Lufax Holding Ltd American Depositary Shares, each representing two (2) Ordinary Shares

Ladies and gentlemen, thank you for standing by and welcome to LUFAX Holding Limited first quarter 2023 earnings call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, we will have a Q&A session. Please note, this event is being recorded. Now, I'd like to hand the conference over to your speaker host today, Ms. Liu Xinyan, the company's head of board office and capital markets.

Thank you very much. Hello, everyone, and welcome to our first quarter 2023 earnings conference call. Our quarterly financial and operations accounts were released by our Newswire services earlier today and are currently available online. Today, we will hear from our chairman and CEO, Mr. Y.S. Cho, who will provide an update of our latest business strategy, the macroeconomic trend, and the recent development of our business. Our co-CEO, Mr. Greg Tee, will then go through our first quarter results and provide more details on our business priorities and the key drivers. Afterwards, our CFO, Mr. David Troy, will offer a closer look into our financials before we open up the call for questions. Before we continue, I would like to refer you to our State Harbor Statement in our earnings precedent, which also applies to this call. as we will be making forward-looking statements. With that, I am now pleased to turn over the call to Mr. Y.S. Cho, Chairman and CEO of Revax. Please.

Thank you for joining. As you reflect on the first quarter, it is clear that macro and operating environments continue to pose challenges for many small business owners. However, we are encouraged by some indications of an economic rebound. giving us cautious optimism in our U-shaped recovery. We remain committed to navigating the challenges that lie ahead and maintain our unwavering focus on building a more resilient business. We'll continue to exercise patience, prudence, and preparedness for the anticipated macro upswing in our SEO segment. Let me provide some updates for the first quarter. There are some signs of a gradual recovery in the macro environment, though they remained unevenly distributed at the nascent stage. China's first quarter GDP growth, expanding by 4.5% year-on-year, indicates that the country is on track for its 2023 growth target of 5%. In addition, China's National Bureau of Statistics stated that first quarter was a promising start to the macro recovery. However, Chinese industry profits declined 21% year over year, and we continue to see a divergence in the pace of recovery across industries. While small business owners are becoming more confident, it may still take some time for macroeconomic tailwinds to flow through to our core SME segments. To give an example of this important sentiment, the Peking University survey results published in February show that approximately 80% of SBOs are optimistic about their business outlook in 2023. Over half of survey participants are expecting business volume increases of more than 50% this year. However, it is important to note that SBOs have had less than two months of normal operations in the first quarter after the spike in COVID cases and the Chinese New Year holiday. Thus, it will take time for SBOs to fully resume new business investments, which underpins lending demand. Now let me talk about the impact on our business. I would like to start by sharing our outlook on the U-shaped recovery. During the first quarter, we observed an improvement in credit rating mix and credit quality for new loans initiated in the last two quarters. 82% of new unsecured loans in the first quarter fell within our top three credit rating categories versus 41% a year ago. Neuron growth is increasingly concentrated in our preferred top third and middle third regions, which we believe will prove to be more resilient as the macro environment improves. Notably, the deterioration in asset quality has slowed down substantially in the first quarter. We have also witnessed early signs of improvements in asset quality in certain economically resilient regions and industries. We expect that flow rate will continue to improve gradually through the end of this year when operations of SMEs gradually recover. We also expect that credit charge-offs for the risk-bearing loans will likely peak in the second quarter and then gradually decline in the second half of this year. In the second half, we do expect total credit costs to remain elevated, but underlying driver will shift from past charge-offs to upfront provisioning. Arising from increasing the portion of loans we provide full guarantees for. This will be supportive for net margins in 2024 and beyond. As new growth and the portion guaranteed by us increases progressively over the next several quarters, we anticipate that the revenues will decline at a slower pace than they did this quarter. By year end, we expect the portion of loans that we bear risk as a percentage of entire portfolio to exceed 40%. This ratio stood at 24.5% at the end of the first quarter. Our ability to focus more on new business is made possible by three factors. One, the improving medical environment. Two, ongoing progress in rating funding partners for our deployment of the model, where we provide the entire guarantee. And three, the recent completion of our front-fine restructuring, which was difficult but necessary. As a result, the main drivers of our U-shaped recovery are taking shape. But as we have stated previously, we expect a notable recovery in profits underpinned by stabilized ANR to be a 2024 event. As part of our U-shaped recovery plan, we have implemented several strategic initiatives. We have completed the restructuring of our direct sales force and further optimized our headquarters and front-line operating costs. Total expenses including excluding credit impairment losses finance and other costs in the first quarter decreased by 21.5% versus a year ago. The total number of direct sales force decreased from 47,000 as of the end of 2022 to around 36,000 as of the end of the first quarter. We managed to retain the most productive members of our direct sales team. whose average productivity is more than double that of those who departed. In line with our plan, 80% of new business in the first quarter came from top third and middle third regions versus 70% a year ago. Now that we have completed our organizational restructuring, we are focused on several priorities. Firstly, we continue to increase the proportion of risk-bearing or neurons we enable, under which our guarantee subsidiary provides 100% credit enhancement. We are encouraged to see our funding partners support for the model where we provide the entire guarantee. Furthermore, as we deepen our position as an SEB advisor, we focus on product diversification and co-selling between our retail credit enablement model and our consumer finance business to meet customer needs. This will diversify our lending duration mix, gradually adding shorter duration products to our longer-term duration base. Finally, we'll continue to enhance productivity in our post-loan recovery efforts to claw back a portion of past credit losses. These key initiatives are supported by our continued investment in technology. During the first quarter, we deployed new technology to help us gain deeper insights into our small business owners' daily operations. For customer onboarding, we strengthened our capabilities by further embedding facial, voice, and location verification features. As a result, we further enhanced our ability to assess owners' business status. For the underwriting process, we introduced real-time assessment of customers' online marketing activities, allowing us to further evaluate their business momentum and repayment capabilities. These changes in credit process are augmenting our historical individual credit assessment, so-called KYT, with a deeper insight with owners' business and industries. Next, let's move on to the capital markets. We successfully completed our Hong Kong listing by introduction on April 14th, marking an important milestone in our corporate development. The listing will increase our exposure to the Hong Kong market and broaden our investor base to continue to create value for our shareholders. Additionally, we are pleased to announce that we paid out the second half of the 2022 dividend on an aggregate amount of US$114.6 million in April 2023, demonstrating our commitment to maintain a stable dividend policy. Finally, as we shared in our last earning call, we have substantially completed our regulatory rectification efforts And the industry is now entering a phase of normalized supervision. We believe this normalized supervisory framework will provide greater stability and predictability for our industry. And we will work closely with regulatory authorities to ensure our compliance with all relevant regulations. I will now turn the call over to Greg for more details on our operating resource. Thanks.