed last quarter, the steady expansion of our Tech-empowerment business continues to lay the groundwork for highly visible long-term revenue pipeline and higher asset quality. Complementing this pivotal shift, our installment e-commerce business maintained a steady momentum, continuing to serve as reliable stabilizer for our broader portfolio. Second, the solid growth and expanding profitability of our installment e-commerce business. Consistent with our strategy from the previous quarter, we maintained a disciplined approach, prioritizing asset quality and risk control over sheer volume expansion amidst the current macro environment. As a result, our e-commerce loan volume maintained stable at CNY 2.3 billion. More importantly, our ongoing focus on operational refinement yielded solid profitability improvement.

Speaker #3: Complementing this pivotal shift, our installment e-commerce business maintained a steady momentum, continuing to serve as a reliable stabilizer for our broader portfolio. Second, the solid growth and expanding profitability of our installment e-commerce business.

Speaker #3: Consistent with our strategy from the previous quarter, we maintained a disciplined approach, prioritizing asset quality and risk control over sheer volume expansion amidst the current macro environment.

Speaker #3: As a result, our e-commerce loan volume remained stable at $2.3 billion. More importantly, our ongoing focus on operational refinement yielded solid profitability improvements.

Speaker #3: Gross profit for this segment reached $329 million, representing a 58.7% increase, while gross profit margin expanded from 9.4% last quarter to 14.1%.

James Zheng: Gross profit for this segment reached CNY 329 million, representing a 58.7% increase, while gross profit margin expanded from 9.4% last quarter to 14.1%. By seamlessly integrating consumption scenario into our broader ecosystem, this segment continues to serve as a valuable revenue driver, adding another layer of resilience to our diversified revenue streams. Third, our prudent provisioning strategy. The industry dynamics unfolding in late June, including a tightened funding supply and, as anticipated, upward tick in sector-wide risk resulting from peer-level risk events, which I noted earlier, have introduced a new market complexity. Incorporating these cautious forward-looking industry expectations into our risk assessment models, we adopted a more conservative provisioning approach for our Q2 portfolio. As a result of this strict and prudent stance, our overall credit cost increased 9.6% sequentially to CNY 1.4 billion during the quarter. To better understand of our provisioning, let's look at our gross provision metrics.

Speaker #3: By seamlessly integrating the consumption scenario into our broader ecosystem, this segment continues to serve as a valuable revenue driver, adding another layer of resilience to our diversified revenue streams.

Speaker #3: Third, our prudent provisioning strategy. The industry dynamics unfolding in late June, including a tightened funding supply and an anticipated upward tick in sector-wide risk resulting from peer-level risk events, which were noted earlier, have introduced new market complexity.

Speaker #3: Incorporating these cautious, forward-looking industry expectations into our risk assessment models, we adopted a more conservative provisioning approach for our second quarter portfolio. As a result of this strict and prudent stance, our overall credit cost increased 9.6% sequentially to $1.4 billion during the quarter.

Speaker #3: To better understand our provisioning, let's look at our gross provision metrics. By stripping out the net accounting impact of fair value changes, our gross provision ratio for new capital-heavy loans was at 7.8%, higher than the last quarter.

James Zheng: By stripping out the net accounting impact of fair value changes, our gross provision ratio for new capital-heavy loans was at 7.8%, higher than the last quarter. Furthermore, our provision coverage ratio remained robust at 230%. Now, let's move on to our operating expense items. On the cost and expense side, our total operating expenses decreased by 17.6%, or CNY 244 million to CNY 1.1 billion, mainly due to the decrease of the sales marketing expenses of CNY 165 million and partially offset by a one-time decrease in G&A expenses driven by costs associated with our organizational optimization. For balance sheet items, as of 30 June, our cash position, which includes cash equivalents, and restricted cash, was approximately CNY 2.5 billion. Shareholders' equity remains solid at about CNY 12 billion. Now, turning to our business outlook.

Speaker #3: Furthermore, our provision coverage ratio remained robust at 230%. Now, let's move on to our operating expense items. On the cost and expense side, our total operating expenses decreased by 17.6%, or $244 million, to $1.1 billion, mainly due to the decrease of the sales marketing expenses of $165 million, and partially offset by a one-time decrease in G&A expenses driven by costs associated with our organizational optimization.

Speaker #3: For balance sheet items, as of June 30th, our cash position, which includes cash, cash equivalents, and restricted cash, was approximately $2.5 billion. Shareholders' equity remained solid at about $12 billion.

Speaker #3: Now, turning to our business outlook. As I mentioned earlier, the recent business risk events involving certain players have created sector-wide impacts, and alerting has not been immune to these headwinds. Specifically, we are facing two main challenges.

James Zheng: As I mentioned earlier, the recent risk events involving certain players have created sector-wide impacts, and Lexin has not been immune to these headwinds. Specifically, we are facing two main challenges. First, a contraction in new loan volumes, and second, the liquidity squeeze resulting from funding supply has constrained some borrowers' cash flows and could potentially impair their repayment capacity, leading to increased risk volatility in the coming quarters. Against this backdrop, we are taking proactive and decisive measures to navigate this environment. First, we are maintaining dialogue with our funding partners to reinforce mutual trust. This ensures that we are well-positioned to resume normal funding supply as soon as the market conditions permit. Second, amidst the industry-wide funding squeeze, we are prioritizing cash flow management while driving cost optimization and operational efficiency, including staff reduction, to safeguard our core business fundamentals.

Speaker #3: First, a contraction in new loan volume, and second, the liquidity squeeze resulting from funding supply, has constrained some borrowers' cash flows and could potentially impair their repayment capacity, leading to increased risk volatility in the upcoming quarters.

Speaker #3: Against this backdrop, we are taking proactive and decisive measures to navigate this environment. First, we are maintaining dialogue with our funding partners to reinforce mutual trust.

Speaker #3: This ensures that we are well positioned to resume normal funding supply as soon as market conditions permit. Second, amidst the industry-wide funding squeeze, we are prioritizing cash flow management while addressing cost optimization and operational efficiency, including staff reduction, to safeguard our core business fundamentals.

Speaker #3: Third, like Jay mentioned earlier, we are proactively exploring new business models centered on technology empowerment services for B and consumer. These initiatives will safeguard our long-term sustainable growth and lay a solid foundation for our future business trajectory.

James Zheng: Third, like Jay mentioned earlier, we are proactively exploring new business models centering on tech-empowerment services for To B and consumer. These initiatives will safeguard our long-term sustainable growth and lay a solid foundation for our future business trajectory. Looking ahead, given the regulators heightened their scrutiny to resolve the risks associated with certain industry players, along with the potential introduction of new industry regulations, we have limited visibility on when funding partners will resume normal operations, and the exact timeline for our loan volumes to normalize remains uncertain. Compounded by the industry-wide liquidity squeeze, we expect our revenue to further decrease and the credit risks and the costs to trend upward in Q3, for which we will make adequate provisions. Additionally, we have initiated a series of organizational optimization to navigate industry uncertainties with the resulting one-time expenses primarily recognized in Q3.

Speaker #3: Looking ahead, given the regulator has heightened their scrutiny to resolve the risks associated with certain industry players, along with the potential introduction of new industry regulations, we have limited visibility on when funding partners will resume normal operations, and the exact timeline for our loan volumes to normalize remains uncertain.

Speaker #3: Compounded by the industry-wide liquidity squeeze, we expect our revenue to further decrease, and the credit risks and costs to trend upward in the third quarter.

Speaker #3: For which we will make adequate provisions. Additionally, we have initiated a series of organizational optimizations to navigate industry uncertainties, with the resulting one-time expenses primarily recognized in the third quarter.

Speaker #3: Consequently, we expect the company to record a net loss in the third quarter. As for the remainder of the year, due to the limited visibility at this time, we will provide further guidance as the year progresses.

James Zheng: Consequently, we expect the company to record a net loss in Q3. As for the remainder of the year, due to the limited visibility at this time, we will provide further guidance as the year progresses. In light of ongoing industry uncertainties, the board has made a decision to adjust our dividend distribution policy from a semiannual to annual payment. Therefore, any potential dividend declarations for 2026 will be assessed when we announce our Q4 results in early 2027. This proactive step allows us to optimize liquidity, fortify our core operations, and maintain strategic flexibility needed to navigate near-term market volatility. I want to emphasize that delivering shareholder value remains our top priority, and we view this as a prudent adjustment that may be temporary as the market visibility improves. The board will actively reassess our capital allocation strategy and explore renewed initiatives to drive shareholder returns.

Speaker #3: In light of ongoing industry uncertainties, the Board has made a decision to adjust our dividend distribution policy from a semi-annual to an annual payment. Therefore, any potential dividend declarations for 2026 will be assessed when we announce our fourth quarter results in early 2027.

Speaker #3: This proactive step allows us to optimize liquidity for our core operations and maintain the strategic flexibility needed to navigate near-term market volatility. I want to emphasize that delivering shareholder value remains our top priority, and we view this as a prudent adjustment that may be temporary as market visibility improves. The Board will actively reassess our capital allocation strategy and explore renewed initiatives to drive shareholder returns.

Speaker #3: In conclusion, while navigating this industry-wide transition, we are taking decisive and proactive measures to safeguard our liquidity, protect long-term shareholder value, and position ourselves for sustainable growth once the market normalizes.

James Zheng: In conclusion, while navigating this industry-wide transition, we are taking decisive and proactive measures to safeguard our liquidity, protect the long-term shareholder value, and pivot ourselves for sustainable growth once the market normalizes. Operator, we are now ready to open the lines for questions.

Speaker #3: Operator, we're now ready to open the lines for questions.

Speaker #1: Thank you. As a reminder, to ask a question you need to press star, one, and one on your telephone. For the benefit of all participants, if you wish to ask your question to management in Chinese, please also translate it into English.

Operator: Thank you. As a reminder, to ask a question, you need to press star 1 and 1 on your telephone. For the benefit of all participants, if you wish to ask your questions to management in Chinese, please translate them to English. One moment for the first question. Our first question comes from the line of Judy Zhang of Citi. Your line is open. Please go ahead.

Speaker #1: One moment for the first question. Our first question comes from the line of Judy Zhang of Citi. Your line is open. Please go ahead.

Speaker #2: 谢谢给我第一个提问的机会。我这边有两个问题。第一个问题就是想请管理层如何看待近期行业发生的一些风险事件，对公司和行业的影响，以及公司打算未来有什么举措来应对。第二个问题想请管理层展望一下三季度的风险资产质量风险这方面的状况。Let me translate. I got two questions. The first question is, what's your take on the recent risk events in the industry? How has it affected the industry and your business?

Judy Zhang: 谢谢给我第一个提问的机会。我这边有两个问题。第一个问题就是想请管理层如何看待近期行业发生的一些风险事件对公司和行业的影响，以及公司打算未来有什么举措来应对？第二个问题，想请管理层展望一下三季度的资产质量风险这边的状况。

Operator: Let me translate. I have got two questions. The first question is, what is your take on the recent risk events in the industry? How has it affected the industry and your business, and what steps are you taking in response? Second question is, how do you expect the risk trend to evolve in Q3? Thank you.

Judy Zhang: Let me translate. I have got two questions. The first question is, what is your take on the recent risk events in the industry? How has it affected the industry and your business, and what steps are you taking in response? Second question is, how do you expect the risk trend to evolve in Q3? Thank you.

Speaker #2: And what steps are you taking in response? And the second question is, how do you expect the risk trend to evolve in the third quarter?

Speaker #2: Thank you.

Speaker #3: 好的。那第一个问题我来回答一下。近期个别平台暴露风险的整个的一个事件，就是引发了行业的整个的一个信任危机。行业的资金供给大面积暂停收紧，但是这个事件还是属于行业的整个的个例，已经涉嫌刑事犯罪，后续将催生更多的一些监管政策的出台。我们也预计行业的流动性和供给将会持续的收紧，收缩期将会显著的延长。公司始终坚持合规的经营，不存在该机构的所涉及的问题，但我们也与行业一致受到了资金供给的收紧影响。7月住在业务受到较大的冲击，新增放款明显的收缩，整体的资产质量也会随着行业进行一定的波动。公司拥有充足的资本储备及持续的造血能力，能够满足各项运营和需求。公司仍在主要资金合作伙伴的白名单中，确保能尽快恢复的放款。风险拨备也是非常的充足，存量的资产可以有序的压降退出。

Jay Wenjie Xiao: 好的，那第一个问题我来回答一下。近期个别平台暴露风险的整个事件，引发了行业整个的信任危机。行业的资金供给大面积暂停收紧。但是这个事件还是属于行业的个例，已经涉嫌刑事犯罪，后续将催生更多的一些监管政策的出台。我们也预计行业的流动性和供给将会持续地收紧，收缩期将会显著地延长。公司始终坚持合规的经营，不存在该机构所涉及的问题，但我们也与行业一致，受到了资金供给的收紧影响。7月，助贷业务受到较大的冲击，新增放款明显地收缩，整体的资产质量也会随着行业进行一定的波动。公司拥有充足的资本储备及持续的造血能力，能够满足各项运营和需求。公司仍在主要资金合作伙伴的白名单中，确保能尽快恢复放款。风险拨备也是非常充足，存量的资产可以有序地压降退出。

Jay Wenjie Xiao: This is the translation for Jay's remarks. The recent risk events involving certain peers have triggered a crisis of confidence among funding providers, causing a broad-based tightening and even suspension of funding supply across the industry. That said, these are isolated cases, though they do involve potential criminal conduct, and we would not be surprised to see more regulatory measures follow. We expect funding supply in the loan facilitation sector to remain tight for a while, and the adjusting period will likely last longer than initially expected. As for us, we have always operated strictly in compliance with regulations, and we do not have any of the issues seen at these institutions. But we are not immune to the broader industry trend. With funding supply tightening, our credit facilitation business took a meaningful hit in July. As a result, new loan originations have contracted notably, and asset quality is facing further volatility in line with the broader market. That said, we are in a solid position. We have ample capital reserves and organic cash generation capability to meet the needs of ongoing operations. We remain on the whitelist of major funding partners, which should allow us to resume loan origination as soon as conditions allow. We have sufficient provisions in place to manage an orderly wind down of existing portfolios.

[Translator]: This is the translation for Jay's remarks. The recent risk events involving certain peers have triggered a crisis of confidence among funding providers, causing a broad-based tightening and even suspension of funding supply across the industry. That said, these are isolated cases, though they do involve potential criminal conduct, and we would not be surprised to see more regulatory measures follow. We expect funding supply in the loan facilitation sector to remain tight for a while, and the adjusting period will likely last longer than initially expected. As for us, we have always operated strictly in compliance with regulations, and we do not have any of the issues seen at these institutions. But we are not immune to the broader industry trend. With funding supply tightening, our credit facilitation business took a meaningful hit in July. As a result, new loan originations have contracted notably, and asset quality is facing further volatility in line with the broader market. That said, we are in a solid position. We have ample capital reserves and organic cash generation capability to meet the needs of ongoing operations. We remain on the whitelist of major funding partners, which should allow us to resume loan origination as soon as conditions allow. We have sufficient provisions in place to manage an orderly wind down of existing portfolios.

Speaker #2: This is the translation for Jay's remarks. The recent risk events involving certain peers have triggered a crisis of confidence among funding providers, causing a broad-based tightening and even suspension of funding supply across the industry.

Speaker #2: That said, these are isolated cases, though they do involve potential criminal conduct, and we wouldn’t be surprised to see more regulatory measures follow. We expect funding supply in the loan facilitation sector to remain tight for a while, and the adjustment years will likely last longer than initially expected.

Speaker #2: As for us, we've always operated strictly in compliance with regulations, and we don't have any of the issues seen at these institutions. But we're not immune to the broader industry trend.

Speaker #2: With funding supply tightening, our loan facilitation business took a minimal but meaningful hit in July. As a result, new loan originations have contracted notably and asset quality is facing further volatility in line with the broader market.

Speaker #2: That said, we are in a solid position. We have ample capital reserves and organic cash generation capability to meet the needs of ongoing operations.

Speaker #2: We remain on the white list of major funding partners, which should allow us to resume loan origination as soon as conditions allow. We also have sufficient provisions in place to manage our already winding-down existing portfolio.

Speaker #3: 面对新的行业环境，公司经营战略正在加速调整。我们将聚焦以下核心的几个方向。第一，我们还是要坚持多元化的战略，加快推动科技的转型，经济持续增长为现在需求提供了底层的支撑。金融机构合规自营将成为行业的趋势。公司顺应这一趋势，大力发展科技富人模式，利用平台流量风控AI科技及运营能力，全方位助力金融机构发展自营业务，实现低风险可持续的增长。在科技业务上，公司具备多年积累的生态业务优势，我们将继续推动从农单住贷模式向科技富人模式转变，为未来长期稳健的发展打下基础。同时电商业务也将稳健的发展并持续贡献利润。这些多元的业务是我们与其他相比的一个竞争优势。

Jay Wenjie Xiao: 面对新的行业环境，公司经营战略正在加速调整，我们将聚焦以下核心的几个方向。第一，我们还是要坚持多元化的战略，加快推动科技的转型。经济持续增长，为信贷需求提供了底层的支撑。金融机构合规自营将成为行业的趋势。公司顺应这一趋势，大力发展科技赋能模式，利用平台流量、风控、AI科技及运营能力，全方位助力金融机构发展自营业务，实现低风险可持续的增长。在科技业务上，公司具备多年积累的生态业务优势，我们将继续推动从融征贷模式向科技赋能模式转变，为未来长期稳健的发展打下基础。同时，电商业务也将稳健地发展并持续贡献利润。这些多元的业务是我们与其他相比的一个竞争优势。

Speaker #2: In response to the new environment, we are accelerating our transformation, focusing on a few key areas. First, we are doubling down on our diversification strategy and accelerating our tech empowerment transformation.

Jay Wenjie Xiao: In response to the new environment, we are accelerating our transaction, focusing on a few key areas. First, we are doubling down on our diversification strategy and accelerating on our tech-empowerment transition. As economic growth continue to provide underlying support for credit demand, we see a clear industry trend for financial institutions to develop their own lending business compliantly. We are well positioned to ride this trend with our tech-empowerment model, i.e. leveraging our capabilities in traffic, risk management, AI, and operations to help financial institutions grow their own lending business in a low risk and sustainable way. We have been building our ecosystem for years, and we are advancing the transition from guaranteed backed loan facilitation model to a tech-empowerment model, and that positions us well for long term sustainable growth ahead. Meanwhile, it is worth stressing that our installment e-commerce business will keep growing steadily and continue to contribute profit. These diverse businesses are our differentiated advantages compared with our peers.

[Translator]: In response to the new environment, we are accelerating our transaction, focusing on a few key areas. First, we are doubling down on our diversification strategy and accelerating on our tech-empowerment transition. As economic growth continue to provide underlying support for credit demand, we see a clear industry trend for financial institutions to develop their own lending business compliantly. We are well positioned to ride this trend with our tech-empowerment model, i.e. leveraging our capabilities in traffic, risk management, AI, and operations to help financial institutions grow their own lending business in a low risk and sustainable way. We have been building our ecosystem for years, and we are advancing the transition from guaranteed backed loan facilitation model to a tech-empowerment model, and that positions us well for long term sustainable growth ahead. Meanwhile, it is worth stressing that our installment e-commerce business will keep growing steadily and continue to contribute profit. These diverse businesses are our differentiated advantages compared with our peers.

Speaker #2: As economic growth continues to provide underlying support for credit demand, we see a clear industry trend for financial institutions to develop their own lending business compliantly.

Speaker #2: We are well positioned to ride this trend with our tech empowerment model; that is, leveraging our capabilities in traffic, risk management, AI, and operations to help financial institutions grow their own lending business in a low-risk and sustainable way.

Speaker #2: We've been building our ecosystem for years, and we are advancing the transition from guaranteed back loan facilitation models to a tech-empowered model. That positions us well for long-term sustainable growth ahead.

Speaker #2: Meanwhile, it's worth stressing that our e-commerce business will keep growing steadily and continue to contribute profit. These diverse businesses are our differentiating advantages compared with our peers.

Speaker #3: 继续推动降本增效，提升公司穿越周期的能力。公司已经推进一系列的组织精简与效率提升，管理成本未来预计将降低30%到40%，调整后组织响应速度会更快，能效会显著的提升，长期持续运营和应对周期变化的能力将进一步得到加强，为公司转型发展提供有力的保障。AI驱动运营的升级，公司将人工智能技术更深入的嵌入到核心运营风险客户服务等各环节，通过AI智能化精简升级升级精简流程，提升效率，进一步压降经营成本，确保公司在周期波动中保持精益的运营能力。展望未来，我们认为住贷行业监管和资金收缩的态势短期之内不会改变，恢复需要更长的时间。短期内公司将继续审慎的经营，确保风险资产有序压降，中长期通过科技富人金融机构与AI驱动运营效率的提升，加速向科技模式转型，以适应监管新常态并为长期稳健增长奠定基础。

Jay Wenjie Xiao: 继续推动降本增效，提升公司穿越周期的能力。公司已经推进一系列的组织精简与效率提升，管理成本未来预计将降低30%到40%。调整后组织响应速度会更快，人效会显著地提升，长期持续运营和应对周期变化的能力将进一步得到加强，为公司转型发展提供有力的保障。AI驱动运营的升级，公司将人工智能技术更深入地嵌入到核心运营、风险、客户服务等各环节，通过AI智能化升级精简流程，提升效率，进一步压降经营成本，确保公司在周期波动中保持坚毅的运营能力。展望未来，我们认为住宅行业监管和资金收缩的态势短期之内不会改变，恢复需要更长的时间。短期内公司将继续审慎地经营，确保风险资产有序压降。中长期通过科技赋能金融机构与AI驱动运营效率的提升，加速向科技模式转型，以适应监管新常态，并为长期稳定增长奠定基础。

Speaker #2: Second, we are driving cost efficiency to strengthen our ability to navigate industry cycles. We've rolled out a series of organizational streamlining and efficiency measures, and we expect management costs to come down by 30 to 40 percent.

Jay Wenjie Xiao: Second, we are driving cost efficiency to strengthen our ability to navigate industry cycles. We have rolled out a series of organizational streamlining and efficiency measures, and we expect management costs to come down by 30% to 40%. As a result, we are seeing faster decision making, significantly higher productivity per employee, and a stronger foundation for long-term operational sustainability and resilience to market cycles, all of which create a runway we need to execute our transformation. Third, we are deepening our AI integration across the board in key operations, risk management, and customer services. By embedding AI more deeply into our processes, we are simplifying workflows, improving efficiency, and further reducing operating costs so that we stay lean and agile even in a volatile environment. Looking ahead, we do not expect the regulatory and funding environment to ease anytime soon. Recovery will take time.

[Translator]: Second, we are driving cost efficiency to strengthen our ability to navigate industry cycles. We have rolled out a series of organizational streamlining and efficiency measures, and we expect management costs to come down by 30% to 40%. As a result, we are seeing faster decision making, significantly higher productivity per employee, and a stronger foundation for long-term operational sustainability and resilience to market cycles, all of which create a runway we need to execute our transformation. Third, we are deepening our AI integration across the board in key operations, risk management, and customer services. By embedding AI more deeply into our processes, we are simplifying workflows, improving efficiency, and further reducing operating costs so that we stay lean and agile even in a volatile environment. Looking ahead, we do not expect the regulatory and funding environment to ease anytime soon. Recovery will take time.

Speaker #2: As a result, we are seeing faster decision-making, significantly higher productivity per employee, and a stronger foundation for long-term operational sustainability and resilience to market cycles.

Speaker #2: All of which create the runway we need to execute our transformation. Third, we are deepening our AI integration across the board. In key operations, risk management, and customer services, by embedding AI more deeply into our processes, we are simplifying workflows, improving efficiency, and further reducing operating costs.

Speaker #2: So that we stay lean and agile, even in a volatile environment. Looking ahead, we don't expect the regulatory and funding environment to ease anytime soon.

Speaker #2: Recovery will take time. In the near term, we will stay disciplined, continue to adopt a prudent operational approach, and ensure an already wind-down of risk assets.

Jay Wenjie Xiao: In the near term, we will stay disciplined, continue to adopt prudent operational approach, and ensure an orderly wind down of risk assets. Over the medium to long term, we will accelerate the transition to a tech-empowered model by empowering financial institutions with our technology solution, and driving our operational efficiency through AI, so that we are well adapted to the new regulatory landscape and positioned for long-term sustainable growth. Thanks.

[Translator]: In the near term, we will stay disciplined, continue to adopt prudent operational approach, and ensure an orderly wind down of risk assets. Over the medium to long term, we will accelerate the transition to a tech-empowered model by empowering financial institutions with our technology solution, and driving our operational efficiency through AI, so that we are well adapted to the new regulatory landscape and positioned for long-term sustainable growth. Thanks.

Speaker #2: Over the medium to long term, we will accelerate the transition to a tech-empowered model by empowering financial institutions with our technology solutions and driving our operational efficiency through AI, so that we are well adapted to the new regulatory landscape and positioned for long-term sustainable growth.

Speaker #2: Thanks.

Speaker #3: 好，我来回答一下关于Q3的一个风险情况，然后受6月底行业风险事件的影响和冲击，行业整个流动性的供给受到一个显著的影响，从而导致一些风险指标在近期出现一个波动上涨的一个情况。展望第三季度，我们预估住贷资金供给将进一步收紧，叠加我们主动的进行风险管理和控制，预计新增放款规模会有一个明显的一个下降。受此影响，我们预计存量资产的风险环比Q2仍将面临一个上行的一个压力，同时叠加余额规模的一个持续收缩，我们90加余额不良率预计也将有一定的一个上涨。同时在这个催收方面，因为行业合规收紧以及近期政策的一个影响，预计回款率也会受到一定的一个影响出现一定的一个下降。针对这个行业风险，我们持续加强这个审慎的风险管理策略，然后足额的进行风险拨备计提，我们将有序的推进存量资产的一个有序的压降和退出，努力把风险的波动幅度控制在公司的一个偏好之内。

Arvin Zhanwen Qiao: 我来回答一下关于Q3的一个风险情况。受6月底行业风险事件的影响和冲击，行业整个流动性的供给受到一个显著的影响，从而导致一些风险指标在近期出现一个波动上涨的情况。展望第三季度，我们预估助贷资金供给将进一步收紧，叠加我们主动地进行风险管理和控制，预计新增放款规模会有一个明显的下降。受此影响，我们预计存量资产的风险较Q2仍将面临一个上行的压力。同时叠加余额规模的持续收缩，我们90加余额不良率预计也将有一定的上涨。同时在催收方面，因为行业合规收紧以及近期政策的影响，预计回款率也会受到一定的影响，出现一定的下降。针对这个行业风险，我们持续加强审慎的风险管理策略，足额地进行风险拨备计提。我们将有序地推进存量资产的压降和退出，努力把风险的波动幅度控制在公司的偏好之内。

Speaker #2: This time, the translation is for our friends' remarks. Following the industry risk event in late June, we did see some volatilities in a few risk indicators recently, driven by a sector-wide liquidity shock.

Will Tan: This is the translation for Arvin's remarks. Following the industry risk event in late June, we did see some volatilities in a few risk indicators recently, driven by a sector-wide liquidity shock. Looking ahead to Q3, with funding supply tightening further and our active risk management measures in place, new loan originations will decline materially. As a result, we expect existing portfolio risk to remain upward pressure sequentially. Compounded by a further contracting loan balance, the 90-days plus delinquency ratio is expected to rise further. On the collection side, due to the industry-wide regulatory campaign and higher compliance requirements for loan collection practices, our collection rate will also see a decline. That said, with our prudent risk approach and adequate provisioning, we have the capability to manage an orderly wind down of existing risk assets. Our goal is to keep any risk fluctuation within our risk appetite.

[Translator]: This is the translation for Arvin's remarks. Following the industry risk event in late June, we did see some volatilities in a few risk indicators recently, driven by a sector-wide liquidity shock. Looking ahead to Q3, with funding supply tightening further and our active risk management measures in place, new loan originations will decline materially. As a result, we expect existing portfolio risk to remain upward pressure sequentially. Compounded by a further contracting loan balance, the 90-days plus delinquency ratio is expected to rise further. On the collection side, due to the industry-wide regulatory campaign and higher compliance requirements for loan collection practices, our collection rate will also see a decline. That said, with our prudent risk approach and adequate provisioning, we have the capability to manage an orderly wind down of existing risk assets. Our goal is to keep any risk fluctuation within our risk appetite.

Speaker #2: Looking ahead to Q3, with funding supply tightening further and our active risk management measures in place, new loan originations will decline materially. As a result, we expect existing portfolio risk to remain, with upward pressure sequentially.

Speaker #2: Compounded by a further contracting loan balance, the 90-days-plus delinquency ratio is expected to rise further. On the collection side, due to industry-wide regulatory campaigns and higher compliance requirements for loan collection practices, our collection rate will also see a decline.

Speaker #2: That said, with our prudent risk approach and adequate provisioning, we have the capability to manage an orderly wind-down of existing risk assets. Our goal is to keep any risk fluctuation within our risk appetite.

Speaker #1: Thank you for the question. Please hold for our next question. The next questions will come from the line of Alex Ye of UBS. Your line is open.

Operator: Thank you for the question. Please hold for our next question. The next question will come from the line of Alex Ye of UBS. Your line is open. Please go ahead.

Speaker #1: Please go ahead.

Speaker #3: 各位听众好，我想请教一个问题是，在当前行业风险事件的影响下，如何展望今年下半年的财务表现。 So my question is, given the impact of recent industry risk events, how should we think about the financial performance for the second half of the year?

Alex Ye: 管理层好，我想请教一个问题，是在当前行业风险事件的一个影响下，如何展望今年下半年的一个财务表现？ My question is, given the impact of recent industry risk events, how should we think about the financial performance for the H2 of the year? Thank you.

Speaker #3: Thank you.

Speaker #4: This is James. I'm going to take this question. Looking ahead to the second half, overall market visibility still remains limited given the ongoing uncertainties around the funding supply recovery.

James Zheng: This is James. I am going to take this question. Looking ahead to the H2, the overall market visibility still remains limited given the ongoing uncertainties around the funding supply recovery and the regulatory trends. As a result, we are not providing any specific financial guidance at this point. However, against the backdrop of sector-wide liquidity tightening, we expect our Q3 performance to be under pressure, mainly due to the following factors. On the revenue side, obviously the sector-wide funding tightening had a material impact on our new loan originations in supply in July and August, the last 2 months. If this situation continues, our Q3 loan origination volume will come down a lot, which will directly weigh on our top line. On the cost and expense side, there are 2 structural factors at play. One is the credit cost.

Speaker #4: And the regulatory trends. So as a result, we are not providing any specific financial guidance at this point. However, against the backdrop of sector-wide liquidity tightening, we expect our third quarter performance to be under pressure.

Speaker #4: Mainly due to the following factors. On the revenue side, obviously the sector-wide funding tightening had a material impact on our new loan originations and supply in July and August, the last two months.

Speaker #4: If this situation continues, our Q3 loan origination volume will come down a lot, which will directly weigh on our top line. On the cost and expense side, there are two structural factors at play.

Speaker #4: One is the credit cost. Liquidity tightening across the sector has led to an uptick in default risks within our existing portfolio. In line with our prudent risk management approach, we will set aside sufficient provisions for the associated potential risks, which obviously will drive up the credit cost for the quarter.

Arvin Zhanwen Qiao: Liquidity tightening across the sector has led to an uptick in default risks within our existing portfolio. In line with our prudent risk management approach, we will set aside sufficient provisions for the associated potential risks, which obviously will drive up the credit cost for the quarter. Second, the operating expenses. In Q3, we proactively streamlined our organizational structure, optimized headcount, and enhanced efficiency.

James Zheng: Liquidity tightening across the sector has led to an uptick in default risks within our existing portfolio. In line with our prudent risk management approach, we will set aside sufficient provisions for the associated potential risks, which obviously will drive up the credit cost for the quarter. Second, the operating expenses. In Q3, we proactively streamlined our organizational structure, optimized headcount, and enhanced efficiency.

Speaker #4: Second, the operating expenses. In Q3, we proactively streamlined our organizational structure, optimized headcount, and enhanced efficiency. This generated one-off severance-related costs, which will temporarily drive up our G&A expenses for the quarter.

James Zheng: This generated a one-off severance related cost, which will temporarily drive up our G&A expenses for the quarter. Over the long run, however, the benefits of these cost savings and efficiency initiatives will gradually flow through to our financials. If I factor in all of this, we expect the company to record a net loss in the Q3. For Q4, we will update our business and financial guidance as we get more clarity on the regulatory front. While the short-term performance is under pressure, we are steadily resolving existing portfolio risks and advancing our tech-empowered transformation and driving organizational efficiency. This will for sure solidify our capitalized operation foundations and position ourselves well for steady, resilient growth under the new regulatory cycle.

Speaker #4: Over the long run, however, the benefits of these cost-saving and efficiency initiatives will gradually flow through to our financials. So, if I factor in all of this, we expect the company to record a net loss in the third quarter.

Speaker #4: For Q4, we'll update our business and the financial guidance as we get more clarity on the regulatory front. While the short-term performance is under pressure, we are steadily resolving existing portfolio risks.

Speaker #4: Advancing our technology empowers the transformation and drives organizational efficiency. This will, for sure, solidify our capitalized operational foundations and position ourselves well for steady, resilient growth and the new regulatory cycle.

Speaker #1: Thank you for the questions. Our next questions will come from the line of Yu Jie Jing of CICC. Please go ahead.

Operator: Thank you for the questions. Our next questions will come from the line of Yujie Jing of CICC. Please go ahead.

Speaker #5: 感谢公司给我这个提问的机会。我是中金公司的吉米杰。想请教一下管理层关于股东回报的问题。上半年公司调整了分红政策，那公司对股东回报的长期计划是怎样的？Let me quickly translate my question. Following the change to your dividend policy, how should we view your long-term plans to return value to shareholders?

Yujie Jing: Let me quickly translate my question. Following the change to your dividend policy, how should we view your long-term plans to return value to shareholders? Thanks.

Speaker #5: Thanks.

Speaker #3: 好的。近期由于同业风险事件引发的行业的一个波动，董事会经过审慎的评估，决定将公司的分红周期由半年度调整为年度。董事会认为保持充裕的流动性和财务韧性，为业务转型提供充足的资金储备和安全边际。有助于公司在行业调整期内能够稳健运行。这也将更好的保护股东长期的利益。在此我也想向大家明确，管理层致力于持续创造并回馈股东价值的理念从未动摇。随着未来行业逐渐复苏，公司业绩逐步恢复，董事会将会结合公司的实际状况积极评估，包括回购在内的多元化股东回报的路径。

James Zheng: In response to the recent industry volatility triggered by recent events at certain peers, the board, after careful consideration, has decided to change our dividend distribution from a semi-annual to an annual schedule. The board believes that maintaining ample liquidity and financial flexibility and preserving sufficient capital resources and a financial buffer for our business transformation will help us navigate the industry adjustment more smoothly, and that, in turn, will better protect long-term shareholder interest. I would like to stress that our commitment to creating and returning value to shareholders has not wavered. As the industry gradually recovers and the business performance improves over time, the board will actively evaluate a range of shareholder return options, including share buyback, based on our specific circumstances at that time. Thank you.

Speaker #2: In response to the recent industry volatility triggered by risk events at certain tiers, the Board, after careful evaluation, has decided to change our dividend distribution from a semi-annual to an annual schedule.

Speaker #2: The board believes that maintaining employee liquidity and financial flexibility, as well as preserving sufficient capital reserves and a financial buffer for our business transformation, will help us navigate the industry adjustment most smoothly.

Speaker #2: And that, in turn, will better protect long-term shareholder interests. I would like to suggest that our commitment to creating and returning value to shareholders has not wavered.

Speaker #2: As the industry gradually recovers and business performance improves over time, the Board will actively evaluate a range of shareholder return options, including share buybacks, based on our specific circumstances at that time.

Speaker #2: Thank you.

Speaker #1: Thank you for the questions. At this time, there are no further questions from the line. I would like to hand the call back to management for closing remarks.

Operator: Thank you for the questions. At this time, there are no further questions from the line. I would like to hand the call back to management for closing.

Speaker #6: Thank you. This conference is now concluded. Thank you for joining today's call. If you have any more questions, please do not hesitate to contact us.

Will Tan: Thank you. This conference is now concluded. Thank you for joining today's call. If you have any more questions, please do not hesitate to contact us. Thanks again.

Speaker #6: Thanks again.

Operator: That concludes today's conference call. Thank you for your participation. You may now disconnect your-