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

Ladies and gentlemen, thank you for standing by and welcome to Lufax Holdings Limited fourth quarter 2023 earnings call. At this time, all participants are in listen-only mode. After 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. Lou Sheehan, the company's head of board office and capital markets. Please go ahead, madam.

Thank you very much. Hello, everyone, and welcome to our fourth quarter 2023 earnings conference call. Our quarterly financial and operating results were released by our Newswire services and are currently available online. Today, you will hear from our chairman and CEO, Mr. Y.S. Cho, who will provide an update of our latest business strategies, the macroeconomic trend, recent developments of our business, and special dividends. Our co-CEO, Mr. Greg Gibb, will then go through our fourth quarter results, provide more details on our business priorities and outlook. Afterwards, our CFO, Mr. David Choi, 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 safe harbor statement in our earnings press release, which also applies to this call, as we will be make forward-looking statements With that, I'm now pleased to turn over the call to Mr. Y.S. Cho, Chairman and CEO of LUPEX, please.

Thank you. Thanks for joining today's call. During the fourth quarter, the economy environment remained complex, and SCBOs continued to come under pressure. Nevertheless, as we prioritize quality over quantity, we have now completed our major de-risking actions, and we continue to carry out a prudent strategy. We are confident that the strategic initiatives we have implemented form a solid foundation for longer-term growth and profitability, and believe that cumulative impact of our strategic upgrades will optimize and recalibrate our risk-return profile to align with the prevailing macro environment in China. Now let me provide some updates for our quarter. the quarter. First, the broader macro environment remained challenging for SBOs. This is reflected in the SME Development Index, published by the China Association of Small and Medium Enterprises, which declined slightly to 89.1 in the fourth quarter of 2023. Furthermore, the SME Business Conditions Index, published by Cheong Kong Graduate School of Business declined from 49.9 in September to 47.8 in December. This indicates that XBO segment is likely to recover at a somewhat slower pace. Next, let's turn to our business. Throughout 2023, we've made five major deal-risking and diversification actions, including four mixed changes and one business model adjustment. First, we have changed our segment and product mix. Our heavier concentration in the SGO segment and offerings of SGO BNC loans generated healthy profit prior to 2022. However, with a change of macroeconomic environment, such concentration drove a deterioration in both our operational and financial results in the past 18 months. To address this, we have strategically adjusted both product offerings and segments. In terms of product offerings, we've shifted from a predominant focus on STBO business loans to a more balanced offering of business and consumption loans. For our product portfolio, we've expanded our offerings to be more comprehensive, encompassing both installment and revolving payment options. Within the STBO segment, we refined our focus by targeting customers with better risk profiles, specifically those in the R1 to R3 rating range. Second, we have adjusted our regional mix. Since the second half of 2022, we've observed significant variations in credit performance and resilience across different areas. Accordingly, we have completed the reduction in our footprint and are focusing on higher quality geographies with expected greater economic resilience. Third, we have optimized our channel mix, especially our direct sales channel, which is the most important for our business. We recognize that our rapid historical expansion had resulted in low productivity and higher risk with direct sales team. and responded by optimizing the scale of our direct sales team. As a result, the number of direct sales teams reduced from 47,000 at the end of 2022 to around 21,000 at the end of 2023. Fourth, we have adjusted our industry mix, reflecting the relative sustainability of industries under the changing macro environment. In our internal risk assessment, we have assigned greater importance to preservation of each industry's economic cycle stage within our models and increased KYB and industry factors for enhanced model predictiveness. Finally, we have completed migration of our business model. As discussed previously, the high CGI premium charges by our business partners had negatively impacted our revenue and profit. We recognized that high third-party reliance reduced our tactical freedom. Therefore, we started negotiations with our funding partners at the end of 2022 and successfully completed transition into a 100% guaranteed business model by the end of third quarter 2023. In the fourth quarter of 2023, All the new loans were either granted by our consumer finance subsidiary as unbalanced loans or enabled by our guaranteed company under the 100% risk-bearing business model, thus eliminating the drag factor of CGI. On a single account basis, new loans enabled under 100% guaranteed models are expected to realize lifetime profitability. However, may record net accounting loss for the first calendar year due to higher upfront provisioning as compared with the loans on the CGI model. While this strategic shift enables us to capture greater economic value, it has also increased our risk exposures. Therefore, we remain prudent and prioritize quality over quantity throughout 2024. In terms of asset quality, Compared to the third quarter, C2M3 flow rate experienced an increase in the fourth quarter. This was mainly driven by the reduction in our outstanding loan balance and short-term impact from the restructuring of our direct sales team and branches. With the completion of all the restructuring measures, we have seen gradual improvement of the flow rate in the first quarter of 2024. To sum up, During the fourth quarter, with the completion of the risking initiative, the downsides of our business is under control, and we have stronger visibility of our businesses. However, the upside, we still need more time due to our prudent strategy and transformation of our business model. Finally, over the past quarters, we have consistently heard our shareholders' requests for us to improve investor return. and capital efficiency. Considering the priorities in our business de-risking and business model transformation, as well as our outlook for the growth and capital requirements for the next several years, we believe we have the capability, and now is the right time, to return value to our shareholders through a special dividend with an estimated dividend size of approximately RMB 10 billion. Thanks. I will now return the call over to Greg.