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 touch-tone 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. Ms.

Good morning, and welcome to CN Finance Third Quarter Financial Results Conference Call. In today's call, our Director, and Vice President, Mr. Tianjun, 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 the U.S. Private Security Litigation Reform Act of 1995. These follow-up statements can be identified by terminology such as view, inspect, anticipate, future, intents, 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 community's control. which might 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. is as required under law. Now, please welcome Mr. Tian Jun.

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

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

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 51 billion RMB, which increased by 20%, and achieved a net profit of about 5,300 million RMB, which increased by 15%. During the third quarter of 2023, the company focused on expanding business skills 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 is highlighted for the quarter, including 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 Trump lending model, and $1.2 billion was under a commercial bank partnership.

Second, continuing to improve the services of our partners, help them relieve the pressure of liquidity, and improve the liquidity of our analysis and return policy partners. In this quarter, some partners have started to renew their contracts and continue to split and buy back the remaining loans, effectively helping the company to reduce the risk of loss.

Continuing to refine our service to sales partners and help ease their liquidity pressures. Due to our instrument 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 extracted 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. 其次,为了提升资产质量,公司不断地对新产要素

In order to improve the asset quality, the company has been continuously refining the factors in its credit assessment,

and have fully leveraged 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 facilitators in the first tier and new first tier cities have reached 80% of overall loan facilitation.

Guanlin said that the current Chinese market 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.

we find the risk control system. Risk to prospective followers with high-quality collateral 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 low products.

Second, continue to promote the application of the model, system, and big data in the new market. The standardization of the business of深化公司

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 travel 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 exposure.

Now, I'd 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 notice 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 chart 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 position due to the inability to fulfill their obligation to repurchase delinquent loans in the last few quarters, were able to recommend their payments, which had provided more protection to the loans. 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% 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 are 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?

Uh, uh, uh, uh, uh, We are still at the end of the recovery period. The real estate market is still at the end of the recovery period. We are still able to dig deeply into the needs of the market loan and grasp the needs of this person, grasp the needs of this person,

So 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, new tier one cities. And also the second reason was because we kind of focused on our most competitive product, which is large ticket size products with higher value as the collector. Thank God those two are the two main reasons that gave us the chance to grab the amounts of the borrower in such, you know, facing such uncertainties in economy. as well as the fluctuation in property prices. 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. 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?

Based on the current market situation,

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 rent model loan

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

So roughly flat on a overall basis for, from this year. Yes.

Okay.

Uh, and last question is the, with the sales partners buying back into their position in the quarter, is that, are you seeing your, 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?

Uh, you got, uh, kind of, uh, uh, uh, or because of some other reasons? They have their own funds, but they have more cash in their hands, or because of some other reasons?

On the one hand, we have tried to implement a relatively relaxed analysis and return policy for partners. Then, for partners who have experienced a peace of mind in terms of the ability to return in a short-term way, 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.

In this way, we have increased the strength of the entire asset system. We have increased the whole judicial process in terms of assisting and promoting partners in the asset system. We have increased the progress of the entire judicial process. We have increased the asset... 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.com. Thank you.

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