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Lufax Holding Ltd American Depositary Shares, each representing two (2) Ordinary Shares
Q4 2021 Earnings Conference Call
3/10/2022
spk00: ladies and gentlemen thank you for standing by and welcome to lufa's holding limited fourth quarter 2021 earnings call at this time all participants are in a listen only mode after the management's prepared remarks we'll have a q a session please note this event is being recorded now i would now like to hand the conference over to your speaker host today mr yu chun the company's head of broad office and capital markets please go ahead sir
spk07: Thank you, operator. Hello, everyone, and welcome to our fourth quarter 2021 earnings conference call. Our quarterly financial and operating results were released by our newswire services earlier today and are currently available online. Today, you will hear from our chairman, Mr. Ji Guangheng, who will start the call with some key achievements in 2021, address current capital market concerns, and finally share our outlook for 2022. Our co-CEO, Mr. Greg Gipp, will then provide a review of our progress and details of our development strategies in a quarter. Afterwards, our CFO, Mr. James Jung, will offer a closer look into our financials before we open up the call for questions. In addition, Mr. Weiss Choi, our co-CEO, and Mr. David Choi, CFO of our Retail Credit Facilitation business, will also be available during the question and answer session. Before we continue, I would like to refer you to our safe harbor statement in our earnings pressure lease, which also applies to this call, as we'll be making forward-looking statements. Please also note that we will discuss non-IFRS measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under the international financial reporting standards in our earnings release and filing with the SEC. With that, I'm now pleased to turn over the call to Mr. Ji, Chairman of Lufax.
spk10: Thank you for your participation. Hello, everyone, and thank you for joining our fourth quarter 2021 earnings conference call. I'll start today's call with an update of our key achievements for the year, then address current market concerns, and finally share our outlook for 2022.
spk07: key achievements.
spk10: In 2021, we achieved steady growth, improved regulatory compliance and corporate governance, and strengthened our status as the role model for compliance and governance among overseas listed Chinese companies. The company's annual revenue increased by 19% in 2021, and the net profit increased by 36% in the same year. After removing some of the financial impact, IFRS' net profit increased by 29% in the same year. In 2021, the annual annual ADI revenue of RMB 7.11 was used to achieve the common welfare goals, implement the regulatory requirements, Our full year 2021 total income increased by 19%, net profit by 36%, and non-efforts net profit by 29% when excluding the impact of non-core items.
spk07: As a result, our basic earnings per ADF for 2021 reached 7.11 RMB. At the same time, we increased our share of credit risk-bearing while proactively reducing the all-in cost of our 2021 average outstanding loan balance by 3 percentage points, improving regulatory compliance and contributing to the national goal of common prosperity.
spk10: In terms of regulatory communication, we communicate with the regulatory department through channels In communicating with regulators, we had open and frequent dialogues through all available channels at all levels and achieved satisfactory results.
spk07: Upholding our principle of preemptive diagnosis and swift operational adjustments for timely, optimal results, we maintained a proactive, candid, positive, and responsible stance in aligning the direction of our business with the trends of regulatory changes.
spk10: Second, key investor concerns. Since the last report was released, the company management has held 51 performance communications, NDR, and other activities.
spk07: Since releasing our results, our management team had over 50 investor engagement events, including post-earnings calls, non-deal roadshows, and other meetings.
spk10: As the policy of monitoring becomes clearer, the focus of the market will return to business development. The specific problems of the business will be introduced by Greg and Weiss later. I will first report on the market concerns of monitoring the economy and monitoring trend issues.
spk07: Based on our data, 66% of the investor questions were about business operations, 24% about microeconomic and regulatory trends, and the remainder about capital market initiatives such as dividend payout. share buybacks, and Hong Kong listing. We're glad to see that investors are refocusing their attention back onto our core business as we gain more clarity on regulatory fronts. I will share our thoughts on macroeconomic and regulatory directions. Then Greg and YS will discuss our operational financial results. Updates on the April 29th ratification.
spk10: The company has completed most of the necessary changes. There are also long-term follow-up matters, such as the cancellation of the subsidiary company, the storage of the Internet, the storage of money, the clearing of the truth, and the breakage of the chain, and so on. Through the information of each channel, the comprehensive meeting, including the speech of Chairman Guo Shuqing in the Q&A session of the National News Agency press conference on March 2, The management team has determined that 429整改 will continue to enter the final stage in various fields. The company will continue to promote the completion of整改 work and closely coordinate the future inspection work of the supervision department. From the initial feedback obtained by several relevant supervision departments, in terms of整改 attitude, specific plans, and practical effects, it is one of the 14 better整改 platforms.
spk07: By the end of 2021, we had completed the vast majority of our ratification initiatives and were on track to clear the remaining issues that required prolonged efforts, including the closing of redundant subsidiaries, running off our online deposit products, and stopping sharing certain borrower data directly with financial institutions. Judging from information and insights gathered from all channels, including a statement from Mr. Guo Shuqing, chairman of CBIRC, during the Q&A session of a press conference on March 2nd, we believe that the regulatory ratification process is gradually entering its final phase. We'll continue to push the ratification process towards the finish line and cooperate with the regulatory authorities for final review. Based on preliminary feedback from a number of relevant regulatory authorities, we are ranked in the front of the 14 companies undergoing regulatory review, based on our ratification stance, execution plans, and accomplished results. We envision that these aforementioned assessments will be validated over time. Second, local financial supervision and management regulations. Local Financial Supervision and Administration measures the preliminary draft.
spk10: The draft requires local financial organizations to not carry out their business across the audit area. From the content point of view, the company's influence is limited. First of all, the insured insurance company has basically completed the layout of branching institutions across the country, which can be done locally. Second, The company already has a consumer finance license that can be used by the whole country. Finally, the regulation is currently in the stage of seeking advice. The subsequent companies will continue to pay attention to the planning and layout in advance. As the national small loan license management method falls, the company has sufficient capital, good contract construction, and perfect company management to support the potential license application.
spk07: Although the preliminary draft mandates that local financial institutions shall not conduct business across provisional administrative boundaries, we foresee rather limited impact on Lufax for the following reasons. First of all, our guarantee companies have largely completed the establishment of a nationwide local branch network that enables us to conduct local businesses. Secondly, we pose a nationwide consumer finance license. Thirdly, we have sufficient time to stay attuned to new licensing requirements, devise proactive plans, and execute preparations as the draft regulation is currently still at a stage of public comment. With our abundant capital reserves, excellent compliance infrastructure, and sound corporate governance, we're well positioned to apply for and attend a national microlending license or any necessary license should they become available. Results to Chinese ADRs delisting risk. ADRs delisting risk.
spk10: At the same time, the company is already researching the path of listing in Hong Kong, and the relevant departments have made initial communications.
spk07: Forcing ADS to delist from the U.S. exchange will affect not just us, but all U.S.-listed Chinese companies. With such regulations' long-lasting and widespread impact, we believe that both Chinese and U.S. authorities are engaged in constant discussions. Since our public listing, Lufax has strictly complied with all relevant regulations in both countries and fulfilled our disclosure obligations. At the same time, we have explored ways for potential due listing on the Hong Kong Stock Exchange and engaged in preliminary communications with relevant regulatory departments. Thirdly, the outlook for 2022.
spk10: Having overcome many challenges in 2021, we entered into 2023 facing continued uncertainties. Knowing the
spk07: Credit risk due to the microeconomic slowdowns and pocket COVID resurgence, we have made preemptive preparations. In the fourth quarter, we placed greater emphasis on credit asset quality by implementing more stringent risk management criteria. In 2022, we'll focus on deepening our business transformation and returning more value to our shareholders. 深化业务改革 Deepening our business transformation 为保证收入质量实现未来业务的可持续发展
spk10: RUKONG 2022 will continue to deepen the reform and find a balance between quantity and system.
spk07: To ensure the quality of our income and the sustainability of our growth, we plan to deepen our business transformation and strike a balance between scale expansion and quality improvement in 2022.
spk10: One, regarding retail modern business, the company will continue to advance the reform of the retail channel by expanding the team, optimizing the structure, In our retail credit facilitation business, to mitigate the impact of shifting market dynamics, we plan to strengthen our direct sales channel, recruiting more
spk07: capable direct salespeople optimize our team structure and help them achieve greater productivity. In addition to increasing the contribution of direct sales to our overall loan volume, we'll also implement more prudent risk management measures to keep microeconomic impact under tight control.
spk10: Second, financial management business. We will continue to optimize product structure, enhance customer experience, improve service quality and efficiency, and achieve customer wealth retention.
spk07: In our wealth management business, we strive to optimize our product mix, improve our user experience, enhance our service quality and efficiency, and secure our client assets' principal value as well as return on investment.
spk10: Due to the short-term impact of some measures, the company's 2022 performance is expected to show a low-to-high trend. We believe these reforms are necessary to make the company go more steadily and further down the solid foundation.
spk07: These initiatives may cause some short-term fluctuations in our results, but we are confident we will resume our growth trajectory in the second half of 2022. We're convinced that these business transformation initiatives are necessary to lay a solid foundation for our long-term stability and growth. Greg will share more details of our business initiatives and financial guidance later.
spk10: Continue to reward shareholders. Although there are fluctuations and uncertainties in the market in 2022, we will continue to give back to the stock market through repurchase, dividend and other ways. Despite continued market volatility and uncertainties in 2022, we hold high confidence in our own prospects.
spk07: Because of our steady profitability, quality cash flow, ample capital reserve, and preemptive compliance measures, as such, we'll continue to reward our shareholders through share buybacks and dividend payouts.
spk10: In terms of dividends, the company will make dividends of $0.34 per ADS in April 2022, which is about 30% of the company's profit in 2021.
spk07: In April 2022, we will distribute roughly 30% of our 2021 net profit to shareholders in the form of cash dividends equal to US$0.34 per ADS.
spk10: Second, in terms of repurchase, the company announced a $1 billion stock repurchase plan in 2021. As of December 31, the total repurchase amount is about $8.6 billion. According to the board's approval, In terms of share buyback, as of December 31st, 2021, we had completed about $860 million, or 86% of the U.S. $1 billion total share buyback announced in 2021.
spk07: On top of it, our Board of Directors has approved another U.S. $500 million of share buybacks in 2022.
spk10: Finally, I would like to reiterate the core competitive advantage of the business model. One is that we focus on serving small and medium-sized enterprises. Customers are more engaged in trade, manufacturing, retail, and other industries. This is in line with the policy orientation of the country supporting the physical economy. The second is that we follow the concept of the ten-stripe economy. Through this, we ensure that consumer finance is displayed. The third is that we have a professional financial DNA and maintain good communication with regulators. have a deeper understanding of monitoring policy, and a more thorough execution of monitoring requirements. These unique advantages allow us to smoothly transform and stabilize the development in a constantly changing political environment. In the future, we will insist on the concept of the peace treaty and carry out a warm-tempered finance, and build the gap into an overseas listed company. The peace treaty is the starting point for the creation of greater value for investors and society.
spk07: Finally, I would like to reiterate our core competitive advantages formed out of our exceptional business model. First, our business is fully in sync with China's national policy directive of supporting the real economy, as we primarily serve small macro business owners, mostly in wholesale trade, manufacturing, and retail industries. Second, we operate through guaranteed licenses as well as our nationwide consumer finance license. Thirdly, we have attained unparalleled insight into regulatory trends through our close dialogues with regulatory authorities. We have also accomplished thorough implementation of regulatory requirements by leveraging our domain expertise and financial DNA. The combination of these unique factors enables us to achieve business transformation and grow steadily and sustainably in a constantly evolving policy environment. Looking ahead, we will continue to uphold our commitment to maintaining full operational compliance providing compassionate and inclusive financial services, setting ourselves as a role model for corporate governance among overseas listed Chinese companies, and generating growing value for our shareholders and our society. With that, I'll turn the call over to Greg, who will share our business updates in detail.
spk05: Thank you, Chairman Jeet. In 2021, we successfully and smoothly executed a series of operational adjustments to ensure the long-term sustainability of our growth and profitability. We reduced the average APR of our loan portfolio, increased self-risk bearing, and reduced our reliance on Ping An Life Channel for sourcing. Our full-year revenue growth grew by 18.8% year-over-year, and net profit grew by 36.1% year-over-year, both exceeding guidance. In 2021, our retail credit facilitation business achieved a number of important milestones. First, we lowered our average loan portfolio pricing to 22.4% in the fourth quarter of 2021 from 25.7% in the same period of 2020, while maintaining overall unit economics. More details will be elaborated by James. Second, our business model is more in line to meet regulatory requirements. As Chairman Gee mentioned before, our guarantee company has set up locally approved subsidiaries in all of mainland China except Tibet, Ningxia, and Yunnan provinces, allowing us to operate our financial licenses locally. In terms of potential future license requirement, we have a consumer finance license, which enables us to leverage up to 10% or 10 times our capital, as opposed to a 5x leverage ratio that is currently contemplated for the proposed national microlending license. Should any changes occur that give rise to a national or nationwide microlending license, we have the required capital reserves, eligibility, and preparedness to initiate our application for such one, giving us even more flexibility in serving our core small business owner segments. Our current guarantee licenses allow us to share credit risk and process data flows with more than 65 national and local funding partners under existing regulatory frameworks. In addition, we are actively exploring new collaboration to meet expected credit rating license teachers requirements, which come into effect by the mid of 2023. We are prepared to connect to a third party credit scoring company by the end of June this year. Based on our latest understanding, the cost of that connection and the potential changes to our business model will not have any material impact. Third, we continue to increase our share of risk bearing in line with regulatory guidelines. During the fourth quarter of 2021, excluding the consumer finance company, we bore risk on 20.8% of new loads facilitated, up from 10% in the same period of 2020. Our guarantee company that bears credit risk operates with a leverage ratio under two times at the end of 2021, against a maximum leverage requirement of 10 times. Our healthy leverage ratio together with strong capital position gives us comfort to meet any new capital requirements that may come from regulatory changes. Last but not least, we saw improvements in the direct sales productivity and operating costs of steady growth and net returns despite sharply reduced reliance on Ping An. During the quarter, new loan sales from the Ping An Life Channel continued to slow down, accounting for 24.6% of new loan sales during the fourth quarter, down from 36.4% in the same period of 2021. To counter this, our direct sales team contributed more by improving productivity. Compared to the fourth quarter of 2020, our direct sales generated 21.6 more volume in new loan sales, but headcount only increased 8.4% and productivity rose 12.1%. This increased investment in O2O direct sales reaffirms our view that our offline to online service approach is the most effective way to increase coverage of this otherwise hard-to-reach small business owner segments. Our wealth management business is also making good progress in the transitioning market. In the fourth quarter, total client assets of $432 billion is overall flat but grew 13% year-over-year when excluding P2P and online bank deposit products. Meanwhile, we also deepened our product reform to effectively shift our focus toward high-value clients and higher tech-grade products. As of December 31, 2021, Contribution to total client assets from customers with investments of more than 300,000 RMB on our platform increased to 81% from 76% of the same period in 2020. Client assets from customers with investments over 1 million RMB on the platform grew by 14% year over year, and these customers have a clear preference for higher take rate products. We have differentiated ourselves by demonstrating consistent growth in high value customers and higher take rate products, laying a solid foundation for future growth. As a result, our take rate in the fourth quarter was 64 basis points, increasing 19.9 basis points compared to the previous quarter. Driven by the optimization in product and investor mix, our wealth management business has improved economics. Going forward, we will further focus on higher take rate products and new growth on upper middle class customers as we continue to develop additional value-added services to bolster wealth management revenues. Now, let's take a look at the future strategies. In the second half of 2021, the transformation of Ping on Life Business led to more notable decline in the business velocity and credit quality of customers sourced through the Life Channel. The impact of this decline is seen in the change in our overall C to M3 flow-through rates, which deteriorated from 0.4% in Q3 to 0.5% in Q4. This deterioration deepened our resolve in Q4 to initiate change in our channel mix, further reducing reliance on the life channel and increasing the quality, productivity, and then the number of direct sales. In 2022, we will strengthen our direct sales channel by raising our recruiting standards, hiring more capable direct salespeople, providing them with more systematic training, equipping them with new technology, and overall helping them achieve greater productivity. Increasing contribution from direct sales will help sustain our new loan sales growth and should improve our overall loan portfolio quality as our direct sales force exerts higher control over the assessment of borrow credit worthiness than our referral channels. As a result of actions taken, we expect the C to M3 flow through rate to peak in the first quarter and normalize in the second half, creating limited financial impact in the course of 2022. In the next few months, we will closely monitor new loan sales, channel mix, asset quality, and productivity of direct sales to track our progress and demonstrate our success in this transition. Finally, regarding our guidance, most of the impacts from these channel adjustments will occur in the first half of 2022, resulting in slower profit growth in the first half, but accelerated new business and profit growth in the second half. Our guidance for 2022 is therefore more detailed to reflect the timing of planned adjustments and one-time items. We expect our new loan sales growth to be relatively flat to low single digit in Q1 and gradually picking up to 3% to 6% for the first half. An accelerated growth in new loan sales should be witnessed during the second half, and we expect to grow new loan sales at 9% to 12% for the whole year. We expect total income to grow 8% to 10% for Q1, 10% to 12% for both the first half and the full year. Projected profit growth for the full year is 11% to 13%, with profit growth of negative 2% to 2% in Q1 and the first half. The slower profit growth in the first half reflects a number of year-over-year legacy-related items in the first and second quarter, which suppress relative profit growth in the first half of 2022. If we remove the impact of these specific items, year-over-year net profit growth is expected to be 6% to 10% in Q1 and 6% to 9% in the first half, respectively. Lufax's management team has a track record of executing transformations to ensure business sustainability and profitability, and we believe this time is no different. By taking the short-term pain of making the channel transition in the first half at a time we believe it is prudent to be prudent with overall growth, we will set strong foundations for steady high-quality long-term growth. I will now turn the call over to James Jung, our CFO, to go through the detailed operating and financial performance and our guidance for the year. Thank you, Greg.
spk09: I will now provide a closer look into our fourth quarter results. Please note that all numbers are in RMB terms, and all comparisons are on a year-over-year basis, unless otherwise stated. We concluded the fourth quarter with solid financial results, achieving consistent growth in both the top line and the bottom line. During the quarter, our total income was $15.8 billion, up 19.2% year-over-year, and our net profit increased by 1.7% to $2.9 billion year-over-year. Without considering the one-time asset impairment cost, our net profit is $3.4 billion, about 19.7% year-over-year growth. For the full year of 2021, our total income was $61.8 billion, up 18.8% year-over-year, and our net profit increased by 36.1% to $16.7 billion year-over-year. and the growth in both income and net profit for the full year of 2021 exceeded the high end of our previously announced guidance range. Additionally, our net margin for the full year of 2021 improved to 37% from 24% last year. Let's have a closer look at our operating numbers. First, We further reduced our APR while maintaining stable retail credit facilitation business unit dynamics. Our loan balance APR was 32.4% in the fourth quarter of 2021, a 3.3 percentage point decline from 25.7% in the fourth quarter of 2020. In comparison, our loan balance take rate was 9% in the fourth quarter of 2021, only 0.1 percentage point decline from 9.1% in the fourth quarter of 2020. Our loan balance APR was 23.5% in the full year of 2021, a three percentage point decline from 26.5% in 2020, while our 2021 take rate only declined 0.2 percentage point to 9.6%. As we continue to diversify funding sources, engage with more banking partners, reduce credit insurance premiums on our loan portfolios, and improve customer charging mechanisms, which lead to diminishing impact from the early loan repayments, we will continue to maintain stable unit economics and drive relentless improvements in our sales and operating efficiencies despite APR decline. Second, we maintained a stable growth in our overall loan volume and further penetrated into core and targeted customer segments. On the retail credit side, we grew our new loan sales by 14.3% to $151.6 billion during the fourth quarter of 2021, in line with our business focus on risk management under the current macro conditions. At the same time, we continued focusing on serving small business owners. During the fourth quarter, excluding our consumer finance subsidiary, 79.6 percent of new loans facilitated were disbursed to small business owners, up from 74.4 percent in the same period of 2020. On the workman's side, despite the negative impact of P2P and online department products runoff, we managed to grow our total client assets to $432.7 billion as of December 31st, 2021. Third, we continue to execute our plans to evolve our risk-sharing business while simultaneously maintaining asset quality. In line with prevailing regulatory requirements, we bore credit risks for 21% of the new loans we facilitated in the fourth quarter of 2021, up from 20% in the third quarter and 10% in the fourth quarter last year. As of December 31st, 2021, our outstanding balance of loans facilitated with guarantees from third-party credit enhancement partners accounted for 78.9% of the total outstanding balance of loans facilitated down from 89.4 percent as of December 31, 2020. All of the affirmation operating metrics exclude those of our consumer finance subsidiary. Due to slowdown of macroeconomic growth, COVID-19 pandemic, and life-channel changes, we saw some deterioration of overall asset quality. Thanks to our risk management system, the negative impact on our risk indicators are limited. Excluding consumer finance subsidiary, our DPD 30-day plus and the DPD 90-plus delinquency rates were 2.2% and 1.2% for the total loans we facilitated as of September 31st, 2021, compared to 1.9% and 1.1% as of September 30th, 2021. We will remain vigilant and be prudent on our borrowers' acquisition and risk management strategy. Fourth, we optimized our product mix to improve the take rate of our wealth management segment. During the quarter, our take rate for the segment increased by 19.9 bps to 64 bps from 44.1 bps in the previous quarter, primarily driven by our continued product mix optimization as we sharpened our focus on products with a higher take rate. Now let's take a closer look at our fourth quarter financial numbers. At the highest level, our total income in fourth quarter grew by $2.5 billion, or 19.2% year-over-year growth, while our total expense increased by $2.4 billion, or 26.2% year-over-year growth. And then the net profit grew by 1.7% year-over-year to reach $2.9 billion. Water operating related costs continue to remain flat due to deficiencies. Total expense increase is primarily driven by the credit impairment cost due to higher risk sharing and one-time asset impairment cost, excluding one-time asset impairment cost, which was mainly due to impairment loss of intangible assets related to Qianhai Asset Exchange and the Tianjin Guarantee Company, total net profit was $3.4 billion, reaching 19.7% year-over-year increase. Next, let's go through financial numbers line by line. As the total income mix of our retail credit facilitation business continues to improve, Thanks to the evolution of our business and the risk-sharing model, total income increased by 2.5 billion or 19.2% year-over-year. During the quarter, while the platform service fee decreased by 10.4% to 8.8 billion, our net interest income grew 81.5% to 4.2 billion, and our guaranteed income grew by more than 538% to $1.6 billion. In addition, other income, which is directly linked to delivering services to our financial partners, increased to $769 million in the fourth quarter from $452 million in the same period of last year. As a result, our retail credit facilitation platform service fee as a percentage of total income decreased to 51% from 70%. Because consolidated trust plans provide lower funding costs, we continue to utilize them in our funding operations, enabling our net interest income as a percentage of total income to increase to 27% from 18% a year ago. Moreover, as we continue to bear more credit risk, we generated more guaranteed income, reaching 10% as a percentage of total income compared to 2% a year ago. by expanding our service to credit enhancement partners in account management, collections, and other value-added services. Our other income as a percentage of total income increased to 5% from 3% a year ago. Our investment income decreased by 7% to $359 million in the quarter from $386 million in the same period of last year, mainly due to the fair value losses from investment assets. In terms of work management, our total platform transaction service fees increased by 23% to $708 million in the fourth quarter from $576 million in the same period of 2020. This increase was mainly driven by an increase in fees generated from our current products, which was partially offset by the runoff of legacy products. Turning to our expenses, in the fourth quarter, Our total expenses grew by $2.4 billion or 36.2% to $11.5 billion from $9.1 billion in the same period of 2020, primarily driven by increase of credit impairment costs and one-time asset impairment costs. Total expenses excluding credit and asset impairment losses, financial costs, and other losses increased by 4% to $8.3 billion in the fourth quarter of 2021. from $8 billion in the same period of 2020 remain almost the same as we further improved operating efficiency. Our total self-marketing expenses, which include expenses for borrowers and investor acquisition, as well as general self-marketing expenses, decreased by 1% to $4.8 billion in the fourth quarter. Our general administrative expenses decreased by 1.5% to $971 million in the fourth quarter from $986 million in the same period of 2020. This decrease was mainly due to our expense control measures. Our operations and servicing expenses increased by 15.2% to $1.9 billion in the fourth quarter from $1.7 billion a year ago. This increase was primarily due to the increase in trust plans management expenses resulting from the increase in the usage of consolidated trust plans and growth in the outstanding balance of loans facilitated. Our technology and analytics expense increased by 29.5 percent to 597 million in the fourth quarter of 2021, from 461 million in the same period of 2020, mainly due to our ongoing investments in technology research, development, and the lower base in fourth quarter of 2020. as a result of Social Security relief during the COVID-19 outbreak. Our current impairment losses increased by 157.2% to $2.5 billion in the fourth quarter from $985 million a year ago. This was mainly due to the increase of provision and the indemnity loss driven by increased risk exposure as the risk sharing at the total balance level has increased from 6.3% to 16.6%. It is worth noting that we grew our guaranteed income by 539%, a faster pace than expense, and continue to achieve positive profitability for guaranteed business. Including in the credit impairment losses, there's also a $216 million increase related to legacy product in work management business. Our finance cost decreased by 18 percent to $267 million in the fourth quarter from $326 million a year ago, mainly due to the decrease in the balance of convertible bonds following our C-RUN convertible notes restructuring and the increase in interest income resulting from the increase in deposits. Additionally, our effective tax rate was 33.3% during the fourth quarter of 2021 versus 31.9% in the same period of 2020 due to one-time deferred tax asset impact. For the fourth year of 2021, our effective tax rate was 28.6% versus 31.5% in 2020. As a consequence of the affirmation factors, our net profit increased by 1.7% to $2.9 billion during the fourth quarter from $2.8 billion in the same quarter of 2020. Meanwhile, our basic and diluted earnings per ADS during the fourth quarter were 1.26 and 1.21, respectively. Our basic and diluted earnings per ADS during the year of 2021 were 7.11 and 6.69 respectively, represented a 27.2% and a 20.5% growth year-over-year. As of December 31st, 2021, we had a cash balance of $34.7 billion compared to $24.2 billion as of December 31st, 2020. Looking ahead, we expect an annual new loan sales growth to be at 9% to 12%, but the growth will notably be much higher in the second half due to the completion of channel optimization initiatives. Similarly, we expect a total income growth of 10% to 12% throughout the year. Operating related costs will stay stable across the year with annual increase at about 6% to 8%. Credit related provision growth will even out in the second half given the increased risk sharing already started in the second half of 2021. As a result, we expect our total profit to grow at 11% to 13% for the whole year. Year-over-year growth will be similarly lower in the second half due to one-time legacy POP-related items in 2021. The profit growth rate will pick up in the second half once the channel optimization impact starts to come through, and the credit costs are normalized on an annual basis. Next, let me give you some specific guidance for Q1, first half, and all year. For the first year of 2022, we expect new loans to grow by 9% to 12% year-over-year to the range of $706.8 billion to $726.2 billion, and wealth management assets to grow by 2% to 3% year-over-year to the range of $441.3 billion to $445.7 billion. We expect our total income to grow by 10% to 12% year-over-year to the range of $68 billion to $69.3 billion, and net profit to grow by 11% to 13% year over year to the range of $18.6 billion to $18.9 billion. For the first quarter of 2022, we expect new loans to grow by minus 2% to 2% year over year to the range of $169 million to $175.8 billion and the wealth management client assets grow by 2% to 3% year-over-year to the range of $429.6 billion to $433.8 billion. Since retail credit presentation income is recognized over the life of a loan and is more driven by loan balance, we expect the total income to grow by 8% to 10% year-over-year to the range of $16.5 billion to $16.8 billion. In the first quarter, net profit will grow minus 2% year-over-year to the range of $4.9 billion to $5.1 billion. But if excluding the legacy P2P impact in 2021, net profit is expected to grow by 6% to 10% year-over-year. For the first half of 2022, we expect new loans to grow by 3% to 6% year-over-year to the range of $334.8 billion to $344.6 billion, and wealth management time assets to grow by 3% to 4% year-over-year to the range of $433.7 billion to $437.9 billion. We expect our total income to grow by 10% to 12% year-over-year to the range of $33.1 billion to $33.7 billion, and net profit to grow by 1% to 3% year-over-year to the range of $9.8 billion to $10 billion. and by 6 to 9 percent excluding the legacy P2P impact in 2021. This forecast reflects our current and preliminary views on the market and operational conditions, which are subject to change. This concludes our prepared remarks for today. Operator, we're now ready to take questions.
spk00: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press dial followed by 1 on your telephone keypad now. If you change your mind, please press dial followed by 2 to withdraw your question. When preparing to ask your question, please ensure your phone is unmuted locally. We have our first question from Richard Xu from Morgan Stanley. Richard, please go ahead.
spk01: Thank you, Madison, for the detailed explanations. I have, you know, just some additional questions on the, I guess, reform of the direct marketing channels. Could management provide a little bit more details in terms of what's entailed? And then the note is basically in the past couple years, management has been reducing the, I guess, the cost for the direct marketing channels. Will this lead to rising costs, cost-income ratio from the reform of direct marketing channels? And for the insurance channels, any expectations in terms of the contribution from those channels in a couple of years? Thank you.
spk09: Okay, let me answer that question and then go ahead and supplement if I missed any. So let me first give you the overall picture on the neuron sales trend by channel. if I talk about this reform. If you look at our total neuron sales growth ratio in 2021, it was 14.8%, 15.9% from direct sales, while live channel made negative 7% growth. And the fourth quarter, quarter on quarter, the total neuron grew by 14.3%, in which direct sales, it delivered 21.6% growth, why live channel made negative 20% growth. And if I share a general table number, DS channel, they are still delivering 2D growth. But live channel contribution, their sales volume dropped, I mean, compared with the same period in 2021, their sales volume dropped by almost 40%, 40%, right? So as a result, the live channel contribution ratio to our new sales it dropped from 36% in 2020 down to 29% in 2021, and then down to 24% in fourth quarter last year. And if I measure January fair number, it already came down to 20%. It's quite a rapid decrease. And this is a result of our management decision. This is why we exactly intend it, because if you understand the difference of net flow, C20 net flow, of BS channel and live channel. As of today, the live channel's credit quality, which is measured by NEPHRO, is almost 50% higher than that of DXS channel. So we have to control and safeguard our portfolio quality. So going forward, I believe this 20% live channel contribution ratio will be maintained because we believe we took all the necessary actions by now to curb the rising risk of live channel. Then going to direct sales reform. So it's obvious that we have to increase sales volume from direct sales to cover the short from live channel. And here I want to emphasize DS reform. What we mean by DS reform is not to fix an issue. DS channel alone is a good channel. As Greg said, fourth quarter last year, DS channel sales volume growth ratio was 21.6%, which was delivered by 8% headcount growth and then 12% productivity growth. So DS channel is very strong now in terms of new sales delivery and credit quality. So the DS reform we are doing now is to increase DS channel contribution in sales, sales, neuron sales volume. Of course, we want to achieve this through per DS productivity increment rather than having more and more direct sales. So what we do is we create a Yo Chai Ji Hua that we launched from our fourth quarter last year. So if we analyze our DS mix, we find that the group whose sales experience is more than three years before they joined us and married and have reasonably indebted, so they need to work hard for families. So those groups used to take about less than 10% of our new hire, but it increased to 45% by January this year. For that, we put extra input. We increased the fixed salary to attract more yutai, and then gradually we changed fixed salary to a variable commission. Then it's very obvious that X time will be 6. Our analysis shows that this group of Yo Chai, they show obviously higher price than other groups. And then if we have more and more Yo Chai groups, eventually this will further reduce our sales expense because direct sales expense components, one-third variable are fixed. And then two-thirds are the variables. So when we have more and more higher productivity direct sales, it will eventually also decrease our direct sales cost. And then once those groups prove they can deliver higher productivity and the low-delicacy ratio, then we want to change the role from simple sales force to customer relationship manager. So they can manage not only sales, but also second-run, third-run sales. complaint handling, and all reported delinquency management. And eventually we incentivize them based on balance, current balance, instead of loan amount, new loan amount. And then if you see our trailer quote, I believe this task, compared with what we achieved in the last two years, for example, like recovering from the pandemic impact ahead of other players who are increasing self-dealt portion from 1% to about 20% in cooperation with 65 partner banks, 5 trust companies, and keeping the net margin unchanged despite we sharply decreased our APR. Compared with those tasks, I think this is a relatively simple task that we have full confidence, and you can see that how we deliver this.
spk05: Richard, any follow-up questions on that?
spk01: That's pretty clear. Thank you. Okay.
spk00: Thank you. We now have our next question from Hans Phan from CLSA. Hans, please go ahead.
spk11: Thank you, management, for giving me this opportunity to ask questions. I actually have two questions, if I may. So the first one is actually on the take rate in fourth quarter. We note that the take rate was down a lot in Q&Q to 9%. Can you please elaborate on the drivers behind this? And also, if you look into this year in terms of take rate, how do we see the change there? That's the first question. And the second question is on the regulatory side. Just now, Chairman Ji mentioned Oh, sorry. Craig mentioned that by end of June, it's likely Lufax will finish and connect to the third-party credit scoring companies. So just wondering how likely this is to happen. Is that 100% sure? Have we consulted with regulators on this yet? So because this is something really cared about by the market. So just wondering how confident we are on this. Thank you. Cheers.
spk09: Thanks, Art. Let me answer your first question first. About the take rate, normally the fourth quarter is the period we have the lowest take rate and margin. So if you compare year on year, 2020 and 2021, the balance-based UE actually didn't change at all. And if you also look at, we'll share later, if you look at Our new business, UE, our net margin didn't change any while our API dropped by from almost 27% down to 23%, which is like a full percentage point. So going forward, this year, how do we see the take rate and net margin trend? Greg said in his speech, he said, the old key lines, like the new and safe, the balance, revenue, and net profits, he estimates, will increase by around 10%. So that will indicate, we believe, for sure, our take rate net margin will not change much. Why? Number one, about the price discussion. Our average blended APR for new or now is around 20%. So we believe this will meet labor requirement. And then we don't see any need to further reduce our APR for new ones. So price, we think we can maintain at the current level for new ones, while we can save further expense from operational costs and the funding costs. But that can be offset by that increasing credit costs in the first quarter, second quarter. So overall, to isolate this year, net margin will remain not much changes.
spk05: And on the regulatory, the Doan Julien for June.
spk09: Yeah, Doan Julien, this Doan Julien, so we are ready with a new process of working with Baihang. So that process can be fully ready by June this year. But we haven't got clear signal, clear guidance from PBOC yet. We submitted our plan, but we haven't got clear answer, so we are waiting. But even if we do that, let me add just one more comment regarding the cost. It will cost us about $300,000 a month, so cost-wise it's nothing, but I'm just telling you that process-wise, we are fully ready.
spk05: And, Wyeth, one of the reasons that the PBOC hasn't given us a clear answer yet is they're still also not sure in the sense that our guaranteed license is already available.
spk09: We are a financial guaranteed license company. They are not sure yet whether we have to follow this process. So we are waiting.
spk11: Right, right. And also I remember last time in third quarter briefing, the management mentioned that there's also a potential chance we are seeking the possibility to apply for license of credit scoring company. Is that still on the table?
spk09: Yeah, that's on our table, but IHAR, you may know that 8% of their shares is owned by PNAP. So it's any. We also have a stakeholder in the company. And then the plan that you mentioned, this is still going on.
spk11: Understood. Thank you very much. Next question, please.
spk00: Thank you. We now have a question from Thomas Wang from Goldman Sachs. Thomas, please go ahead.
spk08: Thank you, Madam Chairman. It's a good set of numbers. Congrats on that. Can I just check on the full year 2022 guidance? If I roughly work on new loan numbers, first half guidance, is only 3% to 6% and 3% at 9% to 12%. So it roughly works out 15% to 20% implied for the second half. Can I just sort of get your thoughts on if you extend it a little bit further, do you think this is kind of a sustainable type of new loan facilitation growth, or do you have effect in some sort of pent-up demand in that number? We may see some even normalization going forward. in 2023. Just get your thought on why you think the second half number is in that range. Thank you.
spk09: Okay. So I think the key here is the new sales. So if you remember first quarter guidance number, we believe new sales will make obvious scores from the previous year. The biggest reason is, as I said, the live channel contribution, their sales volume dropped almost by 40%, right? So even if direct sales channel grow by two digits, it cannot offset enough the short-form live channel decrease, sales volume decrease. So it will take some time, but going forward, because we believe the 20% sales contribution ratio from live channel, this will be maintained because we took all the necessary actions by now. So the rest, going forward, will gradually increase over sales volume by developing more and more direct sales channels. So it takes time. So that will come, that will happen from second quarter. And then from second half, you will see the obvious sales growth ratio versus last year by more than two digits. So that will drive our revenue and net income growth in the second half.
spk05: And so, Thomas, if you take that, as far as we can tell, the contribution from Ping on Life this year will be about 20%. And that may be true for another year or two, right, depending on the speed of the transition at Ping on Life itself. And so if you take that into account, rolling into 2023 with the reform on the DS side or the strengthening of the direct sales side, then to go back to a more, you know, for a 15% level that you're seeing in the second half into 2023 is possible, right? So it is an adjustment in the first half of this year, which is slower. But as you look at the second half of the year, that is a good indication to where we think things are in medium term.
spk08: Got it. So if I take it, basically, if the market is still there, it's not anything. You're kind of adjusting your internal on the channel on your sales force. So that's why you have this kind of deep in the first half for 2022. If I may have a follow-up, so Obviously, direct channel plays a bigger part in this growth, to drive growth. Where are you hiring those new direct sales personnels? What type of person are you hiring, and then how are you training them?
spk09: We are hiring locally. We have 35 local branches. They are hiring their own direct sales. And then we are specifically targeting, as I explained, we call them your child. They have different profile. If you analyze who's delivering higher sales volume, higher productivity, and low dealing concentration among our direct sales, almost 60,000 direct sales, that we found that in general, the who had sales experience more than three years before they joined us, and then who got married, and then there are several profile indicators So we are specifically targeting to hire those groups. And then those groups, they used to take less than 10% of our new hire last year, especially first half. And as of today, they take about 40%, more than 40% of new hire. So we are making them proud. And how to hire them? Because earlier, the reason they didn't want to, or they hesitated to joining us, was because our fixed salary at the beginning was very, very low. So then we change it. So we are offering higher fixed salary in the first six months, and then gradually we switch the portion. We gradually reduce fixed part and increase variable bonus based on their performance. So this is a reserving hiring issue. And then how we educate, how we train them. We have the Glacian Supplement. We developed the online training tool through our sales app. So through that, we provide a lot more efficient training than before. It's not offline. We provide... For different target groups, different DS groups, different profiles, we provide different set of trainings for online sales apps.
spk05: So I think that the interesting thing here, Thomas, to sort of just hit your point, is that for the first half, this is to a certain extent self-imposed because we want to maintain this sort of long-term credit quality as a key criteria. and just recognizing that was a necessary change to make given some of the transformations on the Ping An life side. I think that what YS has laid out, what becomes interesting over time when you move into maybe next year is this Yotai group, this more experienced, more stable group of salespeople over time, the ability to deliver on a customer management model rather than a pure loan sales model is very powerful for our economics and our productivity. And so that, at the end of the day, is what we're really trying to build. And then the work behind that as well is really on the technology side to give them the tools to drive that customer management in an efficient way. And so this is kind of a more medium-term transition that you should see come through. It's more about changing mix in the first half of this year, but then it also involves changing a little bit business model and how we serve customers as you go into the medium term. Got it. Thank you, Thomas.
spk07: Thank you. Please move to the next and last question, please.
spk00: Sure. We now have our last question from Mei Yin from UBS. Mei, please go ahead.
spk04: Okay. Thank you. Thank you for giving me this chance to ask the last question. I actually have three questions, if I may. The first one is to... Thank you, Chairman Ji. I would like to ask about the attitude of the supervision. You just mentioned that the reform of 429 is the best we have done so far. Do we have a time point to see when it can be considered the end? Also, if Lu Jinsuo does the best, is it possible for Lu Jinsuo can be used to do other things, such as buying your financial company, or listing, or some other start-up work, or waiting for all 14 companies to do almost everything, and then they will consider it together. This time point is very different. In addition, if there is a housing loan, will there be any progress in this aspect of other regulators? uh uh Thank you. If I may finish up, my other two will be smaller. The first one will have a new, more rigorous policy.
spk10: Is that what you mean? Yes. Or we can answer the first question first and then ask the second one.
spk07: Okay.
spk10: The issue of supervision, as you know from what I just said in the book, we are also very strict. We have repeated it repeatedly. After saying these words, we must have a basic judgment on it. The first is that all our information is a comprehensive judgment. to look at what we're going on. What we're going on. What we're going on. We can at least hear them think that I just talked about us from our attitude to our plan and the current effect is one of the best, one of the best, because in the end they will line up 14 people to say who did the best and who did the worst. We are not very clear, but I think from the current point of view, we have basically been judged that it will be divided into two types of companies. One is There are companies that have completed the revision or have revision plans. I believe this is a type of company. The second type of company is those that have not completed the revision or have not been approved by individual revision plans. I guess these are the two ways to describe it. However, we have to make an objective judgment, and we are constantly calling for it. This is because from April 29th last year to the end of last year, We are also calling on the supervision department to have a conclusion. I think that in the main supervision department of the two meetings, they can hear our voice, and they are accepting our call. I think this thing is for the health of the whole platform. I think this is necessary. So our basic judgment is, first, we think that we are entering the final stage. We have a basic judgment. The second is that we added an ant in 13 plus 1 or 14 plus 1. In 14 plus 1, we think that our entire attitude, plan, and effect, they are not only a certain department, but a comprehensive recognition. I think this is very important. I think, and I think the whole of this restructuring trust, Then include us in this process for us to go to these ways of reflection adjustment we are doing relatively early So I think this is this is I believe we have a few words later as time goes by So we've been talking to the market and the investors for the past two years We are all cautious and rigorous. We have not yet blown the bull so far. I think this is a basic judgment. First, we think It's almost the end. Secondly, what we do is one of the good things. So we need time to judge this. I think it needs to be approved. The second is whether we will do a good job and let it end first. Or we can let it go first. Let it do what it can do. My personal judgment, I don't think this should be done. It shouldn't be said who put who down first. For example, a certain company is doing very well. You can do it. You can do it. You can do it. 我覺得這個應該是一個一覽之的通告 一覽的通告中 我的個人判斷是會說 可能會說哪些是做得好的或者通過了 哪些還需要繼續觀察 可能還有些會做得不好的被處罰 或者還有些會被他們去檢查 有些可能驗收需要他們現場驗收 有些可能自己驗收就OK了 所以在這個過程中 我個人覺得是讓誰先結束 I think because of the time left until today, I personally think that it is about a month away from the one-year cycle. I think these things will slowly become clear. The third is about whether there will be some new measures related to housing generation. I think in the past one or two years, the whole management of this platform should never have been so strict and never have so many policies come out immediately. My personal judgment very strict, very unacceptable to the market, or the market that is already very vulnerable to this kind of supervision measures. I personally think that the supervision department will also be more cautious. It is more about the past a series of policies of supervision, or some in the process of seeking opinions, put it, put all the participants in the market. The suggestion of absorbing some of the land, and some reflections on the execution effect after landing, rather than I think it will be as soon as possible. There are also a lot of intense policies. The information we got from the above should be like this. Because I think the policy is enough now. It's wide enough, wide enough, depth and intensity are enough. I think the key is to see the execution of landing and the subsequent effect of observation. 我们大概一个判断是这样子的。 如果有进步问题呢, 我们也会及时跟你们沟通。 May.
spk00: Thank you. May, please kindly... May, sorry to interrupt. Please kindly repeat most of your questions in English. Thank you.
spk04: Oh, sorry. Oh, okay, okay. So why do I... Let me finish my question. Okay.
spk07: Sorry, May, shall I do a quick summary of the Q&A that just happened before we move on to the next?
spk04: Yeah, please, go ahead.
spk07: So the question was on the regulatory sense of the April 29th ratification and whether there's likely going to be more scrutiny for regulations coming for the loan facilitation model. That was the question. So the chairman's answer was, based on our overall judgment, obviously collecting information and insights from a number of channels, including talking to various departments, and talking to some of the other platforms in the 14 that's going through the review, we are forming a view that it is, number one, it is coming to an end. The process is coming to near the end of completion, given that it is about a year long. Second, Lew Holdings is one of the better ones. We're not saying we're the best amount of 14, but we're definitely one of the better ones. And that's based on our judgment, again, hearing from multiple departments and talking to multiple people. In terms of the end results, Personally, I don't think there will be an exact ranking of the 14 platforms, but I won't be surprised to see if there are a grouping of different types of platforms. For example, there could be two types. The first type is the ratification is almost complete, or there is clear and acceptable plan for the ratification. And the second group, there is not exactly acceptable plans to complete the ratification. In terms of timing, look, saying to the regulators loving heart, given it is coming to the one year anniversary, we do think we need this to conclude. And I'm pleased to say that I think people at the PBOC and the CBIRC and CSRC, they do hear our views and they do agree with us that they want to bring this to a conclusion. In terms of what we've done in the past two years, I think through this process, very importantly, we've kind of rebuilt our trust with the regulators. And through the process, obviously, we have redesigned a lot of our business models to be more compliant. In terms of the new regulations on loan facilitation, based on my communication and personal understanding, we think the regulations is already enough. The focus is more on the actual implementation of those regulations. including some that are still going through consultation, and the regulators would like to see the outcome of the early implementation rather than throwing out new ones.
spk05: May I go ahead with your other two questions, please?
spk04: Yes. Okay. Thank you. If I can follow up, I would like to ask, just now you said that there may be some companies that are doing well and some companies that are doing bad. It is necessary to wait for the ones that are doing bad to be revised in order to be able to give another, for example, permission to say that you are going to start doing the IPO of Hong Kong stocks or the second listing of Secretary. Will the listing time be affected by this? Okay, the other two questions I have, one is still regarding the business channel transformation that you mentioned the direct sales channel would have better asset quality. I think Greg, you mentioned that the M3 flow ratio has deteriorated a bit in the fourth quarter as you increase the business sources from direct channel. So is that mainly because of the macro environment changes that some retail loans are having some deterioration in asset quality, or is it also because of some other reasons that maybe the life insurance side business has deteriorated a lot more? And the second sort of small question is about the take rate on the wealth management. You mentioned that the take rate has gone up. What kind of product was mainly driving that? And also going into the future, how would the take rate improve further? Thank you.
spk09: OK, the second question about the asset policy situation in the fourth quarter. Yeah, we confirm it's mainly because of the impact from live channel. If you exclude that channel and only see the performance of the other channels, especially direct stage channels, then it's quite stable. A little bit of impact in December, January because of the lockdown of Harbin and Xi'an where we have two collection centers. So that made minor impacts on our collection performance. But mostly, the modulatory impact came from the live channel deterioration, and that's why we made a rapid adjustment to channel mix.
spk05: Maybe, May, I'll take your question on wealth before going back to Chairman Ji. On wealth, basically, what we did through the course of 2021 is we let lower margin products kind of run off. and replace them with more focus on qualified investor products, and also gradually the fund mix is also changing to within mutual funds to higher margin products, and then we're also adding insurance services which are higher margin. So all of those together, as well as some of our services to third-party platforms, fees that we collect providing our technology to other financial institutions have been growing as well. So if you take those in accumulation, we see the number of 69 basis points in the fourth quarter, which was up a lot year on year. I expect in 2022, we'll continue to see improvement on this revenue over AUM. Adding another 10 basis points over the course of the year is probably a realistic expectation.
spk10: Okay, I will continue to try to answer your question. This question is actually very sharp. My personal judgment, I will do my own judgment. I think that these 14, 13 companies, in general, I personally think that I will tell you one by one how each of them will be completed. It won't be that I tell you today that this company is completely okay, it will be put down. Tomorrow, I will continue to say that there are three companies to be put down, 10 plus 1, they will follow up. I personally think there will be a stage... I personally think, once again, my personal judgment will be a stage, a one-off statement. I think maybe some of them are OK, they can continue to move forward. Some people may have to continue to follow up. That is, there are some things you have to continue to provide an improvement plan. I guess it's like this. This is 13 plus 1. It should be such a situation. I personally estimate that the time will not be too long. I think we may have to wait for an official statement from the monitoring department. The most important thing for us now is to do our own thing well. So far, we still have some things that need to be changed. So the change is that I think our proposal is approved, but it takes time, right? We just talked about the cleaning of my grandchildren's company, including the storage of my internet, the storage of my internet, the storage of my internet, the storage of my internet, the storage of my internet, the storage of my internet, the storage of my internet, Thank you. Thank you. Thank you. Thank you. Thank you.
spk07: Again, a quick summary of the Q&A just happened. The question was on the exact timing of the April 29th conclude announcement and whether that would impact the Loopback Hong Kong listing. The answer is, again, the chairman personally, and he stresses many times that it's his personal judgment, that the announcement will likely be made in one go instead of separate announcement for each of the platforms. And on that announcement, there's likely going to be that obviously there's one group that the ratification is almost done or the plan is acceptable, so they're OK to move on to other things. And the remaining plans are not acceptable, will require continued monitoring and scrutiny from the regulators. So he believes it will be one announcement. And personally, he does not think that's going to be too long. But of course, the exact timing will need to wait for regulatory's formal announcement. In terms of Hong Kong listing, yes, the April 29th ratification will impact the timing of Hong Kong listing. Before we complete that, we will not go to Hong Kong. We have made preliminary discussions with PBOC, CSRC, CBIRC, and the China Cyber Security Watchdog. So obviously, LUFAX will not pursue a Hong Kong IPO until we get blessing from those relevant regulators. And the last point on the China-U.S. relationship, Through our channels, we believe the regulators from both sides are having continued dialogues. We're trusting their wisdom. As you know, the impact of a forced delisting of the Chinese ADIs will be too big for both sides to take. So we think they are currently working very hard, and we hope a conclusion or some sort of plan or compromise will be reached soon. Thank you, operator. I think that concludes our call today. Thank you, everyone.
spk00: Thank you. Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your line.
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