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Operator
Ladies and gentlemen, thank you for standing by, and welcome to the 360-digit TEDx Second Quarter 2022 Earnings Conference Call. Please also note today's event is being recorded. At this time, I would like to turn the conference call over to Ms. Mandy Dong, our director. Please go ahead, Mandy.
Mandy Dong
Thank you. Hello, everyone, and welcome to our Second Quarter 2022 Earnings Conference Call. Our results were issued earlier today and can be found on our IR website. Joining me today are Mr. Wu Haisheng, our CEO and director, Mr. Alex Xu, our CFO and director, and Mr. Zheng Yan, our CRO. Before we begin the proposed remarks, I'd like to remind you of our safe harbor statement in our earnings press release, which also applies to this call. We may refer to forward-looking statements based on our current plans, estimates, and projections. Also, this call includes discussions of certain non-GAAP measures. Please refer to our earnest release for reconciliation between non-GAAP and GAAP ones. Thus, unless otherwise stated, all figures mentioned are in RMB. I will now turn the call over to our CEO, Mr. Wu Haisheng.
Wu Haisheng
Thank you. Hello everyone, I'm very happy to report another strong quarter. In Q2, total loan ordination and the facilitation volume reached RMB 98.3 billion, up 11% YOY.
Mandy Dong
Outstanding loan balance reached RMB 150.5 billion, up 28% Y01. Despite an unusually volatile macro environment with the Shanghai lockdown and resurgence of COVID in multiple cities, we delivered a solid performance, which once again demonstrated the resilience of our operations and risk management capabilities facing adversity.
Wu Haisheng
I'd like to share with you some of the things that have happened in terms of the supervision. In the second quarter, the supervision of our platform economy has achieved further progress. The relevant supervision meeting has also shown many times that the revision has entered its final stages. The main focus will also be on promoting development. to implement standardized and sustainable monitoring. So we see that the monitoring measures are stable and the direction of monitoring is clearer. On July 28, the Central Political Bureau will make a clear statement in the second half of the year to promote platform economy to be standardized, healthy and sustainable, to complete platform economy specialization, and to implement standardized monitoring of platform economy. On August 1, On the regulatory front, there are further developments in rectification work
Mandy Dong
platform economy. The recent regulatory meetings have all sent a clear signal that the reform is reaching an ending phase. Going forward, regulators will put emphasis on driving healthy and sustainable industry development through normalized supervision. As the regulatory environment gradually stabilizes, we see clearer guidance. On July 28, The Central Political Bureau of the Communist Party of China set up economic priorities for the second half of the year. The policymakers pledged to promote healthy, orderly development of the platform economy, complete the rectification work, and conduct regular supervision. At a follow-up meeting by the PBOC on August 1st, the central bank remarked, significant progress of major platform rectification, and it will urge these companies to complete the whole rectification project, place them under regular supervision that is more standardized, transparent, and predictable. As a result, this promotes the role of the platform economy in job creation and boosting consumption.
Wu Haisheng
According to the deployment and requirements of the supervision, we have completed the investigation and revision work in most areas, and have sent the data to the supervision department. In the field of personal authenticity, we have reported the proposal to the supervision, and maintained close communication with the supervision. Currently, we are promoting the approval of the supervision in the Ministry of Justice.
Mandy Dong
We have completed most of the rectification work according to the regulatory requirements and now in the stage of regular data reporting. Regarding credit agency reform , we have already submitted our execution plans to regulators and have since maintained close dialogue with them. Based on feedback and direction from the regulators, we started to work with other business partners to implement our plans.
Wu Haisheng
In July, the Bank of China issued a notice to the Bank of China to strengthen the management of commercial bank and internet bank loan business and to enhance the financial service efficiency. This is the 14th letter. This document is consistent with the 21st and 24th letters issued before and the 20th and 9th letters in 2019. In July, the CBIRC published a notice on strengthening the management's
Mandy Dong
of Internet Loan Business of commercial banks and improving the quality and efficiency of financial service, namely circular number 14. The document is consistent with earlier guidance, including circular number 24 in 2021 and the circular number 9 in 2020, with the break period extended for one year till June 30, 2023. In addition, the document once again acknowledges the collaborative business model between commercial banks and the related parties in internet lending business. We have already implemented the specific requirements outlined in this circular in our daily operations.
Wu Haisheng
The COVID-19 pandemic and the COVID-19 pandemic have brought many obstacles. In Q2,
Mandy Dong
Despite multiple headwinds from the macro economy and unexpected pandemic resurgence, we remain committed to our strategic set at the beginning of the year. In this extreme volatile market, we successfully executed our operational strategies and made great progress in funding, product, risk management, and customer base, as well as tech upgrading.
Wu Haisheng
In terms of funds, we have further optimized the structure of the financial cooperatives. We have connected more than a dozen shares, as well as large-scale successful businesses with a management of more than 10 billion yuan. This makes our reserve funds more efficient. As the efficiency of funds continues to improve, as well as the issuance of ABS, we ensure that the capital costs On the funding front, we further optimized our funding structure. During the quarter, we added 10 more joint stock banks and major urban and rural commercial banks with over RMB $1 trillion AUM.
Mandy Dong
which make our funding supply more abundant. Thanks to improved funding supply and the resumption of insurance of ABS, our funding cost for credit-driven loans decreased by 21 basis points on a sequential basis. Since the beginning of Q2, we have issued a total of RMB 3.3 billion ABS at an average funding cost of 5%.
Wu Haisheng
On the product front, we continued to optimize product portfolios and lowered our average price. This marks our full compliance of 24% regulatory requirements. In terms of customer service, we continue to implement our customer service upgrade strategy. By increasing our accurate hair model RTA coverage, we have further expanded the scale of high-quality customer service. Customer service quality has also been further increased. Our accurate hair model RTA coverage has increased from 50% of Q1 to nearly 100% of Q2. From our hair section, Q2's high-quality customers, which is what we define as our 18-price customers, compared to Q1, increased by 51%. From all of our channels, that is, from all channels other than the hair channel, the quality of our high-quality customers increased by 20% every quarter. At the same time, we are constantly improving the accuracy of our customers, um um On the customer acquisition front, we continued to upgrade our user base during the quarter. By expanding the coverage of our intelligent market RTA,
Mandy Dong
namely real-time API model. We further increased the number of high-quality users and improved overall user quality. The coverage ratio of our precise targeting RTA model increased from 50% in Q1 to almost 100% in Q2. In the online advertising channels, the number of high-quality users with granted credit lines increased by 51% from Q1. Looking across all customer acquisition channels, the credit approval rate of high-quality users increased by roughly 20% on a sequential basis. Meanwhile, we continue to enhance effectiveness of targeted customer acquisition. On one hand, we continuously upgrade our model for user quality screening On the other hand, we expanded our media partner network for joint modeling and onboarded new partners such as ByteDance. For our existing partners such as Baidu, Chongxun, and Kuaishou, we continued to upgrade our models. In other areas, we optimized the cost efficiency of user acquisition by upgrading our intelligent marketing platform. We also connected to new user acquisition resources, such as Baidu OpenScreen S and Total's RTA resource.
Wu Haisheng
Let's talk about our risk. In the second quarter, we made rapid strategic adjustments to the epidemic, including the acquisition of high-quality new customers, and the gradual withdrawal of high-risk storage users. We deep-dive into user characteristics and carry out large-scale model management. Therefore, we achieved a very good result in the risk of adding a new account. The initial interest rate of the new account from Q1 decreased from 3.56% to 3.01% of Q2. The FPD30 of Q2 new users fell to less than 0.25%. At the same time, the interest rate of all existing assets also gradually decreased. fell from 5.11% in March to 4.71% in June. And these good trends also continued further in July. In July, Day One's inflow rate was 4.64%. The M1 recovery rate of all assets rose from 85.2% in March to 86.9% in June.
Mandy Dong
In Q2, we quickly adjusted our risk strategies in response to resurgence of the pandemic, including acquiring higher-quality customers and gradually cutting off high-risk users. We also completed major upgrades of our risk models to further leverage on users' data. As a result, risk performance of new long ordination was great. First payment day one delinquency rate of new customers dropped to 3.01% in Q2 from 3.56% in Q1. And first payment delinquency 30 days was less than 0.25% in Q2. In the meantime, day one delinquency rate of our current loan book gradually went down to 4.71% in June from 5.11% in March. Such positive trends continued into July, with day one delinquency rates further dropped to 4.64%. The overall M1 collection rate of current loan books trended up to 86.9% in June, compared to 85.2% in March.
Wu Haisheng
Despite the impact of the pandemic,
Mandy Dong
Our overall asset quality improved in Q2, especially for new loan ordinations. This reflected the effectiveness of the adjustments we made and our ability to counter pandemic-related challenges. If macro circumstances stabilize for the rest of the year, we expect our risk management strategies to bring further improvement in asset quality.
Wu Haisheng
In terms of our strategy to upgrade our technology, in the second quarter, we have continued to promote 55.7% of our total total revenue from our green asset products. From a long-term perspective, we still hope to make full use of our technical advantages in the field of financial technology, to make our technical advantages more efficient and accurate, and to make a broader contribution to financial institutions. In terms of tech upgrading strategy, we maintain that
Mandy Dong
55.7% of the loans originated and facilitated was under the capital-like model and other tech solutions in Q2. In the long run, we plan to modulate our leading technology into more products and better serve diverse financial institutions. In addition, the China Academy of Information and Communication Technology, namely CAICT, granted us among the first batch of companies under the Business Security Initiative, namely CSI, together industry giants including China Mobile and Group Baidu and etc. This was a strong statement of our capabilities in business security management and technology.
Wu Haisheng
In the second quarter, we faced many challenges. We responded actively and passed We will continue to carry out a steady business strategy. It is to complete the annual strategic mission of technology upgrade, customer optimization, and reformation.
Mandy Dong
In Q2, we navigated through the extreme pandemic situation of citywide lockdown and other multiple macro fluctuations with strong operational and financial results. Looking ahead into Q3, we will stay vigilant on the macroeconomic environment and the pandemic development. Meanwhile, we are seeing an increasingly stable policy environment and a healthier industry ecosystem. We will maintain a prudent operational strategy, continue to upgrade our technology and customer base, and finish our rectification tasks.
Wu Haisheng
OK. Thank you, everyone. Thank you, Haisheng. Good morning, and welcome to our second quarter earnings call.
Haisheng
As Haisheng discussed, we delivered another solid quarter in a rather challenging period of time from a microeconomic perspective. Early in the quarter, COVID lockdowns in Shanghai and other regions of the nation noticeably weakened consumers' confidence and altered consumption patterns for many. Since the lockdown was removed in June, we have observed some recovery in consumers' demand for credit, although the pace of the recovery are expected to be gradual and modest. Despite the impact from COVID and a generally soft microenvironment, we continue to push for steady improvement in overall asset quality throughout the quarter and the year. With optimization of the risk model and contribution from high-quality new borrowers, Overall day one delinquency has been declining sequentially each and every month since beginning of this year, even during the peak of the COVID lockdown in April and May. It was 4.9% for Q2 versus 5.2% in Q1 and further declined to 4.6% in July. Particularly, day one delinquency for new borrowers in Q2 was well below 4%. indicating clear better quality versus existing borrowers. 30-day collection rate remains stable at around 86% in Q2. COVID lockdowns significantly hampered our collection operation in April and early May. 30-day collection rate hit the lowest point of this cycle in April at less than 85%, then start to recover By July, it was already above 87%, the highest point so far this year. Again, we see clear outperformance by new borrowers versus existing borrowers. For new borrowers, 30-day collection rate was above 90% in Q2. These risk metrics continue to support our current user acquisition strategy, which focus on high-quality segment of the market. Total net revenues for Q2 was $4.2 billion versus $4.3 billion in Q1 and $4 billion a year ago. Revenue from credit-driven service capital heavy was $2.9 billion compared to $2.9 billion in Q1 and $2.4 billion a year ago. The year-on-year growth was mainly due to growth in loan volume and the longer average tenure of the loans. more than offsetting the negative impact from declining in average prices of the loans. Capital heavy facilitation revenue take rate actually improved modestly versus Q1, also due to longer loan tenure. Revenue from platform service capital light was 1.2 billion compared to 1.4 billion in Q1 and 1.6 billion a year ago. The year-on-year and sequential decline was mainly due to the decline in loan volume and the average price of the Capital Light loan facilitation. During the quarter, Capital Light loan facilitation, ICE, and other technology solutions combined account for roughly 56% of the total loan volume. Given the challenging microenvironment, we purposely increased the portion of the loans processed through ICE and other technology solution to further mitigate potential risks so far this year. Such services typically have different commercial terms compared to regular Capital Light loan facilitation. Overall, in the long run, we will continue to pursue technology-driven business model and expect Capital Light and other technology solutions to eventually become a significant majority of our business. During the quarter, average IRR prices of the loans we originated and or facilitated further dropped to between 22% and 23%, well within the 24% rate cap requirement. We expect pricing to be relatively stable for the coming quarters. Sales and marketing expenses increased approximately 11% sequentially in Q2. mainly because of the increase in high-quality user acquisition. Specifically, if we exclude back-end expenses, the increase in average cost to acquire a 360 jietiao new credit line user through third-party traffic sources were roughly in line with the increase in the average size of the new credit lines. As such, the average cost per dollar amount new credit line remain relatively stable queue on queue. As always, we will continue to use lifecycle ROI and LTV as the key metrics to determine the pace and scope of our user acquisition strategy to ensure the sustainability and the profitability of our operations. Although the overall risk profile of our loan portfolio continued to improve in Q2 due to the contribution from new loans from high-quality new users, impacts from micro uncertainty and COVID were still apparent on old loans from existing users. Therefore, we continue to take prudent approach in booking provisions against potential credit loss. New provisions for contingent liability for loans facilitated in the quarter was approximately $1.3 billion. With strong operation results and a stable contribution from capitalized model, our leverage ratio, which is defined as risk-bearing loan balance divided by shareholders' equity, was at a historical low of 4.0 times. in Q2 compared to 4.8 a year ago. We expect to see rather stable leverage ratio for the time being until capital light and other technology solution contribution become a bigger portion of the business in the future. We generate $1.1 billion cash from operation in Q2 compared to $1.4 billion in Q1. The sequential decline in operating cash flow was in part due to some COVID-related timing issue. As Shanghai being gradually reopened in late Q2, some of the business and administrative procedures within the financial system were still not running as efficient as what normally should be, therefore causing some delays in collecting receivables from some of our financial institution partners. Total cash and cash equivalent was $11.4 billion in Q2, compared to $9.8 billion in Q1. Non-restricted cash was approximately $7 billion in Q2 versus $6.2 billion in Q1. As always, a significant portion of our cash will normally be allocated to support the security deposit with our institution partners in normal business course. As we continue to generate healthy cash flow from operations, We believe our current cash position is sufficient to support the growth of our business, to invest in key technologies, and to satisfy potential regulatory requirements, and to return to our shareholders. In according to the dividends policy approved by our board last year, we declared another quarterly dividend of US dollar 18 cents per ADS for Q2. The cash dividends represent approximately 20% of our Q2 earnings. Finally, regarding our outlook for 2022, as we discussed previously, we believe 2022 will be a fairly challenging year for the industry as the participants are settling in a new regulatory environment. Meanwhile, the on-and-off outbreak of COVID, as well as associated measures to control the outbreak, added additional uncertainties to an already soft microeconomy. Therefore, we want to maintain a prudent approach to plan our business and mitigate potential risk. At this point in time, we would like to keep our full-year loan volume guidance of between RMB $410 billion and RMB $450 billion unchanged representing year-on-year growth of 15% to 26%. We view this transitional year as an opportunity for us to further optimize our operation, strengthen our technology platform, and upgrading our customer base to build an even stronger foundation for our future growth. As always, the forecast reflects the company's current and preliminary view, which is subject to material changes. With that, I would like to conclude our prepared remarks. Operator, we can now take some questions.
Operator
Thank you, management. We now begin the quick question and answer sections. If you have any questions, please press 01 on your telephone keypad. If you need to cancel, please press 02. For those who can speak Chinese, please kindly ask your questions in Chinese first and followed by English translations. In addition, in order to have enough time to address everyone on the call, please keep it to one question and one follow-up. And return to queue if you have more questions. So once again, 014 questions. Our first question is Yada Li, CICC. Please go ahead.
Yada Li
Hello, Mr. Guan. Thank you for giving me this opportunity. I'm Li Yada from Zhongjin Co., Ltd. Today, I have a question for Mr. Guan. We can see that the current situation of the Hongwan economy is under pressure, and the pandemic is still uncertain. We can also see that the financial institutions are under pressure. We can also see that users may have to pay back in advance. The adjustment of the pricing is also getting more and more challenging. Maybe the residential institutions, including banks and small and medium-sized companies, So I would like to ask, in this context, whether there have been any changes in the current and future bank-to-bank cooperation, as well as the capital cost of the financial sector, the cost of goods and services, as well as the needs of the borrowers. If there is a certain challenge, how can we overcome it? Okay, then I'll do the translation part. So under the current microeconomic and the pandemic uncertainties, So we saw most of the retail credit service providers, the financial institutions generally has encountered certain pressure, such as the increase of customers' early prepayments, the customer acquisition challenges after the pricing adjustment. So I was wondering, in the context of these uncertainties, are there any changes in the willingness of our bank partners to cooperate with us? And are there any changes in the funding costs, the customer acquisition costs, and also the actual borrowing demand of our potential customers. And if there were some certain challenges with our plans, then how are we going to overcome it? Thanks, management.
Wu Haisheng
Okay, thank you, Adam. Let me answer this question. Yes, you are right. Now financial institutions are often in this and modern business have been under pressure due to the challenges of the macroeconomic crisis. What we see is that due to the pressure on other types of assets, as well as the accumulation of trust in consumer modern assets over the past few years, we have become a more popular asset type in the eyes of institutions. Therefore, From the point of view of cooperative will, it should be said that it is stronger than the will we had before. Even in the context of the second wave of the epidemic, institutions should have chosen to be more cautious. But we see that institutions are still full of interest in the choice of our capital. There will also be a major decline in the response to capital costs. From July and August, because it was Q3, we saw the trend in July and August. This trend has been further extended and even dropped more. This is from the institution side. From the user side, we also saw that the impact of the epidemic will indeed affect the user's motivation, because everyone was locked at home. In Q2, everyone may not have the actual consumption needs. So the user's willingness to borrow money under the epidemic, indeed, we saw a decline. We did a lot of work in Q1 to counteract this decline, because we increased the accuracy of our customers. So we did some counterfeiting of this cost. Yes, I will answer your question, Yada. First, your observation is correct.
Mandy Dong
Due to the impact of macroeconomy, financial institutions are under some pressures. However, thanks to our, number one, accumulated credibility in the market from our consumer loan business. Number two, financial institutions pressure from other asset class. Actually, in Q2, our high-quality consumer loan asset is in high demand from financial institutions. That is reflected by the drop in funding costs that we already discussed. In July and August, we are seeing the trending down of funding costs further. For your second question, as for the customer acquisition activities, Due to the lockdown of pandemic of offline activities, our customer drawdown activities is, to some extent, negatively impacted. Thanks to our series of countermeasures that we apply more precise customer targeting that the drawdown activity of our users are boosting, we have done a lot of work in Q2 We are expecting to see the work bearing fruit in Q3.
Wu Haisheng
We are expecting to see the work bearing fruit in Q3.
Operator
Next question is Thomas Chong from Jefferies.
Thomas Chong
早上好,謝謝管理層接受我的提問。 我有兩個問題,第一個是關於我們 SME 業務方面的。 管理層可不可以分享一下,在這個宏觀不確定的情況下, 我們對 SME 這個板塊會不會有一個戰略上的改變? And then in terms of the expansion of the sales team, will there be any plans to increase sales? The second question is still back to the fee situation. Can you share the current ticket size? From the perspective of the consumer, will it be reduced than before? Thank you. Thanks, management, for taking my questions. My first question is about our SME strategies. Given the current macro backdrops, will we scale back the pace of our SME business as well as the offline sales team? And my second question is about the average ticket size. Given the uncertainties of the macro environments, are we seeing the borrowers are getting a lower ticket size and they are getting a bit more good in borrowing. Thank you.
Wu Haisheng
um um On the sales team, we also made appropriate adjustments. In the past, we divided the third-party agent team and our self-employed team. In the second quarter, we basically made a stop-and-go adjustment for the third-party team. This also reflects our cautious attitude towards the entire industry. This is the first question.
Mandy Dong
Yes, regarding SME business, naturally, this is more cyclical than our consumer-owned business. Thus, we take a more prudent approach on this business. We have tightened our credit standard for this business. As you can see, the total loan ordination of facilitation in SME business in Q2 dropped big in Q3. This is number one. For the second point, as for the customer acquisition channel, for external channels that we have less control, we scale back the volume and more focus on our direct sales team of offline customer acquisition.
Wu Haisheng
In terms of user consumption and TK size, we do see users The demand for consumer sentiment has dropped. There is no demand for consumer sentiment in the home. The revenue has also decreased. We can see that, from our standards, we have made some adjustments to the matching rate. Secondly, we have made a few adjustments to the poor customer base. But more importantly, we are strengthening the proportion of high-quality customers. High-quality customers are more likely to respond to TK-Size. Therefore, overall, TK-Size has not seen a decrease in the number of calls.
Mandy Dong
Yes, Thomas, your observation that the customer consumption willingness drops due to the impact of pandemic is correct. However, we released a few countermeasures. Number one is we've taken the credit standards. That means the approval rate is lower. Number two, we focus more on the high quality customers, which bring more value to the business. two measures together that makes our ticket size relatively stable.
Haisheng
Okay, Thomas, just add a couple more points there. One is on the SME, as Haisheng mentioned, if you look at our earnings release, This quarter, the credit line, the new credit line granted to SME is about $4.9 billion. And the actual loan facility or originate to SME is about $7.8 billion, roughly. Compared to last quarter, that loan volume was a little bit over $10 billion. So that's the numbers there. But I just want to make sure, When we talk about SME, we're talking about rather narrowly defined SME, so meaning like that's real SME, as opposed to some of the players talking about more broadly defined SMEs. So that makes a difference. Secondly, regarding the ticket size, If you look at, for example, average drawdown we look at for Q2 is increased by roughly 5% sequentially. So, you know, that's just added points to Hacheng's comments. Once we pass through the lockdown period, we actually see pretty, you know, still see pretty noticeable growth in terms of ticket size in consumption. Thank you.
Thomas Chong
Thank you.
Operator
As a reminder, please press 014 for questions. Our next question is Alex Yee from UPS.
Alex Yee
Hello, Mr. Guan. Thank you for the opportunity to ask me a question. First of all, my question is mainly about the tech rate. As I mentioned, the price of Q2 will remain stable between 2022 and 2023. As I mentioned, the capital cost has a certain downward trend, and our asset quality is also in a positive state. Looking back, can we expect the tech rate to be So my question is mainly on your tech rate outlook. So given you have mentioned that your average IRR during the quarter was 22% to 23% and expect that to remain stable going forward. And you also mentioned that your funding cost is improving and your credit performance is also stabilizing. So I'm wondering if we could expand some of that specifically. stabilization or improvement to your take rate going forward? Thank you.
Haisheng
Sure, Alex. Let me take your question here. Generally, you're right. Given that we already reached a point in terms of the pricing goal based on the regulatory guidelines, so we don't see really too much pricing downward trend. going forward for the remainder of the year and with that and you know the the overall take rate I would say you probably will see a more stable take rate if anything there could be some improve there but of course other factors you need to consider is the number one the micro environment and you know that will have a I would say, more impact than usual. If we have a rather stable microenvironment, then all the assumptions, we can assume it will be stable to maybe modestly improve take rate. But if it's something unexpected happening on the microfront, then there will be another question there. From funding costs, as Hashim mentioned, sure, you know, second quarter we're at 6.8%, and right now we're sitting at about 6.5. So, you know, there's maybe still a little bit of room to go in terms of lowering funding costs, given the current money supply is pretty, you know, pretty high. available out there. There may be still some room to go. But overall, I would say from our modeling perspective, conservatively, you can model a rather stable take rate. If you want to add some to it modestly, that's also fine.
Alex Yee
OK, that's very clear. Thank you. Yeah.
Yada Li
Thank you.
Operator
Next question is Richard from Morgan Stanley.
Richard
Thank you for giving me this opportunity. I mainly want to ask about the competition pattern. Because our interest rate is relatively low and the risk is low, this may be closer to the products of other platforms. In the situation where demand is getting weaker and weaker, what do we see in the competitive environment? Will there be more overlap with other platforms such as Ant, Bixiaoman, and some bank credit cards? Basically, my question is on the competitive environment in China at the moment, given 360 Digitech is also aiming for low-risk borrowers. Basically, it's also some overlap with the targeted customer buy, like Ant, Banks, et cetera. So what's the competitive landscape at the moment?
Wu Haisheng
Yeah. I will answer this question. From now on, we will be closer to the top platform than before. From this perspective, we will have more overlap than before. But at the same time, we also see that this market is actually, first of all, it's a big enough market. It's so big that it's hard for everyone to compete with each other. This is the first point. The second point is that we are still seeing some divisions in the customer group. For example, the bank you mentioned, the bank now has 4% interest rate and 10% interest rate. And then, like the head company, MaYi, will probably make about 15% of the profit. We will be on the top 20% of the regulatory requirements. So, in general, we still have a share of the customer experience. The third point is that we are actually in different capabilities. um um Yes, Richard, you are right. After we lower our average product price, the overlap of target markets with other joints like you mentioned, or banks,
Mandy Dong
that increased a little bit. However, we do not see the direct head-to-head competition with them. There are a few reasons. Number one, the consumer loan market is a grand market with multi-layers. For example, banks, they have 10% price for that and have 15%. Our price range, as we discussed previously, is within 22% to 23%. Number two, we believe different companies can thrive and prosper based on their unique competence. For example, Ant has driven by their unique ecosystem. For us, we do not have any e-commerce platform or e-commerce ecosystem. Therefore, we can collaborate with all the platform in the market and cover the full spectrum of customer groups.
Wu Haisheng
Okay, thank you.
Operator
And now next question is Hans from CLSA.
Hans
Okay, thank you for giving me the opportunity to ask a question. I'm Hans from CLSA. I want to ask about the issue of asset quality. In fact, as Guan Liancheng mentioned, we are currently looking at the improvement of the overall risk indicator in the second half of the year. So can you generally estimate that the path of this improvement is a slow bump, or is it a more obvious trend? Because recently you can also see that there are still some outbreak of the epidemic, and the red data in July is actually not so good. So let me translate. So my question is more about ask quality. Management just mentioned that looking to the second half, we're going to see improvement in overall risk indicator. My question is more about how do we see the path of this improvement? Is it like a gradual bumpy one or like a notable uptrend, especially regarding the COVID flare-ups recently across many cities? And also, when do we expect the 90-day delinquency ratio to peak? Yeah, that's my question. Thank you.
Wu Haisheng
OK. Thank you, Hans. This question is for our CIO Zheng Yan to answer.
Hans
OK. In terms of our overall risk assessment, we have made a few adjustments in collaboration with other teams during QI. The previous CEO also mentioned these. One is that we have improved the overall customer quality. Through RTA's full coverage and Pre-A models, we have increased the number of our best customers by 50% compared to Q1. The second is that We have increased the data resolution of the draft and then the true report. We have organized a team of the most elite in the company's algorithm to set up a joint project team. Then we extended from this draft and then the true report to 18,000 effective variables. These variables involve some optimization of the log-in model, including some exploration of the product offer, recognition of high-quality customers, recognition of reputational customers, professional model of customers, and model of income load. At the same time, we are also more cautious in dealing with the clients at the end of the strategy. The third piece is that in terms of structure, we are working together with the business side to improve the resources for high-quality clients, including the price and the resources. Under these combination actions, the transaction structure of new transactions becomes healthier. We can see that QI's FPT30 It has decreased by about 20% on the first of July, and it also maintained a downward trend in July and August. We believe that in the case of an outbreak, our team can still be aware of the risk reduction. This fully demonstrates the resistance to pressure of our operating assets, and of course, the team's resilience. Some of the actions mentioned above, some of the actions, the results have not yet been fully reflected. Part of it is dust testing, especially adjustment in structure. Yes, these are part of the test, because we need to observe a longer period of time to release more dust. So when these dust can be gradually filled in the process, we are also very confident to deal with various sudden events in the future. uh uh Yes, and if we talk about the overall average loss, the three-season and four-season, this depends on our deadline structure. Overall, we will set this target at a number between 2.5 and 3. Okay, then I will ask our colleague to help translate it.
spk00
Okay, so our risk management team has been working with other teams closely to make several adjustments in the second quarter. Firstly, improving the quality of newly acquired customers. With the comprehensive coverage of RTA and the iteration of the Pre-A model, the number of our best quality customers has been doubled compared with the first quarter. And secondly, improving the data mining of the People's Bank of China credit report. We have set up a joint project team and derived 18,000 effective variables from the credit report, covering the optimization of several models, including competitive offer exploration, high-quality customers' identification, bad customers' identification, career model, income and liability model, et cetera. And in the meanwhile, we evaluate customers with poor credit performance more cautiously, Thirdly, we improved the resource allocation to high-quality customers on the operations side, including pricing, credit lines, and promotion. With these actions, the credit performance of new transactions has been improved. We have seen that the FPD 30-day Q2 dropped by about 20% compared with the first quarter, and it maintained a downward trend in July and August. With the epidemic outbreak, we can still lower our risks, which fully demonstrates the resilience of our team and our assets. Moreover, the results of some actions mentioned above have not been fully reflected as some actions are in pilot testing. We need to absorb long-term performance. Therefore, with full adoptions of these actions, we are very confident to retain stable risk performance in the future. As for 90-day delinquency rates, it will be lower in third quarter. As we focus more on 30-day delinquency rates, it has been the lowest in July, and our future target will be within 2.5% to 3%. Hope this can clarify your question.
Operator
And this is the end of our question and answer sections, and now I hand back to management for conclusion.
Haisheng
Okay, thanks again for joining us for the conference call. If you have any additional questions, please feel free to contact us offline. Thank you.
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