CNFinance Holdings Limited

Good day and welcome to the CN Finance Holdings Limited third quarter of 2023 financial results conference call. All participants will be in listen-only mode. Should 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. To ask a question, you may press star then one on your touchtone phone. To withdraw from the question queue, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ms. J, Manager of Capital Marketing. Please go ahead.

Good morning and evening, and welcome to CN Finance Third Quarter Financial Results Conference Call. In today's call, our Director and Vice President, Mr. Tian Jun, will walk us through the operating results, followed by financial results from our acting CFO, Ms. Li. After that, we will have a Q&A session. Before we start, I'd like to remind you that this conference call contains follow-up statements with the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in U.S. Private Security Litigation Reform Act of 1995. These follow-up statements can be identified by terminology such as will, expect, anticipate, future, intent, plans, beliefs, estimates, targets, going forward outlook, and similar statements. Such statements are based upon management's current expectations and current markets and operating conditions, as they relate to the events that involve non- 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 this and other risks, uncertainties, or factors is included in the company's filing with the U.S. 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 Mr. Tian Jun.

Thank you for taking time to join this conference call. We will discuss...

then financed the quarter of 2023 operating and financial results, and followed by a Q&A session.

In the third quarter of 2023, the company focused on expanding its business size and increasing its asset value. All important indicators achieved the same growth. This quarter, the company achieved a total of 5.1 billion RMB, which increased by 20%, and achieved a net profit of about 5.3 million RMB, which increased by 15%. During the third quarter of 2023, the company focused on expanding business scale and improving asset quality and achieved year-on-year growth in all important indicators.

During the quarter, The company facilitated loans of RMB 5.1 billion, increased by 20% year-on-year, and achieved a net income of 53 million, increased by 15% year-on-year. Furthermore, as a result of its sound risk control mechanism, the company's recovery rate remained at 110%. The company's highlights for the quarter include the following.

During the quarter, the company's total loan organization volume was 5.1 billion, representing a year-on-year increase of 20%.

and a 12% increase as compared to the second quarter of 2023. Among the $5.1 billion loans facilitated, $3.9 billion was under a truck landing model, and $1.2 billion was under a commercial bank partnership.

Second, continue to advance the services of our partners, and help them relieve the pressure of liquidity. Thanks to our analysis and return policy, the liquidity of our partners has improved. Continuing to refine our service to sales partners and help ease their liquidity pressures. Due to our installment policy, sales partners' liquidity has significantly improved. During the quarter,

A few historical defaulted sales partners were able to recommend their in-store payments. This has effectively reduced the risk exposure of the company.

Optimizing products and help making finance more inclusive.

In the third quarter of 2023, the company's average findings and costs were slightly lower than that in the beginning of the year. And the company adjusted portions of the lower interest rate products in its product mix accordingly. By optimizing the product mix and lower customer interest rates, we were able to give real benefits to the MSC owners and lay a good foundation for serving the needs of followers with better credit history.

Fourthly, in order to improve the quality of assets, the company continuously promotes the production elements, fully utilizes the technology to improve the creditors, In order to improve the asset quality, the company has been continuously refining the factors in its credit assessment and have fully

leverage technology to improve the accuracy of the assessment of borrowers and collaterals. In addition, the company has drastically shifted its business to core regions. During the quarter, loan facilitated in the first tier and new first tier cities has reached 80% of overall loan facilitation. 管理層認為目前的中國市場

Managements believe that

China's market is currently in a period of recovery, and the price of real estate market is still fluctuating. At the same time, we believe that China will continue to introduce similar policies, and China's inclusive finance industry is still in the opportunity period. We will continue to adopt the guiding principle of high-quality development, which emphasizes scale, qualities, and compliance with the following specific objectives in mind.

Optimize the product mix. Improve sales capabilities.

refine the risk control system, reach to prospective followers with high-quality credentials as well as good credit records. In order to match this goal, the company needs to continuously broaden its financing channels, bring in new founders, and launch new loan products.

Second, continue to promote the application of the model, system, and big data in the new generation. The standardization of the business in the deepening company

Continue to promote the application of models, systems, and big data in credit approval. Make the whole process more standardized, generative, systematized, and intelligent to reduce human intervention and improve overall efficiency.

Continue the transition to the platform model by accelerating the disposal of non-performing loans. The company plans to transfer a bulk of deported loans to third parties

before the end of the year to recover cash and reduce the company's risk in the project.

Now, I would like to hand the call over to Ms. J. Lee, and she will walk you through the third-party financials.

Thank you. Now we will go over the financials. Please note that the currency we use will be in R&D, and all comparisons will be made on a year-on-year basis unless otherwise stated. For the third quarter of 2023, total interest and fees income was $425 million as compared to $445 million. Interest and financing service fees on loans was $388 million as compared to $413 million. The decrease was due to the decrease of weighted average interest rate of those outstanding. Interest income charge to sales partners was $32.7 million as compared to $33.5 million. Total interest and fees expenses decreased by 13% to $117 million as compared to $195 million. The decrease was mainly due to the lower funding cost of trust company partners as a result of recent regulatory development. Net interest and fees income increased slightly from $215 54 million to 255 million. Net revenue under the commercial bank partnership model was 27.6 million as compared to 0.4 million. The outstanding low principal under the commercial bank partnership was 5 billion as of September 30, 2023. as compared to $0.6 billion at September 30th, 2022. Collaboration cost for sales partners was $87 million as compared to $85 million. Net interest and fees income after collaboration cost increased 15.5% to 196 million from 117 million. Provision for credit losses decreased by 72% to 12 million from 41 million. In the third quarter of 2023, some sales partners who forfeited their credit risk mitigation positions due to the inability to fulfill their obligation to repurchase delinquent loans in the last few quarters were able to recommend their payments, which has provided more protection to the low. Total operating expenses increased by 27% to $106 million from $83 million. Employee compensation and benefits was increased 16% to 58 million from 50 million due to an increase in the performance-based bonuses as a result of an increase in low origination volume during the third quarter of 2023. Other expenses increased by 71 percent to 35 million from 20 million, mainly due to the increase in fees paid to local channels who are rewarded for referring sales partners to the company and will also receive commissions of a certain percentage of those recommended to the company by the sales partners they have referred. Net income increased by 15% to $53 million from $46 million. Now, we would like to start the Q&A session. Operator, please.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star then two. The first question comes from William Gregorzewski of Green Ridge Global. Please go ahead.

Hey, Greg Corder. With regards to the trust lending at $3.9 billion, that's up quite a bit from where it has been. Can you just talk about where the, I guess, the demand you saw for that growth came from, and if you expect it to continue going forward?

Congratulations, you have passed a very good period. First of all, I would like to ask about the $39 billion loan under the new mode. This is much higher than the previous new mode loan amount. Can you give us a brief introduction of the demand for the loan? And what do you think of the direction of the future of the loan amount?

Overall, the loan amount has grown in comparison to the previous quarter. The main reason is that the strategic positioning of the core assets in the core area of the main line and the new line, which we designated at the beginning of the year, should say that it has played a major role. Secondly, in terms of product optimization and economy, China China China China China As for the increase of loan origination under the trust lending model, I think the main reasons are twofold. I think the first one is that in the beginning of the year, we have decided

to shift our business more to tier one and new tier one cities. Also, the second reason was because we kind of focused on our most competitive products, which is large ticket size products with higher value as the collector. Thank God, those are the two main reasons that gave us the chance to grab the demands of the borrower in such, you know, facing such uncertainties in economy as well as the fluctuation in property prices. 当然我们也进一步的降低了这个融资成本和融资利率,从而有机会进入到更广阔的优质资产以及优质客户群,这个优质客户市场群。 Also, since we have been able to manage to decrease the overall financing costs, it allowed us to reach to customers with better collateral as well as better credit records. And it also helped to broaden our customer reach as well.

okay great um as far as the origination since we're getting close to 2024 do you guys have any forecast for where you're looking for that for next year on a total basis or broken out by trust and commercial uh

We are still in the uncertain stage of development. Our development requirements for 2024 are relatively conservative. But at the same time, it is a relatively feasible development goal and requirement. For the overall loan investment, we set a development goal of 20 billion yuan. In the development goal of 20 billion yuan, we hope that the entire bank loan mode

Based on the current uncertainty of the market, we have set a rather realistic and also conservative goal for the year of 2024. Our projected loan origination for next year is $20 billion with loans under-facilitated commercial bank model picking up 30 to 35%.

Okay, so roughly flat on an overall basis for from this year.

Yes. Okay.

And last question is the with the sales partners buying back into their position in the quarter is that, are you seeing your sales partners with more cash to be a little more flexible to not fall behind on payments or what's, can you just kind of briefly talk about the health of the sales partners financially?

You just talked about the fact that the loan partners are re-operating. Is it because of the increased liquidity or because of some other reasons? On the one hand, we try to implement a more relaxed analysis and return policy for partners.

Then for these partners who have experienced a peace of mind in terms of their ability to return to the market, we adopted this analysis and return policy.

So the first thing that helps to improve their liquidity is we can loosen the terms on their installment payments.

Secondly, we have increased the strength of the entire asset index. We have increased the progress of the entire judicial process in assisting and promoting partners in the asset index. And the second reason is that we have made our effort to help the sales partners to dispose their non-performing loans. We have made our efforts to push the

legal proceeding as well as the settlement with borrowers, which also helped the sales partners to get rid of the non-performing assets and also recover cash.

Okay, great. Thank you.

There are no other questions at this time. This concludes our question and answer session. I would like to turn the conference back over to Ms. J for closing remarks.

Thank you for joining us today. If you have any questions, please feel free to contact us at iricashchina.cn. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.