FinVolution Group

Hello, ladies and gentlemen. Thank you for participating in the third quarter 2020 earnings conference call for Finvolution Group. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded. I will now turn the call over to your host, Jimmy Tan, head of investor relations for the company. Jimmy, please go ahead.

Hello, everyone, and welcome to our third quarter 2020 earnings conference call. The company results were issued via newswire services earlier today and are posted online. You can download the earnings release and sign up for the company email alerts by visiting the IRR section of our website at irr.finbygroup.com. Mr. Feng Zhang, our Chief Executive Officer, Mr. Simon Ho, our Chief Financial Officer, and Mr. Jia Yuan Xu, our Senior Vice President for Finance, will start the call with their prepared remarks. and conclude with a Q&A session. During this call, we will be referring to several non-GAAP financial measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with US GAAP. For information about these non-GAAP measures and reconciliation to GAAP measures, please refer to our earnings press release. Before we continue, please note that today's discussion will contain forward-looking statements made under safe harbor provisions of the U.S. Private Security Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties are included in the company's followings with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Finally, we post a slide presentation on our IR website providing details of our results for the quarter. I will now turn the call over to our CEO, Mr. Feng Zhang. Please go ahead, sir. Thank you, Jimmy.

Hello, everyone, and thank you for joining our third quarter 2020 earnings conference call today. We are pleased to report continued progress in our operations with a shift to higher quality customers. Our operational and financial results were better than expected in the third quarter 2020. A further testament to the agility and the robustness of our core capabilities, for a three-month period between August to October, our average RR declined to 28% as China gradually emerges from the aftermath of COVID-19. our loan business recovery has been gathering momentum. Our loan origination volume in mainland China for the quarter reached 17 billion RMB, representing a 30% increase quarter over quarter and exceeding the top end of our guidance range. More encouragingly, our operating income increased by 21% quarter over quarter to 689 billion RMB. Our focus on prudent credit risk management coupled with our proprietary risk assessment technology continue to support improvement across multiple operating metrics in the third quarter in the following ways. First, the vintage delinquency rate for loans originated in the second and third quarter of this year is expected to come in below 4%, and going forward, we expect the vintage delinquency rate to further lower to around 3.5% by the end of the year. The vertical delinquency disclose continue to show sequential improvement in all time buckets. Notably, the early stage of delinquency rates that are 15 to 89 days past due have fallen to 1.9%. It's a historically low level for the company. Finally, all of these continued improvements, despite the COVID-19 induced economic challenges, demonstrate that our diligent efforts in targeting and serving better quality borrowers paid off as boosted by our enhanced technology capabilities to build greater synergies with our partners. As expected, we continue to experience strong demand from our partners for quality assets. With our strategic shift towards better quality borrowers, we were able to steadily lower the cost of funding on the platform over the past one year. We are glad to report average cost of funds on the platform from institutional funding partners declined to 8.2% in the third quarter. The cost of new funds on the platform is even lower at below 8%. Given market dynamics in the aftermath of COVID-19 and the evolving regulatory environment, our business operations remained healthy and profitable in the third quarter. This performance was powered by our technological capabilities and a strong execution of our corporate strategies. With a faster and a better than expected transition to adjust towards higher quality borrowers, we now expect our loan volume in the domestic market for the fourth quarter to be between 18 billion to 20 billion RMB, representing an increase of between 6% to 18% over the third quarter. Now, I'd like to update you on our other strategic initiatives as we continue to leverage our technological capabilities to drive our growth in the long run. We are making impressive strides in our international business expansion, in particular in Indonesia, which today forms the bulk of our international business. In Indonesia, we operate under a lending license issued by the OGK, and we are now one of the leading fintech platforms in that market with over 3 million registered users. Our business operations in Indonesia is gaining strong traction. Loan origination experienced a significant rebound of five times from the depressed levels in the second quarter of 2020, during which many nationwide lockdown measures in response to COVID-19 were implemented. Loan volumes in Indonesia are now well above pre-COVID levels and at the highest levels since we began operating there. The strong momentum is continuing and we expect loan origination volume in Indonesia to increase another 40% or so quarter over quarter. We also have operations elsewhere in Southeast Asia, for example, in the Philippines, where the fintech ecosystem is emerging in a highly promising and dynamic manner. We will continue to capitalize on our experience, industry know-hows, and technological capabilities to explore growth potential in the technology-driven financial services in these countries. Lin Yang Fortune, our wealth management consultant, tech initiative remains on track in expanding its product and service offerings, with continued growth in cumulative investments facilitated of around 1.6 billion RMB, representing an increase of 33% quarter over quarter. In addition, speaking of the development of our technology as a service, we have been making steady progress in empowering banks and other financial institutions to implement digital transformation in their consumer finance operations. Institutions currently have a healthy pipeline of institutions in discussion and will continue to spearhead our strategy of exporting our technologies to more financial institutions. In summary, our proven track record in technology innovation, responsible risk management and effective measures taken to navigate across credit and economic cycles, have allowed us to successfully manage through the various regulatory changes in recent years. We have repositioned our core business. All fundings on platform have transitioned from P2P to financial institutions, and the customer base has significantly shifted towards the higher quality segment, resulting in lower lending rates for our borrowers and much stronger credit risk profiles. We continue to invest in new strategic initiatives, leveraging our technology and know-how, and some of these initiatives, such as Indonesia, are gaining momentum and starting to pay off. We are financially solid and well-positioned to generate sustainable growth and unlock the vast potential in the consumer finance in China and abroad. Lastly, I would like to take this opportunity to thank Simon for his remarkable contributions to the company during his tenure. Simon will join our board, and we look forward to his continued contributions as a director of the board. At the same time, I would like to extend a warm welcome to Ms. Jia Yuanxu as our new CFO. We look forward to his contributions in his new role. With that, I will now turn the call over to Simon, who will discuss our financial results for the quarter.