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spk00: Hello, ladies and gentlemen. Thank you for participating in the second quarter 2022 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.
spk03: Hello everyone and welcome to our second 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's email alert by visiting the IR section of our website at ir.ginvigroup.com. Mr. Feng Zhang, our Chief Executive Officer and Mr. Jia Yuan Xu, our Chief Financial Officer will start the call with their 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 Securities 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 findings 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.
spk02: Thank you, Jimmy. Hello, everyone, and thank you for joining our earnings call. The second quarter of 2022 was a challenging quarter. with Shanghai under COVID lockdown until June 1st, 2022, and many other major cities also experienced varying degrees of lockdown or restricted mobility during the quarter. All these unprecedented challenges significantly affected China's economic growth and exerted additional pressure on certain aspects of our operations. However, We were able to navigate all these challenges and achieve better than expected results, thanks to the experience and insight we have accumulated during our 15 years of operations. Consistent investments throughout our chain of technologies enabled most of our employees to conduct their work from home during the lockdown, minimizing disruptions to our operations. Our stable and capable senior management team with pragmatic goals coupled with an in-depth understanding of the industry seamlessly executed our decisive strategy despite micro-obstacles. Together with the company's ongoing transition towards better quality borrowers in both domestic and international markets coupled with our long-term goal of financial inclusion, these advantages further contributed to our growth momentum in this challenging quarter. Encouragingly, Our total transaction volume steadily increased for the ninth consecutive quarter to reach IMB 41.5 billion, up 24% year-over-year and 4.5% on a sequential basis. Driven by our stable, better quality borrower base, we achieved a solid set of operational metrics despite weak microeconomic conditions. The total number of unique borrowers in the quarter remained stable at around 3.1 million. Additionally, our total outstanding loan balance further expanded to RMB $56.4 billion as of June 30, 2022, representing year-over-year growth of 44% and a sequential growth of 5%. With respect to our strategic transition toward better quality borrowers, our proportion of Category A and B borrowers in the domestic market who meet our highest credit standards further expanded to 74% of our total borrowers in the second quarter compared to 68% in the previous quarter and from 54% in the prior year period. Accordingly, our average borrowing interest rate further declined to around 24.2% in the second quarter. Passion for technological innovation is embedded in our DNA, driving us to pursue high-quality innovation outcomes with the ultimate goal of serving the real economy and accelerating the digital transformation process. We leverage a host of cutting-edge proprietary technologies to maintain our growth momentum while stabilizing our credit risk performance. For instance, our Funchal platform automatically monitors the credit assessment process and risk control rules, accurately tracks data fields, and swiftly evaluates the performance of these data sources, leading to a 120% increase in operational efficiency. Working hand-in-hand with Funcao platform, our mean mirror fraud detection system provides visual network and fraud detection images, which can uncover up to 65% of intermediary fraud during the loan application process. Based on knowledge graphs, Mean Mirror utilizes complex network computing, machine learning, and a carefully selected rule engine, as well as over 2,000 models embedded with billions of relational data to effectively identify fraudulent activities. We have also implemented these technologies in our overseas markets, validating our technology's flexibility and transferability while strengthening our foothold in those countries. Supported by a prudent risk management framework with proven credit risk assessment and fraud detection technologies, we have maintained a stable risk level and overcome expected COVID-related issues while preparing growth. Our day one delinquency rate remained stable at 5.5% in the second quarter of 2022, with a continuous stable trend into July. Our delinquency rate below 90 days showed signs of recovery, failing to 1.44 from 1.56% in the previous quarter. In addition, as the impact of the COVID-19 resurgence became more manageable, our second quarter vintage delinquency rate is expected to be around 2.4%, Finally, thanks to our loan collection team's impressive efforts, as well as the easing of lockdowns across China, we have also seen an improvement in our loan collection recovery rate to 91% from 90% in the previous quarter. While maintaining our solid growth momentum, we continue to diversify our funding sources and improve funding efficiency in the second quarter. More encouragingly, our overall funding costs have been on a gradual downward trend, In line with our expectations, we significantly lowered our funding cost by 31 bps to around 7.5% during the quarter. Meanwhile, our capital right proportion remains stable at 17% in the second quarter compared to 13% a year ago. These results are a powerful testament to our effective business strategy and skillful execution. We also remain committed to supporting small business owners during this challenging period. During the second quarter, we served over 500,000 small business owners across a variety of industries, such as wholesale, retail, and manufacturing, among others. representing an increase of 23% from the same period of 2021. Transaction volume for this segment further increased to 68% year-over-year to a new record high of RMB 10.4 billion, contributing 25% of total transaction volume in the second quarter. Moving on to our international expansion, our strategic transition toward better quality borrowers with enhanced technologies continue to deliver promising results, Transaction volume for the quarter increased to RMB 0.91 million, representing a sequential increase of 6%. Notably, the proportion of better quality borrowers for the second quarter have exhibited continuous improvement to 62% from 54% in the previous quarter, with a larger number of better quality borrowers in our Indonesia business. Our proportion of loans funded by local institutional partner also increased to 39% from 14% in the previous quarter and from no institutional funding in the same period last year. More excitingly, outstanding loan balance for our international market increased to RMB 0.48 billion, representing a year-over-year increase of 60% and a 33% increase sequentially, validating the tremendous opportunities in the international markets. Last but not least, I'd like to provide an update on our ESG performance. At Finvolution, upholding our long-term commitments and responsibilities to our industry, the environment, and society is at the heart of our core values across operations. We continue to make strides in improving our ESG management practices and advancing our ESG initiatives during the quarter. Our recently distributed fourth Our recently distributed fourth annual ESG report highlights our ESG policies and accomplishments in 2021, and our membership into the United Nations Global Compact reflects our ongoing endeavors. Furthermore, as part of our ongoing efforts in enhancing our data privacy and the information security framework, we have obtained the ISO 27001 Due Certification of Information Security Management System issued by DMV. a well-known international standard certification organization. We will continue to reinforce our ESG engagement on multiple levels while leveraging Finvolution's innovative technology and differentiators in ways that improve and sustain communities for generations to come. In summary, our robust performance in the second quarter of 2022 is another powerful testament to our dynamic business model, technological know-how, and the dedicated efforts of our incredible team. Entering into the second half of 2022, we remain focused on refining our risk assessment and management framework, advancing our cutting-edge technologies, engaging better quality borrowers, and optimizing our product mix. Looking ahead, we remain confident in our resilience and our ability to skilfully navigate evolving market dynamics in a rapidly changing operational environment while capturing new opportunities in a more sustainable manner. With that, I will now turn the call over to our CFO, Xiaoyuan Xu, who will discuss our financial results for the quarter.
spk06: Xiaoyuan Xu Thank you, Feng, and hello, everyone. Welcome to our second quarter turning to earnings call. In the interest of time, I will not go through all of the financial items on this call. Please refer to our earnings release for further details. As Feng mentioned, we are encouraged that despite multiple challenges in the second quarter, we still achieved transaction volume growth for the ninth consecutive quarter while maintaining our risk metrics at a relatively stable level. With our transaction towards better quality borrowers coupled with strengthened relationships with funding partners and consistent technological enhancement, the loan approval rates from our funding partners rose to around 80% in June compared with 65% in the same period last year. We have cumulatively cooperated with around 70 licensed financial institutions and will continue to foster a strong and a robust pipeline of potential partners. As the percentage of our better quality borrowers continue to increase, we expect our funding cost to reflect ongoing improvement during the next several quarters. Driven by our consistent efforts in research and development, we have continuously enhanced our chain of technologies throughout our operations, including customer acquisition, fraud detection, credit risk assessment, and customer service, among others. Consistent improvements in numerous operational metrics across multiple market cycles clearly illustrate the effectiveness of our tech refinements. Bolstered by these trends, our net revenues for the second quarter rose to RMB 2.7 billion, an increase of 12% year-over-year. Even more encouragingly, we also delivered a strong non-GAAP operating profit of RMB 682 million and maintained a substantial balance sheet with RMB 11.4 billion in total shareholders' equity as of June 13, 2022. During the second quarter, our average borrowing cost was 24.2% compared with 26.2% in the same period last year. Of particular note, all loans originated for our new borrowers were under IR 24%. reflecting our ongoing commitment to financial inclusion and our growing ability to align with regulatory directives. We maintained our take rate for the quarter at a stable pace of 3.8%. Together with our partner support and our constant efforts in optimizing funding costs, we are confident that we can continue to deliver solid results going forward. With the population of our capital light model stabilizing at around 17%, our leverage ratio, which is defined as risk-bearing loan balance divided by shareholders' equity, remained stable at 4.1 times. Our unrestricted cash and short-term liquidity position further increased to RMB 5.2 billion for RMB 4.9 billion in the same period last year. representing an increase of 6% year-over-year, further demonstrating the robustness of our balance sheet. During the second quarter, we continued with our strategy of acquiring better quality borrowers both in domestic and international markets with attractive borrowing rates. With the preparation of better quality borrowers increasing both domestically and internationally, Our operational metrics have shown improvement on multiple fronts. Going forward, we are confident in maintaining our growth momentum while keeping our risk performance at a stable level. Between January 2022 and July 2022, we deployed around USD 27 million to buy back our shares in the public market. Since we initiated our share repurchase program in 2018, we have cumulatively deployed USD 158 million to buy back our shares on the public market, reflecting the company's commitment to returning value to shareholders on a long-term basis. Our board of directors have also approved an addition of USD $80 million to our existing shares repurchase program, expanding the program to USD $140 million. We believe that the increase in our share repurchase program is an efficient use of our existing capital and demonstrates our strong commitment to providing greater support for our shareholders amid such a challenging microenvironment. Before I conclude my remarks, let me provide some additional color on our business outlook for the second half of 2022. With uncertainties in the involvement of COVID-19 situation, we remain cautiously optimistic that our business operations will continue to gain momentum both domestically and internationally due to our in-depth experience in the customer finance industry our sophisticated technology expertise, and our strong relationships with our partners. We are also well prepared to capture both existing and new opportunities in the markets in which we operated. As a result, we expect our total transaction volume in the third quarter to be in the range of RMB $44 billion to RMB $45 billion. representing an increase of between 16% to 18% year-over-year. With that, I will conclude my prepared remarks. We will now open the call to the questions. Operator, please continue.
spk00: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, we ask that you please kindly repeat your question in English. Once again, that was star then 1 to ask a question. And at this time, we will pause momentarily to assemble our roster. And our first question will come from Frank Chen of Credit Suisse. Please go ahead.
spk03: 感谢管理层,我是来自瑞士信贷的郑豪。 首先,祝贺公司在二季度取得了相当不错的业绩。 那我有两个问题。 第一个问题是关于long volume的。 那在下半年,根据现有的guidance的话, 前三个季度可能可以达到125到126个比例人民币。 From the perspective of the company, the guidance for the whole year, which is 175 billion to 180 billion, is it still on track? The second question is more focused on the international market. I want to know more about the international market, whether it is in terms of long volume or take rate, and how it contributes to our entire portfolio. Thank you, management, for the opportunities. This is Frank Zheng from Quidditch Swiss. Congratulations on a good set of results despite the headwinds. So I have two questions. The first one is on loan volume. How does the company view volume growth in the second half? Based on the current guidance, for the first three quarters, volume is expected to reach around 125 to 126 billion RMB. So is the progress to deliver the four-year guidance of 175 billion to 180 billion still on track? And the second question is more specifically on international markets. How does the company view the contribution from international markets to volume and take rate? And what does companies outlook? for international markets. Thank you very much.
spk06: Thank you, Frank. I will now return to the first question, which is about our long-volume guidance for the whole year. As a result, we will still maintain this kind of guidance at the beginning of the year, which is 1751 to 180 billion. Our main consideration is that this year, the whole environment is still full of uncertainty. The impact of the epidemic in the first half of the year. Now, in the Jubilee area, the epidemic is still repeated. So I think the whole year should still be full of uncertainty. Under such a big background, Your company will still maintain a relatively cautious attitude of such an experience. Of course, our own capabilities in all aspects have actually improved a lot in the past two years. But we are still Let me do the translation for Alexis.
spk03: First of all, we still maintain our full year guidance of $175 to $180 billion. However, there are still full of uncertainties because the COVID outbreak is still happening in many different cities. And therefore, we will still adopt a prudent approach. We have accumulated experience and technologies and refinements during this period. And therefore, we are still able to maintain a healthy and progressive growth in spite of this very challenging microenvironment.
spk06: And the second question is about our international business. Since the second half of last year, we have been very active in upgrading our international business strategy, which is to create a better population. So far, we can say that the entire strategy has basically been upgraded. As you can see, the turnover of our second quarter is 9.1 billion RMB. Although the growth rate is not very high, about 6%. But please pay attention to this. In terms of the balance, the growth rate has reached 33%. So what does this mean? In our entire customer structure, in our product distribution, there has actually been a very big change. I can share a few more data here. One is that our second quarter has reached 62% of the high-quality population. This is 54% compared to the first quarter, which is a significant improvement. Then, from the product distribution, we can also see that our long-term dividend debt, which represents a higher quality, has also increased from 55% in the previous quarter to 85% now. Compared to a year ago, a year ago, this ratio was only about 20%. So this is the second one. The third one is We are now, especially in the Indonesian market, the ratio of our institutional funds has also increased significantly. The ratio of our institutional funds has increased from 14% in the last quarter to 39% in this quarter. So in these few aspects, it is actually reflected that we have achieved a very significant result in overseas, especially in the Indonesian market, with the transformation of this strategy and the rise of the population. So we In fact, we are very confident in the future. In the third quarter, we expect that the international transaction volume will reach about 1.1 billion RMB. In terms of transaction, the RMB is growing by 20%, which is close to 40% from a global perspective. Our international business began transition to superior quality since the second half of 2021.
spk03: You can already see that we have completed the transition. For example, in the second quarter, although our transaction volume growth is only 6%, but our outstanding loan balance has increased by 33% quarter on quarter. And our proportion of installment loans has also further increased to 85% from 55% in the previous quarter and from only 20% in the same period last year. And with a larger number of superior quality borrowers in Indonesia, the proportion of loans funded by local institutional partners increased to 39% compared to 40% in the previous quarter. Our international business transition progress has been better than expected. And in the third quarter, we expect transaction volume to be around $1.1 billion, up 20% quarter over quarter, and outstanding loan balance to increase around 40%. As our international business has completed its transition to better quality borrowers, we believe we will enter into a growth stage.
spk06: 好,Frank,谢谢,看看有什么其他问题吗? 没有了,很清楚,Many thanks.
spk03: Thank you, Frank.
spk00: The next question comes from Yara Li of CICC. Please go ahead.
spk01: Hello, Guo Liancheng. Thank you for giving me this opportunity. I'm Li Yada from Zhongming Company. Today, I have two questions for Guo Liancheng. The first is about the process of pricing. Until the second quarter of 2022, how much is the overall average pricing in terms of both the total and the new income and the new loan? At present, do we still have high-interest savings assets in our savings loans? I don't know if I can share such a comparison in general. And then look forward to how to look at and adjust this end time point. And then when can we expect such a take rate in our overall situation to gradually stabilize? And then the second question, I might want to ask some risk indicators. For example, the change trend of risk indicators such as the expected rate of 90 days and the risk index of part of the previous debt. And then can we think that we have passed the peak of this risk pressure? The first one is, by the end of 2Q22, what are the average prices of our loan products in both our existing assets and the new origination, respectively? And what is the proportion of high interest rate assets in the total outstanding balance of our loans? And looking forward, when can we expect to see the end point of the pricing adjustment and to see a relatively stable take rate? This is the first one. And the second one is, what is the trend of our risk indicators, such as 90-day delinquency and some leading indicators? And regarding the asset quality pressure, have we seen the peak already? And as for the underlying reasons for improving the asset quality, is it because of our active change in the customer acquisition, operation, and risk control, or can we just view it as a natural response to the improvement of our microeconomy and the recovery from the COVID-19? Thanks, management.
spk06: Thank you, Adam. Let me start with the first question, which is about pricing. Because of the characteristics of our product, we have similar results from a marketing perspective. Because we have a relatively short period of time, more than 8 months. So I will give you some feedback from the marketing perspective. In fact, if you have an impression, you should remember that in the fourth quarter of last year, we should have started to make such a adjustment in terms of pricing very early. In the fourth quarter, we have almost 80% of our customers in the high-quality population. It has been done more than 24 times. From the top of this year, we are still making such a adjustment in a very stable and rhythmical way. As for the second quarter, as we have shared before, our current average price is 24.2%. As for the new customers, 100% of them are priced at less than 24%. So, we are already prepared for the 24th quarter. As for the future outlook, We will consider this because we have experienced the whole second half of the year, especially the test of this epidemic. We have evaluated that our overall business model is still very, very healthy. And then we are very confident in our own operating capabilities. So that we can feel that there is actually more space in this field to fully implement the strategy of our customer group. So our plan is In terms of Q3, we will further consolidate in terms of pricing. The overall frequency pricing of Q3 is expected to be around $23.5. In terms of pricing adjustment, in addition, we still have room for further optimization in terms of capital costs and risks. So we don't think it will have a big impact on take rate. So the 3G degree take rate can be around $3.7. Let me do the translation for this question.
spk03: From the outstanding loan balance and transaction volume perspective, we believe it is similar because of our loan tenure is relatively short at about eight months plus. Let me just remind you that in the fourth quarter last year, around 80% of our loans are already under IRR 24%. And in the second quarter of 2022, our average loan pricing is around 24.2% in terms of transaction volume. And also all loans originated for our new borrowers are already under 24%. And we believe we are ready and have completed the pricing adjustment process. or business model is healthy and we still expect growth to continue.
spk06: Sorry, let me just finish the translation.
spk03: And we believe there is still more room for us to continue with our transaction to better quality borrowers with further improvement in funding and also in our risk improvement. We estimate the average pricing in the third quarter will be around IRR 23.5, and we maintain a take rate of around 2.7%.
spk02: Let me quickly add one thing, just to be more specific, to the question about when do we expect the price adjustment to be done and when do we expect the take rate to be stabilized. So, in effect, we believe the regulatory environment for pricing regulation We don't expect major changes in the foreseeable future. And given our pricing is around 24%, we believe the price adjustment work is mostly done. Now, as we continue to move upscale in our customer quality, we do expect the price to very gradually drop as the customer's quality improves because the better customers enjoy lower price. but it's going to be very gradual. And coupled with the reduced funding and improved risk efficiency, so overall, we believe our take rate going forward will be stabilized at the current level, around like 3.7%, as Alexis just mentioned. Yeah, thanks.
spk06: So, about the second risk, risk, the risk data of the second degree, I think we should Uh, uh, From the details, we think the impact of the epidemic is still fluctuating in the month. We had a high in April. In April, we now see that Vintage is around 2.4. After the high, the risk is falling back. Now it's almost 2.3. As you can see, the risk of the epidemic is still very small. Last year, the overall risk estimate was about 2.3. So in the most serious stage of the epidemic, our vintage trend is actually 0.1. And soon we will fall back. So in the second quarter, the overall risk response is still very effective. Behind this, I think, first of all, the situation of the epidemic should be much more serious than in Wuhan in 2020, because it has a great impact on the national wave, including Shanghai's long-term division. And here I would like to remind everyone that Xinyan is a headquarters company in Shanghai. In fact, we are determined to be challenged by the epidemic, which may be a little bigger than other companies. Okay, let me just do the translation for Alexis. Let us just recap some of the risk metrics. Our Q2 vintage is expected to be around 2.4%, and our loan collection rate from 1 to 30 days
spk03: further improved to 91% from 90%. Our delinquency rate peaked in April and May. It has since returned to 2.3%. You can see that there are some fluctuations during the COVID period. However, the fluctuation for us is very small as it only increased by 0.1%. We believe that for us, our company is based in Shanghai. The impact for us is larger than a lot of companies because the vast majority of our core management and employees are headquartered in Shanghai, and we have been locked down for three and a half months during the Shanghai lockdown period.
spk06: Two years ago, we have been very clear on the strategy of group of customers. Last year, we almost completed the strategy of 24 people. So this is very helpful for our overall response to the impact of the epidemic. In fact, in these two years, our ability is constantly improving. Because the whole of modern technology is a full chain operating ability. From goods to counterfeiting, to risk, to behind-the-scenes, to funds. In fact, every part of it involves a lot of the ability to automate the system. I think I can mention two places here. One is that in terms of goods, we have a platform called Zhang Yu in the past two years. This platform actually helps us to play a very big role in the goods sector. Traditional goods platforms If everyone goes to manage accounts, it may only manage three. But on our system, one person can manage 30 accounts. Another one is the efficiency of advertising. It will be very high on our platform. 100 ads, this traditional one may take three hours. It only takes five minutes on our platform. It can save about 90% of the time. In addition, we have a system called Mingjing. In this system, we have more than of 100 billion in data and more than 2,000 models, which can help us to automatically identify other behaviors of up to 65% through the system in the process of loan application. Therefore, the ability to improve these systems and the ability to improve our own companies can help us to better deal with the uncertainty of the outside world and the impact of the epidemic.
spk03: The reason for success can be our determination in our transaction to better quality borrowers since two years ago. Also, our ability has been growing in our change of technologies from customer acquisition to fraud detection to allocation of funding, etc. I would like to highlight two of our notable technologies. For customer acquisitions, we have the Octopus smart acquisition platform. Under the traditional account management, one person can only handle up to three accounts. But our Octopus platform enables one person to handle over 30 plus accounts. And this increases our efficiency a lot. And when setting up advertisements under the traditional method, it would need around three hours to set up 100 advertisements. However, with the Octopus platform, we only need about five minutes to set up 100 advertisements and we can save a lot of time. And another technology that we are using is the fraud detection. It's the MingMirror fraud detection system. This system is able to leverage on knowledge graphs, utilize complex network computing, machine learning, and over 2,000 models embedded with billions of relational data. We are able to uncover up to 65% of intermediary fraud during the application process. All these technologies enable us to encounter challenges, external challenges and uncertainties during the COVID situation.
spk00: The next question comes from Alex Yeh of UBS. Please go ahead.
spk05: The next question comes from Alex Yeh of UBS. Please go ahead. For example, during the period from July to August, we were asked about the trend. And then, because our small and medium-sized people also have a higher proportion, we saw that the quality of small and medium-sized people is not the same as our overall market. There is a significant difference or a more depressed situation. And then the third is that the consumption data of the current Hong Kong market seems to be relatively poor. What we see is that So translate for my question. First one is on the funding cost outlook. Could you share with us how much more room do we expect? for it to improve for the rest of this year? And second question is on your asset quality. Could you also give us an update on the latest trend on your day one delinquency in, say, July and August? And also, is there any material differences between your SME customers versus your overall portfolio? And thirdly, on the consumer credit demand, the macro data has been weak. And from your perspective, have you seen the application volume declining material from same period last year and how has been the latest recovery trend. Thank you.
spk06: Thank you, Axie. First of all, about the capital cost. In the second quarter, compared to the first quarter, we actually have a very obvious optimization, which is about 30 BP. In fact, I think it is also very difficult in the second quarter because of the epidemic stage. In fact, the partners of the institutions are also very concerned about the changes in risk, so it will become more cautious. But in this process, with our data, it is actually a good proof that we are more at ease in responding. As for the second half of the year, we think that there will be a further space on the financial level. In the second quarter versus the first quarter, our funding cost improved by 31 bits on a sequential basis.
spk03: During the COVID period, our partners will be very concerned about the risk matrix fluctuation, but we give them confidence with our stable risk performance. And in the third quarter, we expect further improvement in our funding costs of between 20 to 30 bps. Improvement in funding costs. 第二个呢,关于这个得问的这个预期率啊,我们要知道差不多是在5.5啊。
spk06: Now, from this data, we are also having further optimization. This trend is getting better. Then we mentioned Xiao Wei. In the second quarter, we made 500,000 users, and the sales volume is also more than 1 billion for the first time. From the epidemic point of view, we can see that the impact of the Xiao Wei company is indeed greater. Um, um, um, um, um, um, um, um, Let me do the translation for question number two as well. Our day one delinquency rate is around 5.5% in the second quarter, and we have seen improvement since then.
spk03: And in the second quarter, we served over 500,000 small business owners with over 10 billion in transaction volume. And before the pandemic, the credit performance of our small business owners is around 10% better than our retail borrowers. And during the lockdown period, we have seen the risk metrics of small business owners is slightly higher than the retail borrowers. And in the second quarter, we have also observed that the risk level for small business owners have returned to levels Similar levels with the retail borrowers. And going forward, we expect the risk metrics for small business owners to fall below retail borrowers.
spk06: It will affect the uncertainty of the Hong Kong environment, and it will also affect consumer confidence. In addition, there are also some factors that are good for consumption, such as some stimulations in terms of national Hong Kong policy, especially some attacks in terms of mobility. In addition, after the epidemic, there have been some retaliatory consumption. In fact, after these factors are added up, We think this comprehensive impact is generally good. On the other hand, from our data, we can basically prove it. From the second quarter, including the current amount of loan application data, it is basically the same as the first quarter, including the fourth quarter last year. There may be a 12% fluctuation up and down, but it is basically the same overall.
spk03: Alex, let me do the translation for the last question as well. Regarding the customer demand, the data from the overall consumer data is rather complicated. It will be affected by various factors. Example, the macro environment impact affecting consumer confidence, the stimulus policy impact on liquidity, and the post-pandemic recovery impact on consumption. If you take into consideration of all these factors, the overall consumer consumption has been rather stable with limited fluctuation within 1-2%. Our data can also prove that the loan application demand has been relatively stable in the second and third quarter.
spk00: The next question comes from Thomas Chong of Jefferies. Please go ahead.
spk04: 梁先生好,謝謝管理層接受我的提問。 我的問題主要是第一個是關於competition。 由於我們的pricing現在都已經是大概是一個24%, 往後的話我們怎麼看呢? 我們跟其他同行或者是傳統銀行未來的一個competition。 第二的話就是... My first question is about competition. Given the pricing is trending to 24%, and going forward, how should we think about competition with our peers and traditional banks? And my second question is about the international business. How should we think about the areas that we can replicate from domestic to international? And are we seeing any differences in the behavior between the borders in these two Thank you.
spk06: Thank you, Thomas. I will now answer the first question about competition. I think competition is actually from several levels. The first one is from the big market. We think the Chinese market is very big, and although it is uncertain, it is still a very stable growth. Second, I think from the perspective of the players, Although our pricing has been adjusted, I think it is still in a different sector from traditional financial institutions. And you can see that there are thousands of traditional Chinese financial institutions. Their pricing is also very low, which means that there are a lot of players in the market. If we look at the 18-24 season, there are not that many players. Thirdly, I think from the perspective of the participants, the number of players now is significantly less than before. And from the perspective of the country's attitude towards finance, it should not be like the traditional idea of the Internet, where there is a state of the winner being notified. More importantly, everyone is in the middle of a growth of their own documents. So in terms of combination, I think Thomas, let me do the translation for you. Okay, we can view competition from a few different perspectives. Number one, China market is large and still growing.
spk03: And number two, compared with the traditional financial institutions, we are still not in the same segment as them as their pricing is much lower. If you think about this, there are 7,000 traditional financial institutions. And number three, the players in this market has been reducing a lot. And in finance market, it is very different from the internet segment because it is not a winner-take-all situation. And we feel that competition is still relatively low. okay and we are still very confident of the future growth.
spk02: Let me take the second question. With regard to our expansion internationally, I think there are a lot of things we can and we are leveraging from our domestic experience. I think the most important thing is Please remember that we have 15 years operational experience in the China market. If we think about the international market, and we are mostly in the developing countries, and particularly in Southeast Asian region. FinTech developing stage probably somewhere around five to 15 years ago, if you compare to China around that period. I think there are many aspects, but I would say Indonesia is probably around similar to 2014, 2015 period of the domestic China. I think, you know, the credit infrastructure is still undergoing pretty rapid improvement, and the market is growing very fast. And I think, you know, if for another country we're operating in, in the Philippines, it is probably, like, in a few years, you know, behind Indonesia. So I think, you know, the experience we have accumulated these years very, very valid and valuable for our expansion, for our development in the Southeast Asian market and additional in the future other developing countries. I think it is on systems, on know-hows, and on talents. So we have a very experienced team You know, for example, one of the things that I think is particularly relevant, you know, if we are thinking about building a valuable and sustainable business in Southeast Asian region is our experience in, you know, transitioning or transforming our business from a high-pricing, you know, population strategy to a very healthy low-pricing, you know, high-quality customer-based strategy. Currently, with the credit infrastructure situation in the Southeast Asian market, inclusive finance, the pricing is higher than what the domestic China market has, which is normal. I think it matches the developing stage of those markets. But as we move forward, we're going to see price drop, both from regulatory requirement perspective and from the economic development and the market competition perspective. And that journey we've went through in China, and our team has tons of experience in that. And that kind of explains why we had you know, manage the transition in our Indonesia market, you know, for the last one-year period when we moved upscale, you know, in a pretty good speed that Alex has just mentioned. So I think, you know, those experiences are very valid, and that makes us feel very confident, you know, coupled with if we think about, hey, you know, in China, like, you know, 2014, 2015, you know, We are very optimistic about the growth prospect in those markets, and we think our experience is going to help us become a leading player in those markets. Thanks.
spk04: Thank you.
spk00: This concludes our question and answer session. I'd like to turn the call back over to the company for closing remarks.
spk03: Hello, everyone. Thank you for joining Fintolution's second quarter earnings conference call. If you have any further questions, feel free to reach out to our investor relations team. Have a nice day.
spk00: The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.
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