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Operator
Ladies and gentlemen, thank you for standing by and welcome to the 360 Digitech fourth quarter and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session, at which time, if you wish to ask a question, you need to press star 11 on your telephone. Please also note that today's event is being recorded. At this time, I would like to turn the conference call over to Ms. Karen Chee, Senior Director of Capital Market. Please go ahead, Karen.
Karen Chee
Thank you, operator. Hello, everyone, and welcome to 360 Digitech's first quarter and full year 2022 earnings conference call. Our earnings release was distributed earlier today and is available on our IR website. Joining me today are Mr. Wu Haisheng, our CEO. Mr. Alex Xu, our CFO, and Mr. Zheng Yan, our CRO. Before we start, I would like to refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP measures, financial measures. Please refer to our earnings release, which contains a reconciliation of the non-GAAP measures to GAAP measures. Also, please note that unless otherwise stated, all figures mentioned in this call are in RMB terms. Now I will turn the call over to our CEO, Mr. Wu Haisheng. Please go ahead.
Wu Haisheng
Hello, everyone. Thanks for joining our Q4 2022 earnings conference call. In the past, we have gone through a very turbulent period. From the lockdown in October and November to the lockdown in December, we have been under the control of the pandemic for the past three years, and we have come to a dead end. We have basically come to a dead end in terms of the specialization and revision of our platform business and financial business. The Chinese Bank of China On December 27, it said that the financial policy should be more active in cooperating with the financial and social policies, and that the recovery and expansion of consumption should be in the priority position, and that the financial support for the internal demand should be increased. The People's Bank of China also said that it will support platform economy development from several aspects, including promoting platform companies, accelerating the reformation of even the smallest problems, and raising the standardization of On the macro environment front, we experienced a volatile quarter in Q4, swinging from widespread swamps across China in October and November to the border reopening and the cancellation of almost all COVID-19 restrictions in December.
Karen Chee
This concluded nearly a three-year period of strict COVID control policies in China. Regulatory authorities also announced that the rectification of financial business within the major internet platform companies has been mostly completed. At a meeting held on February 27, 2023, the China Banking and Insurance Regulatory Commission CBIRC called for proactive coordination between financial, physical, and social policies to provide greater support for the growth of private consumption and domestic demand in China. The Financial Market Department of the People's Bank of China, TBOC, also pledged to facilitate the healthy development of the platform economy in three ways. including speeding up the rectification of the remaining minor issues with some internet platform companies, improving standards for regular supervision, and developing financial measures to support the sustainable healthy development of the platform economy. Our industry is therefore headed in a more positive direction.
Wu Haisheng
In the fourth quarter, we have served 143 financial institutions in the past. As of the end of Q4, we have partnered with a total of 143 financial institutions for our loan
Karen Chee
Total loan origination and facilitation volume was RMB 104.6 billion, up 8% year-over-year. As of the end of Q4, cumulative number of users with approved credit lines reached approximately 44.5 million, and the cumulative borrowers with successful drawdowns reached approximately 27 million, up by 16% and 11% year-over-year, respectively.
Wu Haisheng
Last year, Q4 experienced a relatively large-scale lockdown since the COVID-19 epidemic. There was also a major adjustment in the prevention and control policy, and there have been rapid upheavals all over the country. Considering the uncertainty of the epidemic period and the early release, we have tightened the strategy of supply and control in the fourth quarter. In addition to the effect of customer optimization, our day one return rate has dropped from 4.5% of Q3 to 4.3% of Q4, reaching the lowest level since 2018. Although the recurrence of the epidemic of Q4 has caused a fluctuation in the return rate of 30 days, but due to the improvement of our day one return rate, the overall risk index is still very stable. In last Q4, China implemented its most extensive COVID control measures since 2020. While in December, the government adjusted its COVID policies and a massive wave of infections subsequently occurred across China.
Karen Chee
Given the uncertainties posed by both the COVID and the initial period of reopening, we tightened our customer acquisition and credit assessment holidays in Q4. These, together with the optimization of our user base, have helped improve our day-one delinquency rate from 4.5% in Q3 to 4.3% in Q4, the lowest level since 2018. In terms of customers, considering the risk during the epidemic, we have reduced the size of the investment.
Wu Haisheng
and further replace the advantage of our RK model, which increases the accuracy and efficiency of our customers, and drives the cost of our new customer service users to drop by 24% compared to Q3. At the same time, we have deep cooperation in various scenarios, such as short video, social media, search engines, long video, take-out, and so on, to make the scenarios of reaching users more rich and effective. Thank you.
Karen Chee
We scaled back our marketing efforts given our concerns about the credit risk associated with the COVID. Meanwhile, we continued to upgrade our RTA model and improved our capabilities and efficiencies to acquire targeted users. In Q4, the acquisition cost per new user with the credit line decreased by approximately 24% sequentially. We further expanded and diversified our customer acquisition channels by working with different types of traffic platforms, including short and long-form videos, social media, search engines, and food delivery platforms, etc.
Wu Haisheng
By the end of Q4, we have established long-term cooperation with 143 institutions, including more than a dozen shareholder banks and more than 10,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000, In terms of cooperation with financial institutions,
Karen Chee
Liquidity remained ample in the financial system during Q4, leading to strong demand for high-quality assets by financial institutions and a further reduction in our funding costs. As of the end of Q4, we had established long-term partnerships with 143 financial institutions, including over 10 joint stock banks and major urban and rural commercial banks, with than 1 trillion RMB, allowing us diversified funding sources. Our funding costs decreased by roughly 20 basis points sequentially. For eight years issuance, we issued RMB 1.8 billion in Q4 at an average funding cost of 5.4%. There was some unusual level of volatility in the bond market in the quarter. While some industry peers canceled ABN issuance on a large scale, we continue to issue at a relatively stable price.
Wu Haisheng
In terms of improvements, Duanzhilian's improvements in Q4 have been steadily promoted. As of December 31st, we have completed the improvement work of Duanzhilian's online system in accordance with the proposal of the Ministry of Foreign Affairs.
Karen Chee
We also made steady progress on the credit agency reform, namely Duan Zhilian in Q4. As of December 31, 2022, we had substantially completed the system integration with our financial institution partners under Duan Zhilian in accordance with our plan submitted to the regulator to ensure our practice complies with the new rules. Our loan facilitation process with these partners remained stable in terms of both credit approval rate and key risk matrix.
Wu Haisheng
In the past year and the whole year, we have been affected by the pandemic and the pandemic prevention and control. China's consumption and small and medium-sized needs, whether from needs or risks, are facing many challenges. Our company has maintained a steady business strategy. In 2020, the total sales volume reached 4,124 billion yuan, which is 15.5% of the total growth. This reached the level of our market at the beginning of the year. The effect of our customer optimization has been significantly improved and effectively counteracted the unfavorable influence of the public environment. Our asset value has also maintained a very stable performance. um
Karen Chee
Given the macro challenges and the COVID control measures, China's consumer finance and SME credit markets faced huddlings on both the demand and risk fronts in 2022. Against this backdrop, we stick to our prudent operating strategy and leverage technology to drive quality growth. In 2022, total loan origination and facilitation volume was RMC $412.4 billion, up 15.5% year-over-year, and in line with our guidance at the beginning of the year. We made solid progress in optimizing our user base, allowing us to weather the macro headwinds and stabilize our asset quality. Our day-one delinquency rate decreased by more than 1 percentage point to 4.3% in Q4 from 5.4% in the same period last year, highlighting the resilience of our business. In light of the volatile macro environment, we kept the percentage of loans originated and facilitated under our capitalized model. ICE and other tech solutions relatively stable at roughly 56% in 2022. These business models have provided us with more flexibility and a means to balance risks. We also maintain disciplined cost control and optimize our operational efficiency during the year. As such, we achieved our targeted net take rate for our baseline business despite the decline in loan pricing.
Wu Haisheng
We remain committed to fulfilling our social responsibilities as we operate our business. In 2022, we served a total of 910,000 self-employed individuals.
Karen Chee
and 1.08 million business owners, supporting about 6 million jobs.
Hans
Next, I would like to talk about the year 2023.
Wu Haisheng
Since the year 2023, with the gradual recovery of the social economic activity, we have also observed that the demand for new generation has improved significantly, as well as a significant improvement in the quality of assets. In February, our demand for Day One has dropped to 4.1%. The 30-day recovery rate is about to return to a relatively higher level than last year. The progress of risk improvement is much better than expected. I will also share some of our important work below.
Karen Chee
Given the gradual resumption of economic activity since the start of 2023, we have seen a modest recovery in credit needs and a notable improvement in our asset quality. Our day one delinquency rate in February decreased further to 4.1%, while the 30-day collection rate quickly recovered to last Q3 level, showing a faster than expected improvement in our risk performance. Now, let me share with you the strategies for 2023.
Wu Haisheng
First of all, the continued decline in our cost and capital costs has created a very favorable condition for us to provide better product offers to our users. We have 44.5 million accumulated受信用户. How can we turn these受信用户 into借贷用户? and how to allow users who have already borrowed to use more of this initial revenue. In terms of driving our overall growth, it will play a very big role. For our non-virtuous users, we will add some investment and investment, optimize our product strategy, and improve their vitality. For our in-house users, we will enhance some refined operating methods to match their desired experience.
Karen Chee
First of all, the continued reduction in our credit costs and funding costs has created favorable conditions for us to better serve our users. We have approximately 44.5 million cumulative users with approved credit lines. How to effectively convert them into borrowers and increase the credit utilization of our existing borrowers will be crucial to drive our overall growth. To enhance our engagement with inactive users, we will step up our marketing and outreach efforts while optimizing our product mix and risk control strategies. We will also seek to improve our user retention rate for existing borrowers by refining our operations to offer them with the products and the user experience that better serve their needs.
Wu Haisheng
In terms of new customers, we will further optimize our new customer channels. We have a very clear competitive advantage in the 18-24 customer group division. At the same time, we also see a lot of large traffic platforms. They have rich scenarios, but they are not necessarily good at managing this kind of customer group. As we gradually move towards 24-24, We will continue to diversify our customer acquisition channels. We have already established a clear competitive edge in the customer segment with borrowing costs from 18% to 24%.
Karen Chee
Meanwhile, there are many traffic platforms that have large, diverse user bases but lack the expertise to engage with users in our target segments. As we adjust our overall loan pricing to below 24%, our embedded finance business will be able to cover more leading traffic platforms. We expect more strategic partnerships to be launched later this year.
Wu Haisheng
will explore the market opportunities of the Fan Xiaowei community. We can see from the data from the Spring Festival that some of the consumer demand is recovering relatively quickly. The increase in consumer demand will increase some of the customers' willingness and ability to borrow money. We will design products that are more in line with their needs for this group of people to seize this opportunity. Of our current users, about 30% are Fan Xiaowei users. We will explore market opportunities to serve a broadly defined SME segment, including SMEs, SME owners, entrepreneurs, self-employed individuals, etc.
Karen Chee
Public data shows consumer demand in certain sectors has recovered quickly since the Chinese New Year. The recovery in private consumption will improve the credit demand and repayment ability of the broadly defined SME segments. To capitalize on these opportunities, we will develop targeted products to better serve their credit needs. Approximately 30% of our current user base are broadly defined SMEs, whose outstanding loan balance only accounts for roughly a little bit higher than 30% of the total. This leaves substantial room for growth.
Wu Haisheng
In the field of financial technology, we will further deepen the pre-processing of financial institutions. This will allow us to obtain a more diversified, risk-free income. In terms of the tech,
Karen Chee
Solution business will further deepen our cooperation with financial institutions through our end-to-end technology solutions. This will enable us to generate more risk-free revenue, serve a greater number of high-quality users with lower pricing through our bank partners, and expand our total addressable market. This year, we will focus on extending the depth of our tech solution services to improve our take rates.
Judy Zhang
With these services in place, we believe that our top solutions industry will improve in terms of both long-volume and revenue quality.
Wu Haisheng
Finally, I would like to say a few words. We are a very young company, only six years old. Our track is still in its early stages. The team is still young. Our original dream of starting a business It's just the beginning. We hope to create a more glorious future than today. This year will be a good year. The policy and support of Hongguan are improving. We also have a good strategy and a good position in the industry. Although we can see that Hongguan has not performed well, we strongly believe that this year will be a year of ups and downs. Finally, I would like to conclude my prepared remarks with a few more thoughts. Our company is still very young, having only been around for over six years.
Karen Chee
The sector that we are in is also at the very early stage of its life cycle. Our team is young and motivated, and our initial entrepreneurial dream has just begun to materialize. We desire to deliver far more brilliant results than what we have achieved today. We believe that 2023 will be a good year for us thanks to the supportive government policies and the recovering macroeconomy combined with our sound strategies and unique positioning. Although the macroeconomic rebound has not been very robust so far in the first quarter, we have great confidence that 2023 will be a year of growth. As we continue to improve our risk performance Expand our customer acquisition channels, optimize our funding cost, and improve our services to broadly define SMEs. We expect a fruitful year ahead. With that, I will now turn the call over to our CFO, Alex Xu, who will walk you through with our financial results for the quarter and full year.
Alex Xu
Thank you, Haisheng. Good morning and good evening, everyone. Welcome to our fourth quarter earnings call. As Haisheng discussed earlier, we delivered another solid quarter in a very challenging microenvironment. COVID outbreak and restrictions created additional headwinds for our operation during the quarter, particularly in December. However, since the reopening in early January, we have experienced some modest pickup in demand for consumer credit, while asset quality noticeably improving. In Q4, we continue to target higher quality and a lower risk user base and drive further improvement in user quality, despite significant micro uncertainties. Key leading indicators, day one delinquency has been on a steady declining trend throughout 2022. It was 4.3% in Q4 versus 4.5% in Q3, and further time is 4.1% in February, To this day, the declining trend continued on the Friday evening. The continued improvement in day one delinquency reflects the year-to-date upgrades and micro-improvement in the new year. 30-day collection rate was 84.7% in Q4 versus 86.4% in Q3. This is a reduction of collection operations and a deterioration of consumer confidence following the timely COVID restriction in November and the surge in COVID cases in December. As the COVID cases peaked in late December and the reopening progressed, by early February, 30-day collection rate has quickly recovered to above the Q3 level. Total net revenue for Q4 was $3.9 billion versus $4.1 billion in Q3 and $4.4 billion a year. Revenue from credit driven service capital heavy was $2.8 billion in Q4 compared to $2.9 billion in Q3 and $2.7 billion a year ago. The slight year-on-year growth was mainly due to growth in unbalanced sheet loan volume we achieved a better utilization of our micro landing license this solid performance was more than enough to offset decline in average pricing of the loan and the decrease in off balance sheet facilitation volume our fellowship facilitated patient revenue take rate declined sequentially due to an adjustment On the year-on-year basis, the take rate declined slightly despite significant price cuts. Revenue from platform service Capital Light was $1.1 billion in Q4 compared to $1.2 billion in Q3 and $1.7 billion a year ago. The year-on-year decline was mainly due to decrease in volume and average prices of capitalized loan facilitation. Q4 and full year 2022, capitalized loan facilitation, ICE, and other technology solutions combined account for roughly 56% of total loan volume. As micro-conditions gradually improve in 2023, we will try to strike an optimal balance between risk, growth, and profitability. As such, contribution from cap light, ICE, and other technology solutions will likely be rent-bound in the near term. In the long run, we'll continue to pursue tech-driven business model while seeking a balance among various forms of non-risk-bearing solutions based on microenvironment and operational conditions. During the quarter, average IRR price of the loans we originated and or facilitated remain stable QMQ, well within the regulatory rate cap requirements. Looking forward, we expect pricing to be relatively stable for the coming quarters. Sales and marketing expenses decreased by approximately 34% sequentially in Q4. During the quarter, we lowered the pace of new user acquisition as we focused more on existing users' engagement given the extremely challenging micro-conditions. We added approximately 1.5 million new credit line users in Q4 compared to approximately 1.7 million in Q3. Unit cost to acquire a new credit line users declined approximately 24% sequentially. The decline in consumer acquisition, customer acquisition cost mainly reflect our continued efforts to drive efficiency in our operation, as well as the soft demand in muted economic activities. As micro condition gradually improve in 2023, we may also adjust the pace of the new user acquisition along the way. Meanwhile, re-energizing existing user base will continue to be a main driver for our growth. As always, we will continue to use lifecycle ROI and LTV as key metrics to determine the pace and scope of our user acquisition strategy to ensure the sustainability and the profitability of our operations. Overall risk profile of our loan portfolio remains stable in Q4 as increased contribution from new loans from high-quality borrowers offsetting negative impacts on old loans by micro uncertainties. Although micro condition appears gradually improving, it may still take some time to be reflected in the consumer's behavior. As such, we continue to take a prudent approach in booking provisions against potential credit loss. Total new provisions for risk-bearing loans in Q4 were approximately $1.7 billion. and the writebacks of previous provisions in the quarter were marginal. Provision coverage ratio, which is defined as total outstanding provisions divided by total outstanding delinquent loan balance between 90 and 180 days, were 456% in Q4 compared to 406% in Q3. With solid operating dollars and stable contribution from capitalized models, our leverage ratio, which is defined as risk-bearing loan balance divided by shareholders' equity, was at a historical low of 3.5 times in Q4, compared to 4.3 times a year ago. We expect to see rather stable leverage ratio for the time being until capitalized contribution resume growth in the future. We generate approximately 1.8 billion cash from operations in Q4 compared to 1.6 in Q3. The sequential increase in operating cash flow was mainly driven by better working capital management. Total cash and cash equivalents was 10.9 billion in Q4, essentially flat Q on Q. Non-restricted cash was approximately 7.2 billion in Q4, also flat sequentially. In the last few quarters, we deployed our cash in day-to-day business, mainly due to micro uncertainties. As economic conditions improve, we may look for opportunities to deploy resources to launch new initiative, develop new technology, and expand service offerings. Non-GAAP net profit was $919 million. and that income for 2022 was $4.21 billion. As we continue to generate healthy cash flow from operations, we believe our program is sufficient to support our business development and to return to our shareholders. In accordance with the dividend policy approved by our board, we declare another quarterly dividend of US$0.16 per ADS for Q4. Finally, regarding our outlook for 2023, 2022 was an extremely challenging year in terms of micro-conditions. While we start to see a tentative sign of economic recovery in the new year, the lingering economic impact from the past on consumer confidence and behavior may still last For a little bit, at this junction, we see modest recovery in consumer credit demand, with growth rate potentially accelerating throughout this year. As such, we expect total loan volume for 2023 to be between RMB $455 billion and $495 billion, representing year-on-year growth of 10% to 20%. As always, this forecast reflects the company's current and preliminary view, which is subject to material change. With that, I would like to conclude our prepared remarks. Operator, we can now take some questions.
Operator
Thank you. As a reminder, if you'd like to ask questions, please press star 11 on your telephone. To cancel requests, please press star 11 again. For those who can speak Chinese, please kindly ask your question in Chinese first, followed by English translation. 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 the queue if you have more questions. Thank you.
Hans
One moment for the first question.
Operator
First question comes from the line of Judy Zhang from Citi. Please go ahead.
Judy Zhang
I want to ask a question about the demand now. We see that since the outbreak of the epidemic, the consumer is very active now. I don't know how strong the demand for the epidemic is now. If it is not very strong, what is the main reason? I will translate my question. So thank you, management, for giving me the first, like to ask a question, you know, like a first place. And my question is regarding on the credit amount. How significant the credit demand recovery do you see since the reopening? And what's the main reason for not seeing a strong recovery? And also we said we saw that management gave a relatively conservative long-haul generation growth guidance for this year, which is like a 10% to 20% young year growth, which is just below the long-haul growth guidance like last year, which is 15% to 25%. What's the key reason behind? Thank you. Thank you.
Wu Haisheng
The recovery of consumption exists in some industries, such as catering and tourism. At the same time, from the recovery of consumption to the improvement of employment rate and the improvement of income will also require a process. Therefore, in terms of the new generation of consumption, whether it is from the data of Hongguan or from the data of corporate management, in the first stage, It may not be able to show an immediate effect. Therefore, at this stage, we cannot think of it as a strong recovery. However, we expect to see a better recovery later this year, such as from Q2 and Q3.
Karen Chee
Thanks, Judy. In terms of the credit recovery, actually we have seen some surge of consumer behavior recovery right after the reopening. And we also see a modest recovery in credit needs. But if we look at different sectors, we have seen some sectors leading the recovery. For example, the restaurant and the tourism. but some of the industries are lagging behind. So we believe it takes some time for the outlook for employment and personal income to eventually benefit from the recovery of consumption and boost the credit amount recovery. So it's not right now for the credit amount to recover from the recovery Yes, to have an immediate recovery for our credit needs. And although the recovery in credit needs is not so robust in the recent two months in Q1, we believe that Q2 and Q3 will be better.
Wu Haisheng
I think our friends who are familiar with it We all know that we are a company that values our promises very much. However, it is a very serious matter, so it is very difficult for us to allow ourselves to fail. So even in the extreme situation of last year, we did our best and did not give up. In the end, we achieved our goal at the beginning of the year. This year, On the one hand, it should be said that it is within the scope of most expectations. At the same time, under the situation of such a need to resume, we are inclined to choose a more cautious attitude to look at um um um It should be a good idea.
Karen Chee
In terms of our guidance, actually we are a company sticking to our promise. We won't allow the situation we cannot deliver our promise. Even in the extreme situation in last year, we still stick to our initial guidance in the beginning of the year, and actually we delivered that. So in terms of the guidance for this year, we think it's within the market expectation. And we tend to take a prudent view for the pace of our long-volume growth in this year. And we believe if the market situation, the macroeconomy, improves further later this year, we will also adjust our growth pace. And we believe this year will be... for the loan volume and the growth rate will be gradually ramping up in the year. And this year will be a good year for us. I hope this answers your questions, Judy.
Operator
Thank you for the questions. We will now move on to the next questions. Next question, we have the line from Yada Li from CICC. Please proceed.
Yada Li
Hello, Director. Thank you for giving me the opportunity to ask this question. I am Li Yada from the central company. Today, I have a few questions that I would like to ask the Director in advance. During the epidemic, we noticed that the company focused more on the storage of users at the customer side. Part of the business volume comes from the supply of high-quality users. Then I'll do the translation. Hello, management. This is Yada from CSCC, and thanks for taking my question. During the COVID pandemic, we noticed that you paid more attention to the operation of existing users in terms of the customer acquisition side. And therefore, the new loan sales were partly from the premium existing users. And I was wondering if the marketing budget will increase in 2023 and 2024. What kind of customer acquisition strategy will you adopt in the future? And what are the main factors that determine whether to increase the marketing budget? That's all. Thank you.
Wu Haisheng
Thank you, Adam. First of all, I would like to talk about some of the elements of our overall growth today. The first is that we have a total of more than 4,200,000 search users. Historically, we have traded more than 2,000,000 users. In other words, we still have more than 2,000,000 users who have not traded with us. This is one number. The other number is that every year, um um um um In the larger number of users, it will take a lot of time. This is also the case in history. We see that most of the proportion that drives our growth is from our big plate. This is about the relationship between these two. Karen, please go ahead.
Karen Chee
Yeah. Thanks, Yada, for your question. So I want to highlight the major growth driver for our business. Actually, we have over 40 million users with approved credit lines and over 20 million borrowers. So you can see that we have over 20 million users who never borrow the money from us. In terms of new customers, actually, we have three to four million new customers acquired Basically, every year. So, it's very crucial for us to spend more time making more efforts in terms of engaging our existing users. And we believe this will be a major driver for the growth of our companies in the future.
Wu Haisheng
From a budget perspective, we actually allocate it to old customers and new customers. We will spend some of our budget on the cost of delivery, and also on the discount for old customers. We will provide them with a better product offer, and we will improve the product experience of our Fan Xiaowei customer group in our own customer group. For a marketing budget perspective, actually we allocate the budget to existing users and new users. For existing users, we will spend money to reach out to them and use some offers to call back them.
Karen Chee
users some better offers to call them back to and we will also improve the user experience of those broadly defined SME borrowers to keep them active on our platform. So we will keep our budget for the engagement of all the users, existing users.
Wu Haisheng
In terms of new products, our basic strategy is to continue to expand the scope of our financial cooperation. Because as our current pricing continues to shift to 24, our partners will cover more and more of these high-quality channels. Therefore, this work still has a lot of work space. And then from a simple investment perspective, we are currently seeing some demand levels um um
Karen Chee
Okay, for the new users, we will expand our network to cooperate with more platforms in terms of the embedded finance business model because our pricing is already below 24%. So it brings us opportunities to connect with more quality platforms to serve a larger number of customer base. So in terms of the market spending, considering the recovery, credit needs recovery in terms of the users' activeness, actually we will first, we will prioritize our work to increase the credit utilization for those new users first, and then we will consider to expand our marketing expanding to acquire new users. I hope it clarifies your question.
Operator
Thank you for the questions. One moment for the next question. Next question, we have the line from Thomas Chong from Jefferies. Please go ahead.
Thomas Chong
我们跟传统银行或者是在短视频那边会不会出现更多的竞争呢? Thanks management for taking my questions. My question is about competition. Going into the future, in terms of the pricing side, how should we think about the competition with banks or short form video? Thank you. 好,谢谢,谢谢他妈。
Wu Haisheng
In terms of competition, our point of view is still the same as in the past. We should say that our product positioning today is relatively competitive in the market. Especially in the 18-24 customer group, we have an excellent competitive advantage. The companies we compete with are actually um um This is the first point.
Karen Chee
First of all, we think we are quite differentiated from the traditional banks and the large internet platforms in terms of the pricing. Actually, we enjoy an absolute competitive edge in terms of serving the pricing segment between 18% to 24%. So we don't believe that we will have a head-to-head competition with those large platforms or traditional banks. On the contrary, we think we can provide additional value to them by cooperating with those platforms.
Wu Haisheng
When we look at some large-scale platforms or some companies that are opening up their own business boundaries and user boundaries, we also find that due to the mutual benefit between us, the increase in the size of the large-scale platform itself and the expansion of user boundaries, in fact, it also makes the cooperation between us more open. Therefore, we are actually also happy to see an increase in the size of the industry as a whole, especially some top platforms.
Karen Chee
So because of these differentiation points, we realized that a lot of internet giant platforms, they want to expand their outreach to different type of customers. So because of our core competence, we can help them to expand their customer base and increase their credit product, the loan volume to serving the credit product to their users. So we believe this is what we can, the additional value can provide to those platforms.
Wu Haisheng
Thomas, let me see if I answered your question. Thank you.
Karen Chee
Yeah, I hope this answers your question, Thomas.
Operator
Thank you. Thank you for the questions. Next question comes from the line of Hans Fan from CLSA. Please go ahead.
Hans Fan
Okay. Thank you, Mr. Guan, for giving me the opportunity to ask a question. I would like to ask a question about the loan issue. Mr. Han mentioned that this year's situation should be before low and after high. I would like to ask if we can elaborate on the rhythm of the loan issuance according to the season. What kind of situation will it be? This is the first related question. The second is related to this. If we divide these two pieces of real estate and real estate, how do we plan to make a step this year? Because our current real estate is already close to 60. But last year, the 4th quarter was a little bit lower. So I want to know how the situation is this year. And then we will talk about it for a long time. Do we have a goal? Is the ratio of real estate to how much is it almost? Or is it getting higher and better? So this is Han Stan from CSA. I got a question related to the loan outlook because the management was mentioning about this year is going to be a better part in the second half. So I was wondering what's the sort of lending pace across different quarters and also in terms of the split between Captain heavy and platform services. How do you think about the split this year? Do we have a target for, um, for the split in a longer run? Thank you very much.
Wu Haisheng
Thank you. Um, um, um, In terms of the quarter long meditation pace,
Karen Chee
We expect it will ramp up throughout the year, which means the loan volume will grow quarter by quarter because we believe the credit needs will benefit from the recovery of the consumer's behavior. So the loan volume in the second half of this year will be increasing compared to the first half.
Wu Haisheng
The proportion of new assets, we consider several aspects of the problem. The first is that we are a financial technology company in the long term, so we are pursuing to improve the proportion of the new asset model. In the short term, we will have to balance the risk of the red light environment and a balance in financial results. In terms of this year, our risk assessment should be a very steady one. In terms of commercial revenue, it will also be relatively healthy. Therefore, this year, we will go to China to see and assess the red light, assess the risk performance, and see if it can be further improved. However, I don't think there will be a big change in the overall share ratio of our business this year. However, our next step is to pursue an increase in the share ratio. We still hope to achieve more from the development of our research and technology business. Our research and technology business today Okay, in terms of the contribution from our SLI or the platform service business model,
Karen Chee
First of all, we believe this is our long-term strategy to develop our platform service business model because we always position ourselves as a fintech company. So in the long run, we believe the low-volume contribution from the capital light will further increase. But if we look at a short term, we will actually adjust to the low-volume contribution from the asset-light business model based on our assessment of the macro environment and the credit risk associated with the macro. In terms of, and we want to, we will adjust the contribution to balance the risk and the profitability of our business. We believe this year will be a stable year and we want to achieve a healthy profitability for our business. So this will be an overall judgment. We expect the overall contribution from the capital light business will remain stable in this year. But in the next step, we will further develop our tech solution business because it's a pure tech business model. So as our customer base grows, our loan volume will also increase. And we expect the contribution from the Capital Light or platform service will further increase in the future.
Alex Xu
Hans, I just want to add a couple points regarding the growth rate for this year. We noticed that in the recent few days, some of the companies related to the consumer market reported their earnings. They gave a pretty somewhat disappointing outlook for the first quarter in terms of year-over-year growth. And we look at it, although last year Q1 was a relatively normal quarter, meaning there's not really much disruption in operations in last year's Q1. You know, the comp is not that easy. But even with that kind of not so easy comp, we are expecting year-over-year growth in terms of volume. right off the plate of this year. So, you know, and then along the way, as we move forward for the remainder of the year, we, as Hashim mentioned, we may see gradual acceleration of growth quarter by quarter on the year-over-year basis.
Hans
That's the point I want to add. Thank you.
Operator
Got it. Thank you for the Thank you for the questions. In the interest of time, we will now take the last question. One moment for the last question. Lastly, we have the live from Alex Yeh from UBS. Please go ahead.
Alex Yeh
Thank you for your question. I have two follow-up questions about the growth of this year. First of all, if we look at the current 15% of the Chinese position, what is the assumption behind it? For example, does the demand for consumer modernity still regard it as a more modest recovery? And do we need to raise some of the risk on the risk appetite to achieve such a goal? The second question is, Translate my question to follow up on your loan guidance for this year. So if we look at the midpoint of your guidance of 15%, Can we ask what are the underlying assumptions here? For example, do you still frame the consumer credit recovery as the modest one? And do you need to increase your risk appetite in order to achieve this new point target? And secondly, for the higher end of your target at 20%, I'm just wondering what are the things or data points you need to see for you to be more comfortable to go forward to that higher end and what are the drivers? Thank you.
Karen Chee
Okay, I will ask this question to our CIO, Zhen Yan.
Zhen Yan
Yes, from our risk profile, we are still maintaining a relatively cautious risk assessment. Therefore, we actually saw risk indicators improve further in 2023. For example, in February, the day one rate has dropped to 4.1%. The 30-day recovery rate will be back to a higher level than last year. And the data we saw in March uh, uh, to gradually recover, and to gradually increase the rate of return and income, and then respond to the supply and demand of the present demand. It is also a steady growth under the premise of risk reduction. So if the timing is right, for example, we see that the current demand of a client is rising, or the risk is a very stable good turn, then we will try to adjust our way of trading.
Karen Chee
Okay, from risk appetite perspective, we will take a prudent credit assessment approach in this year, so we can see the further improvement in our risk performance in 2023. For example, our day one delinquency rate in February has come down to 4.1%, and the 30-day collection rate also recovered to a level, the highest level in last year. in February, and we believe in March those two indicators will further improve. So in this year, overall risk performance will be better than last year. Our guidance is based on the assumption that the recovery of the macro environment will improve the outlook for the employment and the personal income and eventually benefit the credit needs recovery. And at the same time, we believe there is an assumption that our risk performance will continue to improve down the road. So this year, if the things are getting better, for example, the recovery of the credit needs and the risk performance accelerate in this year, we will also consider to adjust our growth pace.
Hans
This is our answer.
Operator
Thank you very much. With that, I'd like to hand the call back to the management for closing.
Alex Xu
Okay, thank you again, everyone, for joining us for the meeting. And if you have additional questions, please feel free to contact us offline. Thank you. Bye-bye. Thank you.
Operator
That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.
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