CNFinance Holdings Limited (CNF) 29 Aug 232023 Q2 Earnings call transcript

Good day, and welcome to the CNFinance Holdings Ltd Second Quarter and First Half of 2023 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event being recorded.

I would now like to turn the conference over to Matthew Lou, IR Manager. ahead. go Please

Vice Good the CNFinance Kate. session. will financial evening, welcome CFO, operating After Director and conference walk Li. Qian Thank through Ms. results us quarter morning, a from and have the the and our call, second In followed XXXX we Mr. first to Q&A Jun call. will by you, results today's and President, financial half that, results acting of our

U.S. to the remind in forward-looking forward, as can intends, like that Act we statements. anticipates, this the meaning contains These would Before future, Reform as by start, outlook XXXX. XXXX believe, will, of call forward-looking be target, estimates, you statements of and expects, Securities conference plans, I defined of statements And amended. Section Securities similar going Private the within terminologies XXE Litigation Act of identified such Exchange as

upon conditions to performance and the company's current all which based many risks, control, and uncertainties which management's statements. other expectations to are are which results, of the the known and unknown may company's involve in or difficult are from relate actual statements achievements that differ of to materially forward-looking and cause Such or current operating predict factors and beyond those market events

to except the a obligation events or Further with any future and Securities U.S. under company as result information regarding the this not of required law. and Commission. undertake other risks, Exchange forward-looking uncertainties information, in company's any or factors filings otherwise, statements new does is The update included as

Jun Mr. welcome please Now Qian.

[Foreign Language]

time to for taking this join Thank the conference you call. [Interpreted]

XXXX and financial quarter second by and and CNFinance operating a results Q&A discuss first half followed will of session. We

year-on-year year-on-year quarter first of year-over-year was a billion Total in of high-quality RMBX.X XXXX, income Net and X%. year-on-year a In RMBXX XXXX, representing accomplished XXXX, RMBXXX representing of increase billion, was of million, of came In income following and quarter growth XXXX, of net a a the of year-on-year second a of increase loans million, the income first achieving total RMBXXX achieved XX%. a interest the at interest increase second the major development income loan of on total XX%. volume performance representing X%. was tasks. was XX%. was Total increase RMBXX the RMBX XXX%. During origination million, year-on-year indicators. in increase representing The company the million, year-on-year first we representing half the originated In half growth focused representing (ph), half of

and commercial to loans started the and First, the first commercial to and company's second under bank the partners business was million. associated partnership. we for model, billion source partnership XXXX, RMBXX of price competitive base. loan the promote Bank bank of in with the of RMBX and deepening After originated has high-quality private and borrower Since our we of volume banks this accounting the cooperation continued net has scale the of become the overall In the recognition of the gained XXXX, an half market partnership bank launch Commercial of part origination XX% income. partnership, it important given half of gradually commercial revenue

and to costs optimizing current condition, support sales funding Second, we financing company the the who market the Under delinquent cost to continued positive made and scale partners in dialogue maintain funding to partners a repurchase of risk on continued progress. reduce the the structure to obliged funds and achieved lowering loans. with breakthrough are

to was sales RMBXXX further has pressure funding their quarter strong has partners risk provided liquidity repurchase As to and of the the accumulated second default ease business. helped of end of XXXX, which support of million, support to expand the their amount

our trial decisioning by analyze refine of defaulted we of we system. influential to and beginning credit At of the factors a a have started assessment. borrower applying Since collateral historical rating continued We borrowers evaluation the strengthened time, run mechanism. have procured same the the the optimized we bank. commercial of risk our year, Third, model property well-established from control value

end loans of As the from delinquency rate XXXX, as of XX June was of by down XX% approximately of the company originated XX% XXXX. the of

with are real trend associated the and of reversed. been market not still economy estate there has uncertainties downward the Currently, China's

well as the to as financial period and proposing the of of this tools will innovations, China the challenges economy policy to aggregate play, both real backdrop, However, the structural seize overcome to the and to strategic give we and Against opportunity. vigorously the believe monetary technological and the SMEs, order role that China scientific with development position full continue (ph) opportunities. includes of be in in support

We and will quality compliance, asset continue quality by growth development ensuring to plans pursue coordinating scale of high our include.

of range to will will and launch products on we continue low In sales. First, mix, to product our technology borrowers, reach with interest order rates focus improve leverage a differentiated empower we wider to growth.

optimize core introduced borrower. and refined we cities. In first-tier new and to in mechanism shift will decisioning credit areas of (ph) such borrower, collateral continue the asset thoroughly the sales we quality our first-tier and with decisioning Second, evaluate process, credit quality, partners will business to

to manage sales reduce release and continue to the better partners and help partners pressure. collateral will delinquency sales We evaluate rate

invest in Third, will science to and continue technology to empower business. we our

evaluate developing big to our to borrowers. data are a We model capability enhance

procured suitable on control historical working decades. are accumulated the making the have using risk data we our more two loan model business past in to We

the our looking system. opportunities invest in same with working or collaborate business. could be Our the synergistical are to for developers whose other have advantages fintech companies completed on with research also are the time, we At preliminary developing and

randomize case means audits Fourth, we inspections will strengthen audits inspection, by risks to compliance further compliance and of routine and training. (ph) compliance

financial would Li, through who first to our Jing walk and like the results. will hand call Now, I quarter over to Ms. you second half

you. Thank

use Difficulty] otherwise quarter Difficulty]. second to increased first second Please the the Difficulty] like [Technical is would currency results. [Technical quarter financials of in XXXX half Now income fee RMB and X% for total increase I in [Technical note

reconnected. on the line speaker hold be to me, everyone. for Please Pardon

have the ahead. We line rejoined. Please go speaker

Kate. you, Thank

Sorry, now Li financial welcome with of the please continue Jing to CNFinance. Ms. results

banks to bank. borrower credit to Net providing same partnership fees facilitating Total interest million, to initial the cost to revenue lower million trust under Net commercial an compared increase represented RMBXXX due decreased XX% representing borrowers, income by banks the and surveys, RMBXXX primarily funding expenses interest to introducing model including Commercial from from and to Bank loans the X% RMBXXX companies. assessments, the RMBXXX million, from borrower and fee was charge assistance of technical for million. and

XX, with in billion in (ph) commissions partnership June grow as million banks Bank channels and of Commercial to to RMBX.X as PayPay as were of and as the company XXXX. third-party RMBX.X has of second the XXXX. to scale insurance company to collaboration outstanding half Net RMBX.X XX, such sales of XXXX billion the compared been collaborating compared under The paid principle XXXX, The since loan was commercial million. RMBXX June

loans collaboration million. sales Net increase the Collaboration an million the representing cost RMBXX increase interest for of RMBXXX under bank cost by million, due XX% of sales and income RMBXX partners partnership. as partners primarily after to fee from was RMBXXX to recommended was commercial million, compared

principles model to Provision Commercial the of company for relation with into guaranteed expected guarantee for provision lending Bank control representing financial outstanding guarantor, credit under model bank the loan who primarily a million, commercial and guarantee arrangement, the resulting decrease our million the to entered in losses credit in provides to third-party and certain mechanisms. RMBXX credit by XX% losses risk surveys partnership losses from under the trust constantly loans of credit due decreased partners RMBXX improving from delinquent

RMBXX RMBX.X gains million, scales and risk decreased of million, a net sales the as investment sales RMBXX due partners. result refined the compared position primarily staff to our gains decrease was Other due by effective mitigation management XX% net, from of fine credit and gains as of million representing securities to to Realized of partners increase from primarily the fortified of million management. investments to realized RMBX

XXXX. by increase compensation Other with the as result benefits half organization RMBXX local million second to during in quarter paid based fees income million. for Employee expenses RMBXX in increased the were RMBXX increase RMBXX XXXX. of million, million the operating compared million XX% the to increased and of an to million increased bonus first to base loan RMBXX sales base for Total to due by to of partners a expenses by volume in to from as million introducing increase company. RMBXX million, an RMBXX channels Net primarily primarily from XXX% attributed the X% compared performance RMBXX to

Interest partners first RMBXXX due to in as and to compared those the XXXX. of to XXXX Interest RMBXXX Total million of on from base partners primarily fee XXXX. outstanding to to million the on income that to in million, million, XX% loans partners the increased X% RMBXXX first selling of million. to use interest their loans in charged the by and the primarily RMBXX period more to loan flow to SaaS increased of by X% same RMBXX half company million increased installments the repurchase income half financing from allow service principles cash the from SaaS fact increase average pressure to default help attributed by RMBXXX

Collaboration of of companies sales due an RMBXXX X% RMBXXX by expenses partners the first the commercial was the RMBXX partnership. representing in XX% same increase bank million. X% to primarily half income in finding XXXX. partnership interest primarily partners interest loans from revenue million. RMBXXX trust to by Total bank due of trade XXXX, Net million model (ph) to Net commercial for and decreased and RMBXXX as to period increase sales increased recommended cost million from RMBXXX the lower million sales compared was RMBX.X RMBXXX fee from cost by million under the from million under of million, to

a XXXX the parties first of the to of a by RMBXXX of RMBXX XXX% the facilitation million. of scale Provision of disclosed the in under allowance in increase the traditional to organization from Bank the Commercial million for was partnership reserves model under model to the as such allowance combined loss expected credit quarter increased volumes were company of third the and that and effect credit the increase rapidly first remaining and reserve. guarantee in loans XXXX grew due fact The half reversal loans

Net losses first to XXXX. the million facilitation the was net prior XXXX result to management losses by XX% million sales under facilitated and bulk remaining of decreased the all in the of net in forfeited which loans gains million to half partners refined same of RMBXX attributed to our third-parties the sales company on traditional to the The as were a due the loans that in paying RMBXX the was risk the decrease XXXX same million XXXX, primarily XXXX. partners. period is model, to period in of during as sales the compared of RMBX RMBXX Other quarter by first credit primarily of position mitigation from of fact

XX% with partners primarily from period million to by RMBXX of same to the million, to Total to due million RMBXXX from operating XX% to million XXXX. for sales Employee by period million the benefits RMBXX of introducing by RMBXX to increase by period same to Net XXXX. company. expenses million fees in increased increased local RMBXX the channels income same XXXX. the increased in in RMBXX RMBXXX X% increased from the million expenses paid X% RMBXX and in million in compared Other compensation

XX, XX, As company RMBX.X December RMBX.X as as The cost XX.X% of June December activities. funds NPL billion could billion XX, XX.X% excluding December be respectively, XXXX. from cash had of of from XXXX and for December X.X% to compared XXXX to of XX, originated new of as increased which XX, by the grant as structured the only loans sales as the originated and restricted XXXX, ratio, June cash X.X% of and RMBX.X XX, equivalents XXXX of XX, including delinquency by company billion ratio, loans with loans The XXXX. billion and loan RMBX.X as June XX, cash held June XXXX, used loans and of XXXX, sales, of to excluding from decreased company the

Now, the we would Q&A section. like to start

session. ahead. question-and-answer first the begin from is Gregozeski go now will of Greenridge Please The question Instructions] William Global. [Operator We

out of SME update trying terms you loans, the from Hi. of I on take demand provide that the type, or how hoping kind it's you're of the size, an number trust the seeing clients whether the SMEs compare in could the and to commercial year? the last to does was

Language] [Foreign

demand loan figure a the [Interpreted] as that decrease. July, overall So based we're seeing SME (ph) released of on to of the owners

set here. So I data you of have a for

China's to same economy billion, year. to period was billion as loans loans in new has So among July same billion period compared the And the by to RMBXXX new RMBXXX which issued as decreased RMBXX the July, RMBXXX last of decreased which new them, billion, in compared loans has of real year. was to last the

so and XX%. XX respectively, first which a And half volume RMBX CNFinance, growth and of the loan (ph) second of the quarter billion XX% (ph) the quarter XXXX, and origination representing half to our in of year-on-year As of RMBX.X of representing billion a and number XX XX%, was and respectively, XX% of respectively. which the transactions XXXX, in year-on-year were XX,XXX first growth and second

Okay.

quarter second the number lending originated the as of under the model, model split bank X,XXX that partnership And bank we was under transactions X,XXX. commercial XXXX, the in for model. from trust trust So loan and so

half was Bank As under first was of model number transactions that X,XXX lending number X,XXX. of for partnership the under and XXXX, trust the Commercial

I why So reason when the we entire the was think a market downward has reason going trend is the two-fold. the two, on growth achieved

of same control pandemic negative in was XXXX, prevention. and of all, the of under period the business the First influence our

the number rather So low. is business

our And is share growth still small. And low. market I relatively think of the second that reason is we're our relatively

our XXXX. continued entire trend half So a were to efforts downward is sales build the products market a growth when push out our in more able with achieve of to first to we the

our the average around As to for increased was size XXX,XXX. same XXXX, of size, XXXX ticket so near it in has ticket somewhere the period and XXX,XXX in average

core of So I shift have to asset business the behind average to we of size think and cities. XXXX, ticket X have decision overall increase the Tier reason X Tier to a quarter maintain the we of our mainly quality, the due the that to was fourth since new area made

in the still up. of its [indiscernible] real maintain estate we market, So Tier still area despite assets believe, the go even trend gradually China's new and and uncertainties X the you. will downward overall associated with core the value City Thank

for still Thank economy, remainder Are origination growth the with all the you you'll the of the you see think guys Great. do uncertainty that. over even you of year?

[Foreign Language]

RMBXX off, we at sticking billion. year first origination still to made So target [Interpreted] are of the beginning the the of we reaching loan of

as in borrowers quality of will are still not collateral on development, the value. insist high of estimation we Secondly, but valuation our giving the as well

our you. So the share billion market as have mentioned, still is though, low relatively even I even RMBXX given origination Thank target.

The partners Okay. and sales last question are to the sales sales what's loans interest quarter. the the the of loans then was Thanks. more partners. of going sign partners liquidity defaults that active partners less a on just the And sales into or Is this right how is now? regarding kind down having

Language] [Foreign

positive So [Interpreted] this indicator. we change a see as

to loans, to partners indicates and that that So we quality believe caused that caused number defaults sales are and has decrease. have less that less such which which has asset the repurchase improving, is the means there overall defaulted

keeps partners think I number means It Anything also, is that only the if future, doing better, well. down, means better. going are in are our getting else? And business it our performing sales this

Okay. Thank you.

concludes would like turn question-and-answer conference Lou closing the to That remarks. I Matthew the back session. to for over

and you for us thank joining Thank you again today.

contact Thank other questions, have any you feel to you. at ir@cashchina.cn. us please free If

presentation. today's attending for you Thank concluded. now has conference The

You now may disconnect.