Qfin Holdings, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Kewfin Holdings fourth quarter and full year 2025 earnings conference call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you would like to ask a question, you'll need to press the star key followed by the number one on your telephone keypad. Please also note that today's event is being recorded. At this time, I'd like to turn the conference over to Ms. Karen Gee, Senior Director of Capital Markets. Please go ahead.

Thanks, Darcy. Good morning and good evening, everyone. Welcome to QFIN Holdings Fourth Quarter 2025 Earnings Conference Call. Joining me today are Mr. Wu Haisheng, our CEO, Mr. Alex Xu, our CFO, and Mr. Zheng Yan, our CIO. Before we start, I will quickly cover the Safe Harbor Statement. Today's discussions may contain forward-looking statements. particularly statements about our business and financial outlook that are subject to risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements. Please refer to the safe harbor statements in our earnings release. On this call, we will also discuss certain non-GAAP financial measures. Please refer to our earnings release. which contains a reconciliation of the non-GAAP financial measures to GAAP financial measures. Now, I will turn the call over to Mr. Wu Haisheng. Please go ahead.

Hello, everyone.

Thank you for joining us today. In 2025, China's consumer finance industry underwent a systemic restructuring under regulatory guidance. the introduction of several key policies, including new loan facilitation rules, window guidance for consumer finance companies, and guidelines on comprehensive financing cost management for micro lenders. In the near term, these measures tightened market liquidity, which in turn suppressed credit demand and put unprecedented pressure on both loan growth and risk management across the industry. Over the longer term, However, we expect the ongoing consolidation will facilitate a healthier and more efficient market environment, creating broader opportunities for leading credit tech platforms. We have proactively pivoted our strategy to embrace regulatory changes by putting compliance and risk management at the core of our strategy. We concluded 2025 with resilient financial and operational results. As of the end of 2025, our AI-powered credit decision engine and asset distribution platform served 167 financial institutions, delivering intelligent digital credit services to over 63 million credit line users on a cumulative basis. The rollout of new loan facilitation rules in Q4 led to a further contraction in market liquidity. In response to the dynamic market conditions, we further tightened our risk standards while continuing to optimize our business structure. As a result, total loan facilitation and origination volume on our platform decreased by 21.8% year-over-year to RMB 70.3 billion in the quarter. Non-GAAP net income in Q4 decreased by 45.7% year-over-year to RMB 1.07 billion, and non-GAAP EPA DS on a fully diluted basis decreased by 39.8% year-over-year to RMB 8.23. We delivered on our previously issued Q4 guidance despite the challenging market environment. Turning to the full year, our performance remained resilient and stable overall. Total loan facilitation and origination volume reached approximately RMB 327.1 billion, representing a year-over-year increase of 1.6%. Non-GAAP net income declined by 1% year-over-year to RMB 6.35 billion, while non-GAAP EP ADS on a fully diluted basis increased 10.4% year-over-year to RMB 46.8. In the second half of 2025, the consumer credit industry saw a sector-wide risk elevation amid significant business adjustments. Our risk metrics also experienced notable volatilities. Although leading risk indicators for new vintages improved meaningfully in Q4, Legacy portfolios continued to face headwinds. Our C2M2 ratio, which measures the outstanding delinquency rate after 30 days of collection, increased to 0.97%, the highest recorded since COVID in 2020. Against this challenging backdrop, we prioritized risk management and promptly adjusted risk strategies across the entire credit lifecycle to ensure sustainable, high-quality growth. First, we continued to strengthen the acquisition and engagement of high-quality users. By optimizing our credit approval framework and pricing strategies, we drove higher utilization and retention among high-quality borrowers. The proportion of loan volume from this group rose by 6 percentage points sequentially in Q4. At the same time, we enhanced our ability to detect and guard against multi-borrowing risks. For example, when our models detect that a user is submitting loan applications across multiple platforms within a short period, the system interprets this as a sign of potential financial stress and automatically triggers an alert. We would take proactive measures, such as lowering credit limits or restricting loan disbursements, to mitigate potential before they materialize. These enhancements improved our area on the curve or AUC by 10% to 15%, reflecting a stronger ability to differentiate risk tiers. With this dual approach, we maintain stable originations to high quality borrowers while strategically contracting higher risk segments, resulting in a meaningfully improved asset mix. As a result, our FPD30 a leading risk indicator for new loans, declined by approximately 18% sequentially in Q4. Second, on the collection front, we optimized resource allocation toward high-performing partners to boost productivity. By refining borrower profiling analysis, we improved our ability to assess borrowers' willingness and capacity to repay, allowing for more tailored collection strategies As a result, our 30-day collection rate improved marginally month over month in both November and December, indicating steady recovery in collection efficiency. In late December, the PBOC introduced a one-time credit remediation policy, which allows eligible individuals to fix damaged credit records by 31 March 2026. We have seamlessly incorporated this policy into our collection strategy matrix to further support asset recovery. This has partially incentivized repayment intent among borrowers, and we expected to have some positive impact on our collection efforts in Q1. Despite a challenging industry environment, our risk strategies continue to deliver tangible results. FPD30 for December vintages was close to our historical lows over the past two years. As new loans constitute an increasing share of our portfolio, our CM2 ratio remained broadly stable after peaking in October. As of January 2026, supported by a continued asset mix optimization and runoff of legacy assets, C2M2 ratio declined by 8.2% month-over-month from December. Based on our recent observations, We expect C2M2 ratio in February to broadly return to the levels seen in July and August 2025. Looking ahead, given the uncertainty around the regulatory environment and industry liquidity in the coming months, we will continue to dynamically adjust our risk strategies to bolster business resilience amid market volatility. On the funding front, underpinned by our diversified financial partnerships and strong market standing, we achieved a modest reduction in ABS issuance costs despite liquidity contraction in Q4. As ABS comprised a larger proportion of our risk-bearing funding mix, our overall funding costs fell by another 20 basis points from Q3 to a historical low. For full year 2025, total ABS issuance grew 40.8% year-over-year to RMB 21.4 billion, while the average issuance cost declined by 72 basis points from last year, supported by our robust asset quality and long-standing partnerships with financial institutions. Looking into 2026, the funding environment remains challenging, which may cause short-term volatility in our funding costs. However, our track record of consistent asset performance has enabled us to build strong, trusted partnerships with financial institutions, ensuring a well-positioned funding access relative to industry peers. Looking ahead, we will continue to diversify our funding channels and optimize our funding structure to ensure stable liquidity at competitive funding costs amid market volatility. In user acquisition, we maintained a prudent approach with a continued focus on high quality users. At the same time, we proactively expanded into lower pricing borrower segments to further optimize our customer mix. While these segments entail slightly higher upfront acquisition costs than those of our mainstream segments, their demand tends to be more stable over time and their risk profiles are more predictable. We also optimized our embedded finance channel mix by phasing out underperforming channels and concentrating on high-value channel partners. As a result, FTD30 for new loans from embedded finance channels improved sequentially in both November and December. In 2026, our priority remains increasing the proportion of high-quality users in our acquisition mix. At the same time, we will further refine underwriting and pricing strategies to improve acquisition efficiency and maintain a relatively stable customer acquisition cost. Our technology solutions business exhibited strong growth momentum in 2025 with total loan volume up by approximately 448% year-over-year. Our business scale has reached a new milestone with outstanding loan balance approaching RMB 11.7 billion by year-end. Built on our deep technological capabilities and fintech expertise, Focus Pro, our proprietary lending solution tailored for financial institutions, helps banks serve customer segments priced typically between 3% and 12%. By applying digital and intelligent tools, across the entire credit lifecycle from customer acquisition and marketing to product design, risk identification, and process optimization. Focus Pro enables banks to expand beyond traditional customer segments and efficiently serve the financing needs of underserved small businesses and individuals. This initiative not only broadens our business scope, but also underscores our commitment to supporting the real economy and advancing financial inclusion. Under our AI Plus Credit strategy, our two core AI agents, the AI Loan Officer and AI Credit Officer, have delivered encouraging early results across multiple use cases. As these products continue to evolve, we plan to gradually extend them beyond retail credit into a broader set of business scenarios. Looking ahead to 2026, we will remain committed to our one-call, two-win strategy, strengthening our operating capabilities and enhancing resilience under evolving regulatory framework. For our credit business, serving high-quality users will remain a long-term strategic priority. By leveraging dynamic pricing and superior user experience, We will continue to grow the proportion of high-quality users within our customer mix, maximizing customer lifetime value and ensuring stable asset quality. We are witnessing a regulatory-driven restructuring that will likely accelerate industry consolidation over the next two years. As a leading credit tech platform, we embrace this evolution as an opportunity to upgrade our core competencies and build the foundation for sustainable long-term growth. By navigating this cycle, we expect to emerge as a stronger and more resilient industry leader with deeper structural moats. Our technology solutions business is entering into a new phase of growth. After two years of refinement, its value proposition has been validated through extensive institutional partnerships. Leveraging our AI technologies and full lifecycle credit expertise developed over the years, we are integrating these capabilities deeply into banks' inclusive lending value chain. Through flexible collaboration models across a diverse range of business scenarios, we help financial institutions strengthen their in-house risk management and operations capabilities while advancing our shared mission of financial inclusion. 2025 marked the successful launch of our international business. This year, we will actively pursue opportunities across several overseas markets to accelerate global expansion, including Europe, Latin America, Southeast Asia, and so on. Our vision is to become a globally respected fintech company that leverages technology to promote financial inclusion and elevate the quality of financial services worldwide. We look forward to sharing more progress in the coming quarters. Finally, on capital allocation, in 2025, we returned approximately US$200 million in dividends and US$680 million via share repurchases, representing 98% of our 2024 gap net income. Since the start of 2024, we have cumulatively repurchased 40 million ADSs, equivalent to 25.4% of our outstanding shares at the start of 2024. Looking ahead to 2026, we will remain committed to delivering decent shareholder returns through a progressive dividend policy. Capital allocation efficiency is one of our top priorities. Going forward, we will continue to strike a balance between growth initiatives and shareholder returns to deliver sustainable long-term value for our shareholders.

With that, I will now turn the call over to Alex.

Thank you, Haisheng. Good morning and good evening, everyone. Welcome to our fourth quarter earnings call. We closed the year in a drastically changing operating environment. challenging micro conditions combined with intense regulatory scrutiny put significant pressure to the consumer finance industry, causing noticeable liquidity squeeze and rising risks in Q4. Our operational focus has shifted toward efficiency improvement and cost reduction, as well as a continuous effort to manage risk exposure. Total net revenue for Q4 was $4.09 billion, versus $5.21 billion in Q3 and $4.48 billion a year ago. Revenue from credit-driven service, capital-heavy, was $3.43 billion in Q4 compared to $3.87 billion in Q3 and $2.89 billion a year ago. The year-on-year increase was mainly due to the increase in unbalanced sheet loans more than offsetting the decline in off-balanced sheet loans. The sequential decline was also due to significant lower off-balance sheet loans. Overall funding costs declined 20 pips Q on Q as we rely on less external fundings in Q4. Revenue from platform service capital light was $660 million in Q4 compared to $1.34 billion in Q3 and $1.59 billion a year ago. The year-on-year and sequential decline was mainly due to significantly lower ICE contribution in response to the regulatory changes and the lower ICE take rate due to the rising risks. During the quarter, average IRR of the loans we originated and or facilitated declined about 150 bps versus prior quarter. Looking forward, we may continue to see gradual decline in average pricing as we focus more on high-quality and low-priced users in the coming quarters. Sales and marketing expenses declined 17% Q1Q. We took a more cautious view in customer acquisition given the higher overall risks. We added approximately 1.45 million new credit line users in Q4 versus 1.95 in Q3. we will likely maintain controlled pace to acquire new users in the near term in response to the changing regulatory directions and still uncertain micro condition. 90-day delinquency rate was 2.71% in Q4 compared to 2.09% in Q3. Day one delinquency rate was 6.1% in Q4 versus 5.5% in Q3. 30-day collection rate was 84.1% in Q4 versus 85.7% in Q3. Another key metric, C-M2, which represents the outstanding delinquency rate after 30-day collection, was 0.97% in Q4 versus 0.79% in Q3. With our latest risk-tightening measures in place, we start to see marginal improvement in overall risk performance in recent months. Given current market conditions and regulatory changes, we continue to take a prudent approach to book provisions against potential credit losses. Total new provisions for risk-bearing loans in Q4 were approximately $1.92 billion versus $2.58 billion in Q3. The decline in new provision was mainly due to lower risk-bearing loan volume and improved new loan risk queue-on-queue. Writebacks of the previous provision were approximately $274 million in Q4 versus $785 million in Q3. Provision coverage ratio, which is defined as a total outstanding provision divided by total outstanding delinquent risk-bearing loan balance between 90 and 180 days were 481% in Q4, while decline sequentially is still well above a historical average. Non-GAAP net profit was $1.07 billion in Q4 compared to $1.51 billion in Q3 and $1.97 billion a year ago. The significant year-on-year and sequential decline in profitability was mainly due to lower loan volume, higher credit costs, and the deleveraging in operations. Non-GAAP net income per fully diluted ADS was 8.2 RMB in Q4, which brought non-GAAP EP ADS for the full year of 2025 to RMB 46.8, a year-on-year increase of 10.4%. As substantial share count reduction continued to create EPADS accretion. Efficient tax rate for Q4, effective tax rate for Q4 was 11.3% compared to our typical ETR of approximately 15%. The lower than normal ETR in Q4 was mainly due to the typical year-end adjustments. Leverage ratio, which is defined as the risk-bearing loan balance divided by shareholders' equity was 2.7 times in Q4 versus three times in Q3 due to lower risk-bearing loan balance. We expect to see the leverage ratio fluctuated around this level in the near future. We generate approximately 3.15 billion cash from operations in Q4 compared to 2.5 billion in Q3. Total cash and cash equivalent and short-term investment was $10.72 billion in Q4 compared to $14.35 billion in Q3. During the Q4, we in aggregate repurchased approximately 8.7 million ADSs in open market for a total amount of approximately $168.8 million inclusive of commissions at the average price of $19.4 per ADS. As such, we had completed substantially all of the $450 million 2025 share repurchase plan combined with the $227 million share repurchase we completed in connection with our CB issuance in March 2025. For full year 2025, we have in aggregate repurchased approximately 21.1 million ADSs for a total amount of approximately US$677 million inclusive of a commission at the average price of US$32.1 per ADS, representing 14.8% of our total share outstanding at the beginning of 25. In Q4, we took market opportunities to start to buy back our outstanding CBs as of March 17, 2026, we had repurchased approximately US$460 million in aggregate principal amount of the CB for US$399 million in cash on open market and in off-market private negotiated transactions. Approximately US$230 million in aggregate principal amount of the CB remains outstanding. The repurchase of the CB allowed us to reduce our long-term debt application and associate interest payment at the favorable terms, potentially strengthening our financial position and flexibility, and meanwhile realizing cash gains. In accordance with our current dividend policy, our board has approved a dividend of the U.S. dollar 39 cents per Class A ordinary share, or US dollar 78 cents per ADS for the second half of the 2025 to holders of record of Class A ordinary share and ADSs as of close of the business on April 22nd, 2026, Hong Kong time and the New York time respectively. We will continue to optimize our capital allocation strategy to reflect the changing micro dynamic to support business initiative and to return to the shareholders. As we maintain a progressive DPS dividend policy, we will also opportunistically look into an entry point to resume share repurchase when micro and regulatory environment become more stable and settled. Finally, regard our business outlook. While we start to see some tentative signs of improvement in some operating metrics, micro uncertainty and regulatory pressure persist in the foreseeable future. We will continue to take a cautious approach in business planning for 2026 and focus on efficiency and cost-cutting. For the first quarter of 2026, the company expects to generate non-GAAP net income between RMB $900 million and RMB $950 million, representing a year-on-year decline between 51% and 53%. This outlook 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.

Thank you. If you would like to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your question. For those who can speak Chinese, please start your question in Chinese, followed by an English translation. To allow enough time to address everyone on the call, please keep it to one question and a follow-up, and return to the queue if you have any more questions. Thank you. Your first question today comes from Richard Xu from Morgan Stanley.

Please go ahead.

Thank you, Mr. Guan. There are a series of monitoring policies that continue to guide the downfall of financing costs. As for the trend of the average loan price, how should we look at it? In the long term, what level will the price reach? In this case, what level will the net take rate reach when it reaches the normalization? The second problem is that Basically, two questions for me. One is considering the regulatory efforts to reduce the funding loan yield. What are some of these medium-term, long-term outlook for the pricing of loans? And also, what are the average or sustainable net take rate levels going forward? The second question is the payroll return. How do you balance dividends and buyback, and particularly whether the dividend is sustainable? Thank you.

Okay. Let me take the first one, and Alex can take the second one. For the first one, over the past year, a series of new regulations and window guidance were rolled out to driven down overall borrowing costs. As the industry evolved, small platforms with high pricing are quickly exiting the market. In the long run, these policies will reduce the burden of barriers and create a healthier market. This will lead to industry consolidation and support the growth of the consumption sector. Following the regulatory guidance, we are proactively focusing on high-quality users In the first quarter, our average pricing dropped by 140 basis points. In 2026, we will continue to build our strength in serving these high-quality users. By using flexible pricing and better user experience, we can gradually increase the portion of high-quality users in our customer mix. thus ensuring stable asset quality and better LTV. As we improve our asset structure, we expect some room for further downward adjustment in our average pricing for 2026. In the medium to long term, our pricing will depend on changes in the market and regulatory environment. In terms of the take rate, Our Q4 take rate was 3.5%. Excluding one time item, the operational take rate was slightly below 3%. We believe there is still substantial room to optimize this through better risk management and efficiency improvement. Since Q4, our proactive measures have already shown clear results. Looking ahead, If the regulatory environment stays stable, we aim to maintain a tick rate of about 3%.

Okay. Richard, I will take the shareholder return part. As you know, we have always been putting the shareholder return as one of the top items when we're making the critical decision making in the company. In 2025, the cumulative dividend payout and the share buyback were close to $200 million and $680 million, respectively. That basically gave us a total payout ratio, about 98%, as a percentage of our 2024 gap net income. And since the beginning of 2024, we have brought back approximately 40 million ADSs in total, accounting for about 25.4% of the total share count at the beginning of 2024. This payout ratio, as well as the combined yield, is probably still the highest among the Chinese ADRs. In the future, as I mentioned in the prepared remarks, we intend to maintain the progressive EPS policy in the foreseeable future so that can give the shareholders an expectable kind of dividend yield with that policy support. Regarding the buyback, I think at this point I would say we take a little bit more cautious or view approach for this, just given what's happening in the microenvironment and also as well as the regulatory dynamic there. But we're open-minded, and as you know, we still have an outstanding buyback program not being fully utilized yet. And if the opportunity arises, meaning when the micro-condition becomes more stable and the regulatory environment becomes more settled, we will restart the buyback program. Some people are concerned that with the buyback of the CVs, we sort of used up all the CV kind of proceeds at this point. But in reality, if you look at our balance sheet, we still have plenty of cash on the balance sheet to support any of the potential shorter return programs there. So for the longer-term view, I think we will continue to balance between invest in the long-term business growth and shareholder returns, and to maintain a decent ROE and create long-term values to the shareholders.

Thank you. Thank you. Your next question comes from Emma Zhu from Bank of America Securities.

Please go ahead.

Thank you for giving me this opportunity to ask a question. So the first question is about the risk. What has been the trend of risk indicators so far this year, and how do you foresee the future trend of risk changes? The second question is about business structure. Given the latest market environment, how should we weigh the choice between S-heavy and S-light business models? What is your outlook on the proportion of S-heavy versus S-light structure for this year?

I will probably refer the first risk question to our CRO, Mr. Zhang.

好的,那我先用中文回答一下风险指标的问题, 然后请我们同事帮忙翻译一下。 整个Q4由于流动性大幅收紧, 行业风险还是面临前所未有的压力的。 我们在前端准路和带后催收两个方面, 也采取了一系列积极的一些措施, 目前已经看到了有比较明显的成效。 On the front and back side, we quickly tightened the pricing and sales performance, and greatly enhanced the identification of multi-head risks. We did some isolation in advance of high-risk customers, and increased the acquisition of high-quality customers, and achieved the optimization of customer structure. On the back and back side, we also quickly made adjustments and adopted a more active collection strategy. One is the strategy front, which is to introduce artificial collection to high-risk customers as soon as possible. The second is accurate shrinkage, Okay, I will do the brief translation.

So in the fourth quarter, the industry faced huge pressure due to tightened liquidity. We took proactive steps in both underwriting and collections, and by far, we have seen clear results. For underwriting, we quickly tightened our pricing and credit limit standards. We also improved our ability to identify multiple platform borrowing risks. This has helped us exclude high-risk groups early and focus more on high-quality customers, which has largely improved our customer structure. For collection, we adjusted our strategy on a timely basis. First, we started manpower intervention in collection earlier for high-risk users. Second, we offered fee discounts or waivers for customers with temporary financial difficulties. Third, we increased incentives to boost the performance of our teams.

基于这些努力,我们看到四季度新放款的FPD30风险指标环比有18%的下降。 Among them, the FPD30 in December has reached the best level in the past two years. Entering the year of 2026, this trend is still ongoing. The FPD7 index of January in January of 2026 has already had a complete performance. On the basis of December, it has improved by 10% further. It has also reached the best level in the past two years. As the new loan ratio gradually increases, the risk of the big plate is also gradually improving. Thanks for this effort.

our FTD30 for new loans in Q4 dropped by 18% Q on Q. The FTD30 for December cohort was close to its best level in the past two years. This positive trend continues in 2026. Our January data shows that the FTD7 improved by another 10% from December, also reaching a two-year best. As new loans make up a larger share of our portfolio, our overall risk is improving. And we also see our CM2 ratio peaked in October and stayed stable in November and December. In January, the CM2 ratio dropped by 8.2% month-on-month. Based on current change, we will expect February CM2 ratio to return to the levels of July and August 25.

当然目前宏观环境还在发生很多的变化。 Of course, the macro environment is still undergoing changes with ongoing industry adjustments.

We will closely monitor early risk signals and remain flexible to adjust our strategies as the environment changes. Thank you.

And Emma, I will take the second part regarding the business mix. As you know, the capital line and capital heavy have their own sort of pros and cons. We normally will adjust the mix between the two depending on the micro condition and outside environment. Normally in the up cycle, we intend to do more capital heavy because it's generally speaking generating higher return or higher take rate. Where in the down cycle, we prefer offloading more risks, so we prefer the cap-life side of the model. Consider that given the current regulatory and the microenvironment, we probably want to have more flexibility and more diverse risk. And so this year, meaning 2026, we probably will directionally moving toward capital light a little bit. In 25, for example, on the long volume side, total cap light was about 44% as a total volume in 25. This year, most likely, we will see this number moving up. But that said, we're not going to set a fixed target in terms of mix between the light and heavy. It's a more like a dynamically changing target from time to time given the market condition there.

Thank you. Thank you. Your next question comes from Alex Yeh from UBS. Please go ahead.

Thank you for giving me this opportunity. There are two questions. The first question is about the ICE business. We see that the referral service fee has decreased by 85%. Can you tell us the reason behind it and what changes have occurred to the take rate of the ICE business after the new rule of law was passed? I have two questions here. First one is about the ICE business. So we have seen the Q4 referral service fee was down by 85% Q1Q. Could you help us understand the reason behind and with the new loan facilitation regulation, so how should we expect this ICE business to take way to evolve going forward and the business outlook? Second question is about funding cost. So with the new microloan regulations, setting a four-time LPI cap on loan pricing, so how does that impact our ABS insurance plan for this year and the implication for our over-branded funding cost for the year? Thank you.

Okay, Alex, I will take the first part, and Haisheng will take over the funding cost side of things. So, yes, the first quarter, our revenue contribution from ICE declined pretty meaningfully. Basically, there are two factors to drive that. First of all, the volume. You know, because under the new regulatory setting, the funding partners in the ICE segment become much more cautious in terms of providing funding. And also, the ICE targeted segment overall in the industry declined significantly. And this caused our ICE volume decline by 41% Q1Q. And ICE only account for roughly 20% of our total loan volume in Q4. Secondly, the second driver is actually the take rate decline. As you know, most of the ICE users are what we consider the marginal customers in terms of the risk level tend to be higher than other users. To maintain a sustainable business relationship with those ICE partners, we basically proactively lowered our take rate a little bit and to ensure the reasonable conversion rate, and also to ensure the partner still can run a sustainable business. So, although a short-term look at it, we sacrificed some of the take rate there, but longer term I think it's a good way to maintain a sustainable relationship and sustainable business in terms of ICE in the challenging period. Looking forward, we still believe ISE is a very important part of our platform strategy. We want to serve a broader user base as possible. By using different models, we can match assets with the right funding in the most efficient way. Even though the pricing dynamic changed quite significantly, Still, the ICE segment can still serve some of the users in complying with the current pricing environment. Our future focus is to explore the diversity in need of the long-tail customers while staying in compliance. By offering more value-added services, we will improve their stickiness to the platform and long-term value. This will ensure the long-term profitability of our ICE businesses. Haisheng.

Okay. Let me tell you a second question about funding cost. Given the macro and regulatory environment uncertainty this year, the market liquidity remains tight. This is putting pressure on our funding cost. First, regarding ABS funding cost, the implementation of 4xLPR are making investors more cautious. They may ask for higher returns on microloan assets. As a result, both our insurance amount and funding costs will face some uncertainty this year. Second, regarding funding of loan facilitation business, many financial institutions have received regulatory guidance to be more careful about deploying capital into this segment. This will also lead to a tighter funding supply to some extent. In terms of funding structure, if our ABS insurance goes smoothly, the proportion of our unbalanced shared loan will remain at a steady level. and we expect the overall funding structure to stay stable as well. Our strategy is to continue expanding our financing channels and optimizing our structure. We aim to keep our funding supply stable and our costs competitive throughout the whole year. Thank you.

Thank you. Your next question comes from Cindy Wang from China Renaissance. Please go ahead.

谢谢管理层给我这个提问的机会。 那我这边有两个问题。 第一个想请教就是说, 刚刚管理层有分享了这个CM2的水平在一二月有明显的改善。 那我们是否可以判断这个风险已经起稳了? 然后管理层对于今年Q2以及以后的放款量的增长是怎么展望的? Thanks for taking my questions, and I have two questions here. First, management mentioned that the CM2 level improved significantly in January and February. So can we conclude that the credit risk has stabilized? And what is management's outlook for new loan volume growth in Q2 this year and beyond? Second, the question is related to the overseas market expansion strategies. Please give us an update on the latest developments in overseas markets, especially in the U.K., Are there any plans to enter new markets this year? Thank you.

OK, Cindy. Yes, indeed. The risk control measures we took in Q4 have shown clear results recently, especially in February. The C2M2 ratio returned to the levels of last July and August. However, we need some more time to see if this improvement is sustainable. In addition, as the industry-wide adjustments continue and regulatory uncertainty remains, we will keep a prudent risk strategy and focus on quality of loans. At the same time, we are working to attract higher quality users and improve our operational capabilities to serve them better. To our health needs, and sustainability of our business is more important than just volume growth. We have seen positive signals from the recent two sessions regarding consumption and credit support. In our view, the underlying logic of consumer credit-driven consumption remains unchanged. After the industry consolidation, we will become stronger and better positioned to capture long-term growth opportunities in the market. And in terms of overseas business, yes, overseas business will be a vital part of our company's strategy to drive long-term growth and a diversified business structure. By reshaping our business mix, we will become more robust and defensive. Given today's market environment, this strategy is especially meaningful. Therefore, we will firmly invest more sources and speed up our pace of overseas expansion. In 2025, we took the lead and entered the material market. We used small-scale volume to train our risk models and build our market know-how. This has already achieved early results. At the same time, we conducted extensive and deep research on multiple global markets. We have selected several markets for preparation, and one of them has started operations in 2026. In 2026, we will actively explore multiple markets, including both mature and developing regions, such as Europe, Latin America, and Southeast Asia. These two types of markets have different pros and cons. Mature markets have higher entry barriers, but they have established credit systems and higher regulatory uncertainty. Developing markets may not have perfect credit data yet, but they have a huge market scale and lower barriers to enter. In this market, there is also a clear path to profit. Therefore, we will balance our resources between both types of markets. We expect our overseas teams to grow to about 200 people by the end of the year. Over the past two years, based on our extensive research and studies in different overseas markets, we are extremely confident that our technology and risk model are best in class. With our deep-credited know-how, AI and big data-driven technology, and a strong balance sheet, we are fully committed to our overseas strategy and aim to take a front leap to become a leading global credit tech company in the foreseeable future.

Thank you. Thank you. There are no further questions at this time.

I'll now hand back over for any closing remarks.

Sure. Thank you again for everyone to join the conference. If you have any additional questions, please feel free to contact us offline. Thank you. Have a good day.

That does conclude our conference for today. Thank you for participating. You may now disconnect.