CNFinance Holdings Limited

CN Finance First Quarter 2021 Financial Results Conference Call. All participants will be in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I'd like to turn the conference over to Mr. Matthew Liu. Please go ahead.

Good morning and evening and welcome to the CN Finance First Quarter 2021 Financial Results Conference Call. In today's call, our CEO, Mr. Jai, will walk us through the operating results followed by the financial results from our CFO, Mr. Li. And after that, we will have a Q&A section. Before we start, I would like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended. and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as will, expects, anticipates, future, intents, plans, believes, estimates, target, going forward, outlook, and similar statements. Such statements are based upon management's current expectations and current market and operating conditions. and relate to events that involve known or unknown risks, uncertainties, and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance, or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties, or factors is included in the company's filings with the US Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law. Now, please welcome our CEO, Mr. Jai. Sorry, our CEO is a little blurry. We're trying to reach him. We're still trying to reach our CEO, Mr. Zhai. Mr. Li will walk us through the financial part first, followed by the operational results from Mr. Zhai. Please welcome our CFO, Mr. Li Ning. Okay.

Thank you, everyone, for joining us today. I will first walk you through our first quarter of 2021 financials. We believe year-over-year comparison is the best way to review our performance. Unless otherwise stated, all percentage changes I'm going to give will be on that basis. Also, unless otherwise stated, all numbers I'm going to give will be in RMB. First, total loan origination volume was $2,841.8 million during the first quarter of 2021, among which 7% was first lien and 63% was second lien. Total outstanding loan principal was $10.3 billion as of March 21, 2021, with $8.7 billion under collaboration model and $1.6 billion under the traditional facilitation model. Interest and financing service fees on loans decreased by 13.7% to $422 million from $489.2 million, primarily due to lower interest rates on loans facilitated in an effort to comply with the rules and regulations issued by relevant PRC regulatory authorities, including the decisions of the Supreme People's Court to amend the provisions on several issues concerning the application of law. in the trial of private lending cases issued in August 2020. Interest and fees expenses decreased by 22.2% to 156.3 million compared to 200.9 million, primarily due to the lower average interest rate of the borrowings and the agreement to repurchase and other borrowings in the first quarter of 2021. Collaboration costs for sales partners representing sales incentives paid to sales partners increased by 4% to 98.1 million compared to 94.3 million attributable to the increased loan balance under the collaboration model. Provision for credit losses decreased by 93.8% to 13.7 million from 220.7 million. The decrease was mainly attributed to the combined effect of the first, the increase in outstanding loan principle under the collaboration model that was guaranteed by the credit risk mitigation positions put up by the sales partners. And the second, lower probability of default under the current expected credit loss model which takes into account the outlook of a more positive economic growth of China in the first quarter of 2021 as compared to that of the same period of 2020 under the impact of COVID-19 pandemic. Net gains on sales of loans increased by 35.2% to $40.3 million from $29.8 million, primarily attributable to the increase of MPLs transferred to third-party purchasers and the repurchase by sales partners. Total operating expenses decreased by 6.3% to $94.2 million compared to $100.5 million. Other expenses increased by 50% to $29.7 million from $19.8 million, primarily due to the recovery of COVID-19 pandemic, which led to the increase of promotion and advertising expenses and the expenses associated with business trips of the employees. Income tax expenses was $29.2 million compared to income tax benefits of $16.5 million, primarily due to the fact that we recorded an income before income tax expenses for the first quarter of 2021 as compared to a lose before income tax expenses for the same period of 2020. Net income was 85.6 million compared to the net loses of 65.7 million in prior years. As of March 31st, 2021, The company had cash, cash equivalent, and restricted cash of $2.2 billion, including $1.3 billion from structured funds, which could only be used to grant new loans and activities. The actual delinquency rate for loans originated by the company was 21.3% as of March 31, 2021. 16.5%. The actual NPL rate for loans originated by the company was 10.9% as of March 31st, 2021. Under the commission model, the actual NPL rate was 6%. Okay, that's for my part.