FinVolution Group

Hello, ladies and gentlemen. Thank you for participating in the fourth quarter and full year 2020 earnings conference call for Finvolution Group. At this time, all participants are in a 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 fourth quarter and full year 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's email alerts by visiting the IR section of our website at ir.finvigroup.com. Mr Feng Zhang, our Chief Executive Officer, and Mr Jia Yuan Xu, our Chief Financial Officer, 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 the safe harbor provisions of the U.S. Private Security Certification Reform Act of 1995. Forward-looking statements involve inherent risk and uncertainty. As such, the company results may be materially different from the views expressed today. Further information regarding this and other Risk and uncertainties are included in the company's filings with the U.S. Securities and Exchange Commission. The company does not assume any obligations 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.

Thanks, Jimmy. Hello, everyone, and thank you so much for joining us today. First of all, on behalf of Team Revolution, I would like to express my sincere appreciation to our shareholders and stakeholders for all of their support over the past year. 2020 was an extremely unusual year with enormous challenges. However, despite the economic uncertainties created by the pandemic and the fast-evolving regulatory environment in which we operate, I'm proud to say we have done remarkably well. By strategically shifting to better quality borrowers, we delivered a solid financial performance over the past year. With the clearance of P2P balances in 2020 behind us, our focus for 2021 will be on resuming high-quality growth. After a strong recovery in the third quarter, we continued on our upward trend in the fourth quarter, helping us close the year on a strong note. For the fourth quarter, our average IRR was 26.4%, with loan origination volume increased by 24% from the previous quarter to 21 billion RMB, exceeding the top end of our guidance range of 20 billion RMB. We attributed these gains to our strong strategic execution, our industry-leading technological capabilities, and our sophisticated and prudent approach to risk management. We have successfully completed our strategic transition towards better quality borrowers as evidenced by the significant improvement in our delinquency levels. Equipped with our framework for enhanced risk assessment and management, we were able to continue decreasing our funding costs while simultaneously increasing the number of institutional funding partners, allowing us to maintain ample, diversified, and stable funding sources on our platform. it is encouraging to see our strong growth momentum continue as we enter into 2021. Boasted by our prudent approach to risk management and our industry-leading risk management capability, we saw further improvement on multiple key risk metrics. For example, our day one delinquency rate was 5.2% in February 2021, compared to 12.5% during December 2019, before the COVID-19 outbreak. primarily due to our transition towards high-quality borrowers and effective risk management capabilities. Our vintage delinquency rate is expected to fall below 3% in the fourth quarter, compared to around 6% in the same period in 2019. Going forward, we expect our vintage delinquency rates to maintain at similar levels in 2021. Notably, our 30-day loan collection recovery rate continue to stabilize at over 90%. Portfolio vertical delinquency rate for all outstanding loans on our platform is also at a new historical low. For example, delinquency rates that are 15 to 89 days past due improved to 1.38% compared to 5.6% in the same period last year. On the funding side, funding on our platform remained stable and ample, with growing numbers of institutional funding partners. The number of our funding partners increased steadily to over 50 as we continue to attract new partners on board. Our quality assets have spurred strong demand from institutions to facilitate loans through our platform. With our strengthened risk management capabilities, as well as better credit profiles of borrowers, we further lowered funding costs. The cost of funds on our platform fell to 7.5% in the fourth quarter, compared with 10% in the same period last year. With regards to the CBIRC's notice on further regulating commercial banks' online lending business, the new restrictions are focusing on the joint lending model. We do not rely on the joint lending model to operate our business. Instead, we are empowering our financial institutional partners through a loan facilitation model in which funding partners provide 100% of funds for loans to borrowers. As our funding partner is highly diversified with a mix of internet banks, private banks, consumer finance companies, and trust companies, the new CBIRC regulations impact on our domestic online lending operation is minimal. Now I'd like to share a little more about our new strategic initiatives. specifically on how we plan to leverage our technological capabilities and industry know-how to propel further growth for our company. Powered by our strong technological capabilities and credit risk assessment framework, we have also diversified our loan business into the micro enterprise segment. In 2020, we originated RMB 3.7 billion in loans to over 220,000 micro enterprises. This year, we plan to extend such loan facilitation services to further cater to the operating needs of small businesses. We believe offering financial support for MSE will help fuel the growth and prosperity of the overall economy, which is also in line with the regulatory guidance in China. In 2020, our micro enterprise loan volume accounted for around 6% of our total loan volume, and we expect this portion of our business to account for about 20% of our loan origination volume in 2021. Our international expansion is progressing rapidly with Indonesia market leading the growth. Our Indonesia operations, which today represent the majority of our overseas business, gained further traction with better than expected loan volume growth. Loan origination volume for Southeast Asia in the fourth quarter increased by 100% to 535 million RMB compared to the previous quarter. Over the past two years, we have obtained a peer-to-peer lending license from the Financial Services Authority of Indonesia and a Capital Market Services license from the Monetary Authority of Singapore. These developments are significant for us as we believe that Southeast Asia will be a fast-growing market. We will continue to harness state-of-the-art technology as well as our deep industry expertise and experience to make financial services more accessible for users in the region. In light of evolving market dynamics, our business remains solid with strong loan recovery growth that started in the third quarter of 2020. The performance was supported by our technological capabilities and the effective execution of our plan and strategy. With a successful transition to higher quality borrowers, we now expect our loan volume to be in the range of RMB 100 billion to RMB 120 billion in 2021, representing an increase of 56% to 87% year-over-year. In summary, our resilient performance in 2020 lays a solid foundation for us to drive further growth. Looking ahead in 2021, we remain dedicated to controlling credit risk with our technological capabilities. Given our proven track record in technology innovation, prudent risk management, and responsive measures taken to navigate challenging economic and credit cycles, we are well positioned to capture the immense potential in China's consumer and micro enterprise markets, as well as Southeast Asia's fintech markets. to deliver long-term value for our shareholders. With that, I will now turn the call over to Jiayuan Xu, who will discuss our financial results for the quarter.