Lufax Holding Ltd (LU) 2023 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Lufax Holding Limited First Quarter 2023 earnings call. (Operator Instructions) Please note, this event is being recorded.

女士們，先生們，感謝您的支持，歡迎來到陸金所控股有限公司 2023 年第一季度財報電話會議。 （操作員說明）請注意，正在記錄此事件。

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.

現在我想把會議交給今天的主持人，公司董事會辦公室和資本市場負責人劉欣豔女士。

Thank you very much. Hello, everyone, and welcome to our first quarter 2023 earnings conference call. Our quarterly financials and our briefly were released by our newswire services earlier today 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 strategy, the macroeconomic trends and the recent development of our business.

非常感謝。大家好，歡迎來到我們的 2023 年第一季度收益電話會議。我們的季度財務報告和簡報已於今天早些時候由我們的新聞專線服務發布，目前可在線獲取。今天，您將聽到我們的董事長兼首席執行官 Y.S. Cho，他將介紹我們最新的業務戰略、宏觀經濟趨勢和我們業務的最新發展。

Our co-CEO, Mr. Greg Gibb will then go through our first quarter results and will provide more details on our business priorities and the key drivers. Afterward, our CFO, Mr. David Choy, will offer a closer look into our financials before we open up the call for questions.

我們的聯席首席執行官 Greg Gibb 先生隨後將審閱我們的第一季度業績，並將提供有關我們的業務重點和主要驅動因素的更多詳細信息。之後，我們的首席財務官 David Choy 先生將在我們開始提問之前仔細研究我們的財務狀況。

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 making forward-looking statements. With that, I now pleased to turn over the call to Mr. Y.S. Cho, Chairman and CEO of Lufax. Please.

在我們繼續之前，我想請您參考我們在收益新聞稿中的安全港聲明，該聲明也適用於本次電話會議，因為我們將發表前瞻性聲明。有了這個，我現在很高興將電話轉給 Y.S. 先生。陸金所董事長兼首席執行官曹。請。

Thank you for joining. As reflected 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 bond, giving us cautious optimism in our U-shape recovery. We remain committed to navigating the challenges that lie ahead and maintain our unwavering focus on building a more resilient business. We continue to exercise patients, prudence and preparedness for the anticipated macro upstream in our SBO segment.

感謝您的加入。正如第一季度所反映的那樣，宏觀和經營環境顯然繼續對許多小企業主構成挑戰。然而，我們對經濟債券的一些跡象感到鼓舞，讓我們對我們的 U 型複蘇持謹慎樂觀態度。我們仍然致力於應對未來的挑戰，並繼續堅定不移地專注於建設更具彈性的業務。我們繼續對 SBO 部門預期的宏觀上游進行耐心、審慎和準備。

Let me provide some updates for the first quarter. First, there are some signs of a great recovery in the macro environment though they remained unevenly distributed at a nascent stage. China's first quarter GDP growth expanding by 4.5% year-on-year indicated that the country is on track for its 2023 growth target of 5%.

讓我提供第一季度的一些更新。一是宏觀環境出現了一些大復蘇跡象，但初期分佈不均。中國一季度 GDP 同比增長 4.5%，表明中國有望實現 2023 年 5% 的增長目標。

In addition, China's National Bureau of Statistics stated that first quarter was of 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.

此外，中國國家統計局表示，第一季度是宏觀復甦的良好開端。然而，中國行業利潤同比下降 21%，我們繼續看到各行業復甦步伐存在差異。

While small business owners are becoming more confident and may takes some time for macroeconomic tailwinds to flow through to our core SME segments. To give an example of this improving sentiment and Peking University survey, a survey which was published in February, showed 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 2 months of normal operations in the first quarter after the spike in COVID cases and the Chinese New Year holiday. But it will take time for SBOs to fully resume new business investments, which underpins lending demand.

雖然小企業主變得更加自信，但宏觀經濟的順風可能需要一些時間才能流向我們的核心中小企業部門。以北京大學 2 月份發布的一項調查為例，說明這種情緒的改善，該調查顯示，約 80% 的 SBO 對其 2023 年的業務前景持樂觀態度。超過一半的調查參與者預計業務量增長超過今年50%。但是，值得注意的是，在 COVID 病例激增和農曆新年假期之後，SBO 在第一季度的正常運營不到 2 個月。但 SBO 需要時間才能完全恢復支撐貸款需求的新業務投資。

Now let me talk about the impact on our business. I would like to start by showing our outlook on the U-shaped recovery. During the first quarter, we will resort on improvement in credit rating mix and credit quality for new loans initiated in the last 2 quarters. 82% of new unsecured loans in the first quarter fell within our top 3 credit rating categories versus 41% a year ago.

現在讓我談談對我們業務的影響。我想首先展示我們對 U 型複甦的展望。在第一季度，我們將改善過去兩個季度新發放的貸款的信用評級組合和信用質量。第一季度 82% 的新無抵押貸款屬於我們的前 3 大信用評級類別，而一年前這一比例為 41%。

Year on 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 increments in asset quality and certain economically vigilant 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.

年度增長越來越集中在我們首選的前三分之一和中三分之一地區，我們相信隨著宏觀環境的改善，這些地區將更具彈性。值得注意的是，一季度資產質量惡化趨勢明顯放緩。我們還目睹了資產質量和某些經濟警惕地區和行業上升的早期跡象。我們預計流動率將在今年年底繼續逐步改善，屆時中小企業的經營將逐漸恢復。我們還預計，風險貸款的信貸沖銷可能會在第二季度達到頂峰，然後在今年下半年逐漸下降。

In the second half, we do expect total credit costs to remain elevated, but underlying driver will shift from the past charge-offs to (inaudible) arising from increasing the portion of loans, we provide full guarantees for. This will be supported for net margins in 2024 and beyond. As new growth and portion guaranteed by us increased 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.

下半年，我們確實預計總信貸成本將保持高位，但潛在驅動因素將從過去的沖銷轉移到（聽不清）增加貸款部分，我們為此提供全額擔保。這將支持 2024 年及以後的淨利潤率。隨著我們擔保的新增長和部分在接下來的幾個季度逐步增加。我們預計收入的下降速度將低於本季度。到年底，我們預計我們承擔風險的貸款佔整個投資組合的比例將超過 40%。第一季度末這一比例為 24.5%。

Our ability to focus more on new business is made by -- made possible by 3 factors. One, the improving macro environment, two, ongoing progress in [reading] funding partners for our deployment of the model where we provide the entire guarantee. And three, the recent completion of our front line 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 the 2024 event.

我們之所以能夠更加專注於新業務，是因為 3 個因素使之成為可能。一，改善宏觀環境，二，[閱讀]資金合作夥伴的持續進展，為我們提供全部保證的模型部署。第三，最近完成了我們的前線重組，這是困難但必要的。因此，我們 U 型複甦的主要驅動力正在形成。但正如我們之前所說，我們預計到 2024 年事件 [ANR] 穩定後，利潤將顯著回升。

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 headquarter and frontline 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 that exchange costs decreased from [CNY 47,000] as of the end of 2022 to around [CNY 36,000] as of the end of the first quarter. We managed to retain the most positive 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.

作為我們 U 型複蘇計劃的一部分，我們實施了多項戰略舉措。我們完成了直銷隊伍的重組，進一步優化了總部和一線運營成本。第一季度的總支出，包括——不包括信用減值損失、財務和其他成本，比去年同期下降了 21.5%。該交換成本的總數從 2022 年底的 [47,000 元人民幣] 減少到第一季度末的 [36,000 元人民幣] 左右。我們設法留住了直銷團隊中最積極的成員，他們的平均生產力是離職人員的兩倍多。根據我們的計劃，第一季度 80% 的新業務來自前三分之一和中三分之一地區，而一年前這一比例為 70%。

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 new loans we [enable], under which our guaranteed subsidiary provides 100% credit enhancement. We are encouraged to see our funding partner support for the model where we provide the entire guarantee. Furthermore, as we deepen our position as an SBO adviser. We're focus on product diversification and cross selling between our retail credit in every month model and our customer finance business to meet customer needs.

現在我們已經完成了組織結構調整。我們專注於幾個優先事項。首先，我們繼續增加我們[啟用]的風險承擔或新貸款的比例，我們的擔保子公司提供 100% 的信用增級。我們很高興看到我們的資金合作夥伴支持我們提供全部擔保的模型。此外，隨著我們加深我們作為 SBO 顧問的地位。我們專注於產品多樣化和每月零售信貸模型與客戶融資業務之間的交叉銷售，以滿足客戶需求。

This will diversify our lending duration mix, gradually adding shorter duration products to our longer-term duration base. Finally, we continue to enhance [power] in our post loan recovery efforts to claw back a portion of past credit losses. These key initiatives are supported by our continued investments in technology, during the first quarter, we deployed new technology to help us gain deeper insights into our small business owners daily operations.

這將使我們的貸款期限組合多樣化，逐漸將較短期限的產品添加到我們的長期期限基礎上。最後，我們繼續加強我們在貸款後恢復工作中的[力量]，以彌補過去的部分信貸損失。這些關鍵舉措得到了我們對技術的持續投資的支持，在第一季度，我們部署了新技術來幫助我們更深入地了解我們的小企業主的日常運營。

For customer onboarding, we strengthened our capabilities of -- by further embedding facial, voice and location verification features. As a result, we further enhance our ability to access -- 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 KYC with a deeper insight with owners business and industries, KYB.

對於客戶入職，我們通過進一步嵌入面部、語音和位置驗證功能來增強我們的能力。因此，我們進一步增強了訪問能力——評估所有者的業務狀況。對於承銷流程，我們引入了對客戶在線營銷活動的實時評估，使我們能夠進一步評估他們的業務勢頭和還款能力。信用流程的這些變化正在增強我們歷史上的個人信用評估，即所謂的 KYC，對所有者企業和行業 KYB 有更深入的了解。

Next, let's move on to the capital markets. We successfully completed our Hong Kong listing by production on April 14. Marking on important milestone in our corporate development the listing will increase our exposure through out of Hong Kong market and broaden our investor base to continue to create value for our shareholders.

接下來，讓我們轉向資本市場。我們於 4 月 14 日成功完成香港上市。標誌著我們企業發展的重要里程碑，上市將增加我們在香港以外市場的曝光率，並擴大我們的投資者基礎，繼續為我們的股東創造價值。

Additionally, we are pleased to announce that we paid out the second half of 2022 dividend an aggregate amount of USD 114.6 million, in April 2023, demonstrating our commitment to maintain a stable dividend policy. Finally, as we heard in our last only call we have substantially completed our regulatory rectification efforts, and the industry is now entering a phase of normalized provision -- 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.

此外，我們很高興地宣布，我們於 2023 年 4 月支付了總計 1.146 億美元的 2022 年下半年股息，表明我們致力於維持穩定的股息政策。最後，正如我們在上一次電話會議中聽到的那樣，我們已經基本完成了監管整頓工作，行業正在進入常態化供應階段——監管。我們相信，這種規範化的監管框架將為我們的行業提供更大的穩定性和可預測性，我們將與監管機構密切合作，以確保我們遵守所有相關法規。

I will now turn the call over to Greg for more details on our operating results.

我現在將把電話轉給格雷格，了解我們經營業績的更多細節。

Thank you, Y. S. I will now provide more details on our first quarter results and our operational focus for this year. Please note all figures are in renminbi unless otherwise stated. In the first quarter of 2023, our top line and bottom line performance were adversely impacted by the challenging macro environment. Our total income was CNY 10.1 billion, representing a decrease of 18.2% compared with the last quarter of 2022. This was mainly driven by the decrease in new loans and the pricing pressure from our credit insurance partners. Despite the challenges on our top line performance, we did turn the corner and achieved profitability this quarter. with a net profit of CNY 732 million, primarily due to a decrease in credit impairment losses.

謝謝 Y. S. 我現在將提供有關我們第一季度業績和今年運營重點的更多詳細信息。請注意，除非另有說明，所有數字均以人民幣為單位。 2023 年第一季度，我們的收入和利潤表現受到充滿挑戰的宏觀環境的不利影響。我們的總收入為人民幣 101 億元，與 2022 年最後一個季度相比下降了 18.2%。這主要是由於新增貸款減少以及我們信用保險合作夥伴的定價壓力所致。儘管我們的營收業績面臨挑戰，但我們確實在本季度扭轉了局面並實現了盈利。淨利潤7.32億元，主要是信用減值損失減少所致。

Now let's dive into the details of our key drivers of the top line performance. One of the key drivers is our loan volume. In the first quarter of 2023, our new loans enabled were CNY 57 billion, representing a year-over-year decrease of 65%. This was mainly driven by our tightened credit standards on new loans enabled. Executing on our strategic initiative in response to the elevated credit impairment losses in the first quarter, we continue to prioritize higher-quality SBO customer segments concentrated in economically more resilient geographies. The proportion of new unsecured loans enabled in the R1 to R3 customers, which are our top 3 rankings in our R1 to R6 scale, increased to 82% in the first quarter from 41% in the same period of last year. Meanwhile, the contribution from customers in the top third and middle-third regions continued to increase and reached 80% in the first quarter of 2023 compared to 70% a year ago.

現在讓我們深入了解我們的頂級業績的關鍵驅動因素的細節。關鍵驅動因素之一是我們的貸款量。 2023年一季度，本行新增貸款570億元，同比下降65%。這主要是由於我們收緊了新貸款的信貸標準。執行我們的戰略舉措以應對第一季度信用減值損失的增加，我們繼續優先考慮集中在經濟更具彈性的地區的高質量 SBO 客戶群。 R1 至 R3 客戶（我們在 R1 至 R6 規模中排名前三）的新增無抵押貸款比例從去年同期的 41% 上升至第一季度的 82%。與此同時，前三分之一和中三分之一地區客戶的貢獻繼續增加，到 2023 年第一季度達到 80%，而一年前為 70%。

New loans were adversely impacted in the short run by the optimization of our direct sales team, which was difficult but necessary for the long-term development of the company. The optimization was completed in the first quarter, and we managed to retain the more experienced and productive members of our direct sales force. The average productivity are by retained direct sales employees is more than double that [of those who departed]. We believe that we are on the right path, and we expect to see the results reflected in upcoming quarters. Additionally, we have observed that new loan vintages enabled after we tightened our credit standards demonstrate improved asset quality compared with older loan vintages.

直銷團隊的優化在短期內對新增貸款產生不利影響，這對公司的長期發展來說是困難但必要的。優化在第一季度完成，我們設法留住了直銷團隊中經驗更豐富、效率更高的成員。保留的直銷員工的平均生產力是[離職人員]的兩倍多。我們相信我們走在正確的道路上，我們希望在接下來的幾個季度中看到結果。此外，我們觀察到，與舊貸款相比，我們收緊信貸標准後啟用的新貸款表明資產質量有所改善。

As we focus on higher-quality SBOs, the average ticket size has naturally increased as a result. Average ticket size of unsecured loans for the first quarter of 2023 increased to revenue CNY 270,000 from CNY 240,000 average for the year of 2022. Our Consumer Finance business saw healthy growth in the first quarter despite the challenges in our retail enablement model. The total outstanding balance for consumer finance loans in the first quarter of 2023 was CNY 29.6 billion, up 39% year-over-year, and credit performance was in line with the industry credit performance. Contribution from our consumer finance business grew as a percentage of new loans enabled and increased from 11% in the first quarter of 2022 to 24% this quarter.

由於我們專注於更高質量的 SBO，因此平均票數自然會增加。 2023 年第一季度無抵押貸款的平均收入從 2022 年的平均 24 萬元人民幣增加到 27 萬元人民幣。儘管我們的零售支持模式面臨挑戰，但我們的消費金融業務在第一季度實現了健康增長。 2023年一季度消費金融貸款餘額296億元，同比增長39%，信用表現與行業信用表現一致。我們消費金融業務的貢獻佔新增貸款的百分比有所增長，從 2022 年第一季度的 11% 增加到本季度的 24%。

Further diversifying our product offerings. Another key driver of our top line performance is take rate. As mentioned earlier, our take rate remains compressed, which is mainly due to the elevated premiums charged by credit insurance partners. Although our tightened credit standards have improved asset quality of new loans, credit insurance premiums have remained at an elevated level to date. We are proactively addressing the take rate pressure by continuing to modify our credit enhancement arrangements. Under these arrangements, our guaranteed company provides full credit enhancement without the involvement of external credit insurance partners. We are encouraged by the fact that our funding partners are supportive of the shift as of mid-May, 5 out of 6 Trust partners and 37 out of 78 bank partners have agreed to extend credit under the model where we provide the entire guarantee.

進一步豐富我們的產品供應。我們頂級業績的另一個關鍵驅動因素是採用率。如前所述，我們的承保率仍然處於壓縮狀態，這主要是由於信用保險合作夥伴收取的保費較高。儘管我們收緊的信貸標準改善了新增貸款的資產質量，但信用保險保費迄今仍處於較高水平。我們通過繼續修改我們的信用增級安排來積極應對利率壓力。根據這些安排，我們的擔保公司在沒有外部信用保險合作夥伴參與的情況下提供全面的信用增級。我們的資金合作夥伴支持截至 5 月中旬的轉變，這讓我們感到鼓舞，6 個信託合作夥伴中的 5 個和 78 個銀行合作夥伴中的 37 個已同意在我們提供全部擔保的模式下提供信貸。

In addition, 31 of our funding partners are already extending new loans under the model where we provide the entire guarantee. As a result, our credit risk-bearing by balance in the first quarter, further increased to 24.5% and is expected to exceed 40% by the end of this year. We believe we have adequate capital to support the increase in risk-bearing loans as the leverage ratio of our guaranteed subsidiary was less than 2x. And as of the end of the first quarter, well below the regulatory limit of 10x. As such, we expect our take rate will gradually improve over the next several quarters as we increase the guarantee portion for new loan business.

此外，我們的 31 個資金合作夥伴已經在我們提供全部擔保的模式下提供新貸款。因此，我們一季度的信用風險承擔餘額進一步增加至 24.5%，預計到今年年底將超過 40%。我們相信我們有足夠的資本來支持風險貸款的增加，因為我們擔保子公司的槓桿率低於 2 倍。而截至一季度末，遠低於 10 倍的監管上限。因此，隨著我們增加新貸款業務的擔保部分，我們預計我們的利率將在未來幾個季度逐漸提高。

Next, let's go to the details of our bottom line drivers. The main driver of recovery in our bottom line was a decrease in credit impairment losses. In the first quarter, credit impairment losses declined by more than [50%] and to CNY 3.1 billion from [CNY 6.7] billion in the fourth quarter of 2022. This was mainly driven by a notable decrease in provisions compared with the previous quarter as we've taken a more conservative view on the outlook for credit quality prior to post-pandemic reopening. As the macro environment gradually normalizes and activity is picking up in the first quarter, we partially released a portion of the previously (inaudible) provisions, which had a positive impact on our P&L.

接下來，讓我們詳細了解我們的底線驅動因素。我們利潤恢復的主要驅動力是信用減值損失的減少。第一季度，信用減值損失下降超過 [50%]，從 2022 年第四季度的 [67 億元人民幣] 降至 31 億元人民幣。這主要是由於撥備較上一季度顯著減少所致在大流行後重新開放之前，我們對信貸質量的前景持更為保守的看法。隨著第一季度宏觀環境逐漸正常化和活動回暖，我們部分釋放了之前（聽不清）的部分撥備，這對我們的損益產生了積極影響。

The improvement in our credit impairment losses is also visible in our C-M3 ratios. The forward indicator on asset quality that we monitor closely, it stood at 1% in the first quarter, remaining unchanged compared with the fourth quarter of 2022. This was primarily attributable to the increase of C-M3 for general unsecured loans from 1.1% in the fourth quarter of 2022 to 1.2% in the first quarter, but this was partially offset by a decrease in the flow rate for secured loans from 0.6% to 0.5%. while the asset quality of secured loans is clearly improving, it is worth noting the deterioration in asset quality of unsecured loans has slowed down substantially in the first quarter, and the delta of C-M3 flow rate was 10 basis point increase versus a 20 basis point increase in the fourth quarter of 2022. We will continue to monitor closely such indicators in the coming quarters as they are critical to determining the speed of our U-shape recovery.

我們的 C-M3 比率也體現了我們信用減值損失的改善。我們密切關注的資產質量前瞻指標，一季度為 1%，與 2022 年四季度相比保持不變。這主要是由於一般無抵押貸款的 C-M3 從 1.1% 增加2022 年第四季度到第一季度的 1.2%，但這部分被擔保貸款的流量從 0.6% 下降到 0.5% 所抵消。在擔保貸款資產質量明顯改善的同時，值得一提的是，一季度無擔保貸款資產質量惡化明顯放緩，C-M3流動率delta從20個基點上升10個基點2022 年第四季度的增長點。我們將在未來幾個季度繼續密切關注這些指標，因為它們對於確定我們的 U 型複蘇速度至關重要。

Looking ahead for the remainder of 2023, we expect credit impairment losses at each quarter to be on par with those during the first quarter. This is mainly due to our planned expansion of the model where we provide the entire guarantee during the coming quarters. The extension of such model will increase upfront provision levels, but should result in improved net margins over the medium term.

展望 2023 年剩餘時間，我們預計每個季度的信用減值損失將與第一季度持平。這主要是由於我們計劃在未來幾個季度提供全面保證的模型擴展。這種模式的擴展將增加前期撥備水平，但應該會在中期提高淨利潤率。

During the first quarter, we continued to make progress on our new SBO ecosystem, as a recap, our new value-added services platform, branded LuDianTong, is an open platform populated with digital operating tools and industry content to support business development for our small business owners. We intend to use this platform to engage potential customers at an earlier stage, deepen our interaction with existing customers and create both new cross-sell opportunities and a new source of customer referral.

第一季度，我們在新的 SBO 生態系統上繼續取得進展，回顧一下，我們新的增值服務平台，品牌路點通，是一個開放的平台，包含數字運營工具和行業內容，以支持我們小型企業的業務發展企業主。我們打算利用這個平台在早期階段吸引潛在客戶，加深我們與現有客戶的互動，並創造新的交叉銷售機會和新的客戶推薦來源。

As of March 31, 2023, we had approximately 1.9 million registered customers on LuDianTong who has submitted their complete business or personal information, an expansion of roughly sevenfold from the end of 2022 and through this first quarter. As Y.S. mentioned in the face of an uneven post-pandemic economic recovery, we are cautiously optimistic in realizing our U-shape recovery. However, we will remain prudent on absolute levels of new growth until we see definitive improvement in overall lending demand and credit quality. While we expect to see gradual recovery in our core business metrics in the second half of this year, notable bottom line performance improvement is expected to be a 2024 event.

截至 2023 年 3 月 31 日，路點通上約有 190 萬註冊客戶提交了完整的業務或個人信息，比 2022 年底和第一季度增長了約七倍。作為 Y.S.提到面對疫情后經濟復甦的不平衡，我們對實現U型複蘇持謹慎樂觀態度。然而，在我們看到整體貸款需求和信貸質量明顯改善之前，我們將對新增長的絕對水平保持謹慎。雖然我們預計今年下半年我們的核心業務指標將逐步復甦，但顯著的底線業績改善預計將在 2024 年發生。

I will now turn it over to David, our CFO, for more details on our financial performance.

我現在將其轉交給我們的首席財務官大衛，以了解有關我們財務業績的更多詳細信息。

Thank you. Greg. I'll now provides a closer look at our first quarter results. Please note, all numbers are in renminbi terms, and all comparisons are on a year-on-year basis unless otherwise stated. As Y.S. has (inaudible) before our performance was impacted by the macro environment and our customer selection resulting of 41.8% our top line total income to CNY 10.1 billion for the first quarter. Loss of total expenses decreased by 8.8% to CNY 9 billion as a result on [that provision] was RMB 732 million in the first quarter of 2023.

謝謝。格雷格。我現在將詳細介紹我們的第一季度業績。請注意，所有數字均以人民幣計價，除非另有說明，否則所有比較均為同比。作為 Y.S.在我們的業績受到宏觀環境和客戶選擇的影響之前（聽不清），第一季度我們的總收入達到 41.8%，達到 101 億元人民幣。由於[該撥備]在 2023 年第一季度的總費用損失為 7.32 億元人民幣，因此減少 8.8% 至 90 億元人民幣。

During this quarter, our technology-based income -- techcom-based income was CNY 5 billion, representing an increase of 46.1% of our revenue. Our net interest income was CNY 3.3 billion, a decrease of 32.8% and our guaranteed income was CNY 1.4 billion, representing a decrease of 25.5%. As a result, our technology platform-based income service fees as a percentage of total income declined to 49.7% from 53.7% a year ago. In addition, due to the increase of income from consumer finance loans, our net interest expense of total income actually increased to 33.2% from 28.8% a year ago. Furthermore, as we continue to better utilize our guaranteed company's abundant capital to bear more credit risk by ourselves instead of through our P&C insurance partners, we generated more guarantee income, reaching 14.1% of the total income as compared with 11% a year ago.

本季度，我們基於技術的收入——基於天通的收入為人民幣 50 億元，占我們收入的 46.1% 增長。利息淨收入33億元，下降32.8%，保證收入14億元，下降25.5%。因此，我們基於技術平台的收入服務費佔總收入的百分比從一年前的 53.7% 下降至 49.7%。此外，由於消費金融貸款收入的增加，我們的淨利息支出佔總收入的比例實際上從一年前的 28.8% 增加到 33.2%。此外，由於我們繼續更好地利用我們被擔保公司的充裕資本來自行承擔更多的信用風險，而不是通過我們的 P&C 保險合作夥伴，我們產生了更多的擔保收入，達到總收入的 14.1%，而一年前為 11%。

Our other income, which mainly includes account management fees, collections and other value-added service fees charged to our credit enhancement partners as part of the retail credit enablement process was CNY 227 million in the first quarter of '23 compared to CNY 704 million in the same period of '22. The change was mainly due to change in the fee structure that we charge to our primary credit enhancement partner.

2023 年第一季度，我們的其他收入（主要包括賬戶管理費、收款和其他作為零售信貸支持流程的一部分向我們的信用增級合作夥伴收取的增值服務費）為 2.27 億元人民幣，而 2020 年第一季度為 7.04 億元人民幣22年同期。該變化主要是由於我們向主要信用增級合作夥伴收取的費用結構發生變化。

Turning to our expenses. We continue to prudently manage our operational expenses. Our total expenses excluding credit and asset impairment losses by this quarter and other losses decreased by 21.5% year-over-year to CNY 5.7 billion quarter. Returning to the operating efficiency, in the first quarter, our total expense decreased by 11.8% to CNY 9 billion from CNY 10.2 billion a year. This decrease was primarily driven by sales and marketing expenses.

談到我們的開支。我們繼續審慎地管理我們的運營費用。本季度扣除信貸和資產減值損失以及其他損失的總支出同比下降 21.5% 至 57 億元人民幣。回到運營效率，第一季度，我們的總費用從一年的 102 億元人民幣下降 11.8% 至 90 億元人民幣。這一下降主要是由銷售和營銷費用推動的。

Our total sales and marketing expenses, which mainly includes expenses for borrowers and investor acquisition costs as well as general sales and marketing expenses decreased by 32.4% to CNY 3 billion in the first quarter.

第一季度，我們的總銷售和營銷費用（主要包括借款人和投資者獲取成本以及一般銷售和營銷費用）下降了 32.4% 至人民幣 30 億元。

The decrease was driven by 3 factors, first, a decrease in new loan sales and reduction in commissions. Second, the decrease in investor acquisition and retention expenses and referral expenses for platform services driven by decrease (inaudible). And finally, the decreased general, sales and marketing expenses, which was driven by the decrease in new sales.

減少的原因有 3 個，首先是新貸款銷售減少和佣金減少。其次，平台服務的投資者獲取和保留費用以及推薦費用減少（聽不清）。最後，由於新銷售額的減少，一般費用、銷售和營銷費用減少。

Our general and administrative expenses increased by 4.2% to CNY 756 million in the first quarter, mainly due to the fixed cost, which decreased low volume. Our operating and servicing expenses decreased by 2% to CNY 1.6 billion in the first quarter, mainly due to the expense controlling measures and decreased loan balance and new loan sales. Our credit impairment losses was CNY 3.1 billion in the first quarter compared with CNY 2.8 billion a year ago, an increase of 10.9%, it was primarily driven by the increase in indemnity losses as a result of worsening credit performance due to -- largely due to the part of (inaudible) of economic environment partially offset by the increase in (inaudible) driven by the pace of [low-power].

我們的一般和行政費用在第一季度增長了 4.2% 至人民幣 7.56 億元，這主要是由於固定成本減少了銷量。我們的運營和服務費用在第一季度下降了 2% 至 16 億元人民幣，這主要是由於費用控制措施以及貸款餘額和新貸款銷售的減少。一季度，我們的信用減值損失為 31 億元人民幣，而去年同期為 28 億元人民幣，增長 10.9%，這主要是由於信用業績惡化導致的賠償損失增加——主要是由於——部分（聽不清）經濟環境部分被 [低功率] 步伐推動的（聽不清）增長所抵消。

Our finance costs decreased by 10.5% to CNY 189 million in the first quarter from CNY 211 million for -- the in the same period of 2022, mainly due to the increase of interest [income] from bank deposits, partly offset on the increase of the interest spend driven by increased business rates. As a result, net profit for the first quarter was CNY 732 million compared with net profit of CNY 1.3 billion in the same quarter of '22. Meanwhile, our basic and diluted earnings per ADS during the first quarter, both RMB 0.30 or USD 0.04 (inaudible). On the balance sheet side, our balance sheet remains strong and solid cash at bank products increased as of March 31, 2023 with a cash balance of CNY 51.3 billion as compared with CNY 43.9 billion as of the end of last year.

我們的財務成本從 2022 年同期的 2.11 億元人民幣下降 10.5% 至第一季度的 1.89 億元人民幣，主要是由於銀行存款利息 [收入] 的增加，部分被商業利率上升推動的利息支出。結果，第一季度的淨利潤為 7.32 億元人民幣，而 22 年同期的淨利潤為 13 億元人民幣。同時，我們第一季度每份 ADS 的基本和稀釋收益均為 0.30 元人民幣或 0.04 美元（聽不清）。在資產負債表方面，我們的資產負債表依然強勁，截至 2023 年 3 月 31 日，銀行產品現金穩健增加，現金餘額為 513 億元人民幣，而去年年底為 439 億元人民幣。

In addition, liquid assets maturing in 90 days or less amounted to CNY 40.2 billion as of the end of March 2023, our guaranteed subsidiary income (inaudible) 1.7x (inaudible) regulatory limit of 10x. All this provides strong support the company to mainline base of other sensors actually continue our stable different payout policy.

此外，截至 2023 年 3 月底，90 天或更短時間內到期的流動資產總計 402 億元人民幣，我們保證子公司收入（聽不清）1.7 倍（聽不清）監管上限為 10 倍。所有這些都為公司對其他傳感器的主線基地實際上延續我們穩定的不同支付政策提供了強有力的支持。

That concludes our prepared for today. Operator, we are now ready for the questions.

我們今天的準備工作到此結束。接線員，我們現在準備好提問了。

(Operator Instructions) We now have our first question from Alex from UBS.

（操作員說明）我們現在收到來自瑞銀的亞歷克斯的第一個問題。

So my question is mainly on the pricing outlook. So could you give us some color in terms of what's the average loan pricing for our portfolio and about the pricing for the new unsecured loans. So -- and I guess there are 2 parts to this question. First, on the regulatory front. So we have been lowering the loan price in the past 2 to 3 years due to some regulatory pressure. So I'm wondering if there any follow-up or comments from the regulators in terms of where we are? Do you think we have reached a level where the regulator is now more comfortable with?

所以我的問題主要是關於定價前景。那麼，您能否就我們投資組合的平均貸款定價以及新無抵押貸款的定價給我們一些顏色。所以 - 我想這個問題有兩個部分。首先，在監管方面。因此，由於一些監管壓力，我們在過去 2 到 3 年一直在降低貸款價格。所以我想知道監管機構是否對我們所處的位置有任何跟進或評論？您是否認為我們已經達到監管機構現在更滿意的水平？

And second, if we just put aside the regulatory pressure for now and just focus on the supply and demand dynamics for the SBO segment, should we expect some further downward pressure on loan pricing ahead given now that we are further upgrading our customer profile to better quality borrowers, and given the current pace of economic recovery appear to be quite modest, Thanks to hear your view.

其次，如果我們暫時擱置監管壓力，只關注 SBO 細分市場的供需動態，鑑於我們正在進一步提升客戶檔案以更好地發展，我們是否應該預期未來貸款定價會面臨進一步下行壓力？優質借款人，鑑於目前的經濟復甦步伐似乎相當溫和，感謝聽到您的意見。

Thanks, Alex, for the question. So far, we haven't got any further instructions from regulators about further rolling APR. If you look at the first quarter APR -- blended APR for all new loans in the first quarter is already less than 20%. And then that, if you compare with other peers, we are absolutely and obviously lower than other peers, average APR. We are quite low.

謝謝亞歷克斯提出這個問題。到目前為止，我們還沒有從監管機構那裡得到任何關於進一步滾動 APR 的進一步指示。如果你看一下第一季度的 APR——第一季度所有新貸款的混合 APR 已經低於 20%。然後，如果你與其他同行進行比較，我們絕對明顯低於其他同行，平均 APR。我們很低。

So I believe we are in a good shape in terms of our APR level. And I believe that really we'll met regulatory requirements and now we also have more flexibility in others for just APR upwards or downwards, whenever necessary. Our overall price is more determined by market demand and supply. And also, we consider our operating costs, which includes funding cost and the credit cost and then our -- the operating costs, which include sales expense, right? So we don't think that the it high-risk (inaudible) segment, which will necessarily further reviews of our APR, we already less than again, less than 20% for all loans. So I expect -- I don't expect a notable change in terms of APR in near future.

因此，我相信我們的 APR 水平處於良好狀態。而且我相信我們真的會滿足監管要求，現在我們在其他方面也有更大的靈活性，只要有必要，就可以提高或降低 APR。我們的整體價格更多是由市場供需決定的。而且，我們還考慮了我們的運營成本，其中包括融資成本和信貸成本，然後是我們的 - 運營成本，其中包括銷售費用，對嗎？因此，我們認為高風險（聽不清）部分不一定會進一步審查我們的 APR，我們已經低於所有貸款的 20%。所以我預計 - 我預計在不久的將來 APR 不會有顯著變化。

We now have our next question from Emma Xu of Bank of America.

我們現在有來自美國銀行的 Emma Xu 的下一個問題。

I have 2. The first one is about asset quality. So we see -- on one hand, we see some encouraging signs of your portfolio. As the management mentioned earlier that there is already some green shoots in the business and you expect flow rate to gradually improve in the coming quarters. However, on the other hand, we see the flow rate of your unsecured loan continued to increase in first quarter while total flow rate just remained flat quarter-over-quarter. So could you give us more discussion about your -- the asset quality of your legacy loan portfolio.

我有兩個。第一個是關於資產質量的。所以我們看到 - 一方面，我們看到您的投資組合有一些令人鼓舞的跡象。正如管理層之前提到的，業務中已經出現了一些萌芽，您預計未來幾個季度的流量將逐漸改善。然而，另一方面，我們看到你們的無抵押貸款的流量在第一季度繼續增加，而總流量環比持平。那麼你能否給我們更多關於你的 - 你的遺留貸款組合的資產質量的討論。

And a related question is how is the collection of your charge of loans as the management also mentioned in the report that you are trying to increase the effort to recover past credit losses, which may contribute to the net profit in the future. So could you give us more details on this brand?

一個相關的問題是你的貸款費用是如何收取的，因為管理層在報告中也提到你正在努力增加收回過去信用損失的努力，這可能有助於未來的淨利潤。那麼你能給我們更多關於這個品牌的細節嗎？

The second question is about the loan demand. So how is the loan demand so far? And is the high CGI cost, the major reason limit your loan growth in first quarter. What's your progress of moving to the 100% guaranteed model? And will we expect to see the loan growth more -- to see more strong loan growth in the second half when you move to this entire guaranteed model?

第二個問題是關於貸款需求。那麼到目前為止，貸款需求如何？高 CGI 成本是限制您第一季度貸款增長的主要原因。您在轉向 100% 保證模型方面取得了哪些進展？當你轉向整個擔保模式時，我們是否會期望看到更多的貸款增長——下半年看到更強勁的貸款增長？

Thanks, Emma. The situation in asset quality has slowed down substantially in the first quarter. If you look at C-M3 growth rate for the total loans was 1.0% in the first quarter this year, which remained unchanged from first quarter last year. But if we consider that our balance -- loan balance has been declining in this month, month after month. So if we're analyzing this, for example, if you only compare the accounts, whose milestone book is less than 6 months or 12 months. So if we remove the impact from declining balance on our net flow rate. Then now we already see sort an increment trend. I believe we can show -- we can demonstrate more obvious implements from the next quarter onwards. So that you have confidence. And as the company continuously carry on new sales for credit plan, now we observe an improvement in credit rating mix and credit quality for new loans initiated in the last 2 quarters.

謝謝，艾瑪。一季度資產質量形勢明顯放緩。如果看今年一季度C-M3貸款總額增速為1.0%，與去年一季度持平。但如果我們考慮到我們的餘額——貸款餘額在本月一直在下降，一個月又一個月。因此，如果我們對此進行分析，例如，如果您只比較里程碑簿少於 6 個月或 12 個月的客戶。因此，如果我們消除餘額下降對淨流量的影響。然後現在我們已經看到排序增量趨勢。我相信我們可以展示——我們可以從下一季度開始展示更明顯的工具。讓你有信心。隨著公司不斷進行新的信貸計劃銷售，現在我們觀察到過去兩個季度發起的新貸款的信用評級組合和信用質量有所改善。

Yes, you know that we had a large amount of charge-off last year, so that is one of our focus this year. We are now strengthening our cost recovery actions to claw back more from the past credit losses. And to answer your question about loan demand. Our loan demand is decided by how our SBO customers see your future economy, right? And industry regard you haven't seen any obvious change in a world but no matter what, if you understand our monthly new sales volume and then our market share, actually, loan demand is not about a concern because we are compared to the market size, our market share is very small.

是的，你知道我們去年有大量沖銷，所以這是我們今年的重點之一。我們現在正在加強我們的成本回收行動，以從過去的信貸損失中收回更多。並回答你關於貸款需求的問題。我們的貸款需求取決於我們的 SBO 客戶如何看待您未來的經濟，對嗎？業界認為世界上沒有任何明顯的變化，但無論如何，如果你了解我們每月的新銷量，然後是我們的市場份額，實際上，貸款需求並不是一個問題，因為我們是與市場規模進行比較的，我們的市場份額很小。

So we don't really worry about loan demand at this moment. And the decrease of new loan growth, recent decrease was mainly driven by our tightened underwriting credit policy and also partially to our GST reform. That was the reason. And spin of 100% guaranteed model, we are making a great progress. We are very happy. We are encouraged to see that our funding partners did provide good support for the model where we provide the entire guarantee by now 5 out of 6 trust partners they agreed and 37 out of 78 bank partners they also agreed to expand credit on the model where we provide a full guarantee. In addition, 31 of our funding partners are already providing [disbursing] loans under this model. So we are making a good progress. And then I think the formation can be relatively quick.

所以我們現在真的不擔心貸款需求。而新貸款增長的下降，最近的下降主要是由於我們收緊了承保信貸政策，部分原因是我們的商品及服務稅改革。這就是原因。和 100% 保證模型的旋轉，我們正在取得很大的進步。我們很開心。我們很高興地看到，我們的資金合作夥伴確實為我們提供全部擔保的模型提供了良好的支持，6 個信託合作夥伴中有 5 個同意，78 個銀行合作夥伴中有 37 個也同意在我們的模型上擴大信貸提供充分的保障。此外，我們的 31 個資助合作夥伴已經在這種模式下提供 [支付] 貸款。所以我們正在取得很好的進展。然後我覺得編隊可以比較快。

We now have our next question from Richard Xu of Morgan Stanley.

我們現在有來自摩根士丹利的理查德·徐的下一個問題。

I have questions on funding costs. Just wondering what's the funding cost at the moment, basically, as we change from the insurance model to the guaranteed model? And what's the overall impact on take rate and what would be the level expected to stabilize when shift to guaranteed model is largely complete.

我對資金成本有疑問。只是想知道目前的資金成本是多少，基本上，當我們從保險模式轉變為擔保模式時？對採用率的總體影響是什麼？當向保證模型的轉變基本完成時，預期穩定的水平是多少。

Thank you, Richard. It's Greg here. If we look at the funding costs, which are about 6% overall. They have come down about 30 basis points if you look at the first quarter on a year-on-year basis. As we shift to the 100% guaranteed model, we're not seeing much change in that funding cost. In fact, probably you're seeing the market more broadly coming down. So any shift to the guaranteed model is really not having a net impact in terms of funding cost increase. We think it will be quite stable as we look forward through the remainder of the year.

謝謝你，理查德。我是格雷格。如果我們看一下融資成本，總成本約為 6%。如果你看第一季度與去年同期相比，它們已經下降了大約 30 個基點。當我們轉向 100% 保證模式時，我們沒有看到融資成本有太大變化。事實上，您可能看到市場在更廣泛的範圍內下跌。因此，任何向擔保模式的轉變實際上都不會在融資成本增加方面產生淨影響。我們認為在今年餘下的時間裡，它會非常穩定。

On the take rate, if you kind of go and look at historically, our take rates has been in the sort of 8% to 10% range, more recently due to the higher credit guarantee insurance costs, that take rate is now closer to about 7%, 8% range.

關於利率，如果你從歷史上看，我們的利率一直在 8% 到 10% 的範圍內，最近由於更高的信用擔保保險成本，該利率現在接近約7%、8%範圍內。

As we then move to the 100% guaranteed model, right? So if you look out over a year or 1.5 years from now when more of the portfolio will be 100% guaranteed, that credit premium or credit insurance premium that was previously paid to our CGI partners will be earned by us. And that number was historically about 5% to 6%. So if you take a base today of 7% to 8%, which is obviously compressed because of the higher CGIPs and we move to the guaranteed model, where that take rate moves over to us. Then you should be looking at on a stabilized basis over the longer term, a take rate of about 14%. So we think that's, Rich, where things will end up probably in about 1.5 years from now when we've made more of the complete shift.

當我們轉向 100% 保證模型時，對嗎？因此，如果您展望一年或 1.5 年後，屆時更多的投資組合將獲得 100% 的保證，那麼之前支付給我們的 CGI 合作夥伴的信用保費或信用保險保費將由我們賺取。這個數字在歷史上大約是 5% 到 6%。因此，如果您今天採用 7% 至 8% 的基數，由於 CGIP 較高，這顯然被壓縮了，我們轉向有保證的模型，該模型將轉移到我們身上。那麼從長期來看，您應該在穩定的基礎上考慮，大約 14% 的採納率。所以我們認為，Rich，當我們完成更多的徹底轉變時，事情可能會在大約 1.5 年後結束。

We now have our next question from Yada Li of CICC.

我們現在有來自中金公司的李雅達的下一個問題。

This is Yada from CICC. My question today is regarding the risk-bearing percentage. And I was wondering what is the trend of this percentage going forward? And how to view this change and potential impact on our top line credit impairment losses and the bottom line. And that's all.

我是中金公司的雅達。我今天的問題是關於風險承擔百分比。我想知道這個百分比未來的趨勢是什麼？以及如何看待這種變化以及對我們的頂線信用減值損失和底線的潛在影響。就這樣。

In terms of the risk-bearing percentage, as of the end of this first quarter, it was at about 24%. We expect by the end of the year, on a portfolio basis to be over 40%. And that means, as you move through the second half of the year for new loans, a much higher percentage will be under this 100% self-guarantee model. Now as we go through that process, similar to the question that Richard just asked, that will increase our top line revenue because you're basically moving what was paid previously to credit guarantee insurance partners onto the balance sheet, and therefore, the revenue will come with it. So that will provide a basis for a revenue increase.

從風險承擔比例來看，截至本季度末，約為24%。我們預計到今年年底，在投資組合的基礎上將超過 40%。這意味著，隨著下半年新貸款的增加，這種 100% 自我擔保模式下的比例會高得多。現在，當我們經歷這個過程時，類似於理查德剛才問的問題，這將增加我們的收入，因為你基本上是將之前支付給信用擔保保險合作夥伴的款項轉移到資產負債表上，因此，收入將來吧。因此，這將為增加收入提供基礎。

As we take on more credit risk, we initially have to provision for the new loans. So that is front-loaded in the model. So what you'll see in our overall credit impairment costs right? We had credit impairment costs in Q1 of CNY 3.1 billion. We expect this number over the next couple of quarters to remain stable, but what's driving it, the mix is changing.

隨著我們承擔更多的信用風險，我們最初必須為新貸款做好準備。所以這在模型中是預先加載的。那麼你會在我們的整體信用減值成本中看到什麼？我們在第一季度的信用減值成本為 31 億元人民幣。我們預計這個數字在未來幾個季度將保持穩定，但推動它的是組合正在發生變化。

So CNY 3.1 billion in the first quarter is mostly from the credit impairment cost from the legacy portfolio, if you will, the existing past book. As we move into the second half of this year, you'll still be at about CNY 3 billion or so credit impairment cost, but more and more of it will be coming from the fact that the new business has done -- a higher percentage of new business is done through self-guarantee.

因此，第一季度的 31 億元人民幣主要來自遺留投資組合的信用減值成本，如果你願意的話，現有的過去賬目。隨著我們進入今年下半年，您的信用減值成本仍將約為 30 億元人民幣，但越來越多的成本將來自新業務完成的事實——更高的百分比的新業務是通過自我保證來完成的。

So while that carries a higher upfront cost, if we look forward into 2024, it should also improve our net margin, right? Because you're shifting from a very high credit insurance cost today of over 10%, right, to a model where we think that the new business that we're doing should perform more in line with historical levels. And that should be, therefore, constructive for our 2024 profitability.

因此，雖然這帶來了更高的前期成本，但如果我們展望 2024 年，它也應該會提高我們的淨利潤率，對吧？因為你正在從今天超過 10% 的非常高的信用保險成本轉變為我們認為我們正在做的新業務的表現應該更符合歷史水平的模型。因此，這對我們 2024 年的盈利能力應該是有建設性的。

There are no more questions on the line. That concludes our question-and-answer session for today. I will now turn the call back over to our management for closing remarks.

在線沒有更多問題。今天的問答環節到此結束。我現在將把電話轉回給我們的管理層作結束語。

Thank you. This concludes today's call. Thank you for joining the conference call. If you have more questions, please do not hesitate to contact the company's IR team. Thanks again.

謝謝。今天的電話會議到此結束。感謝您加入電話會議。如果您有更多問題，請隨時聯繫公司的 IR 團隊。再次感謝。

This concludes today's call. Thank you for joining. You may now disconnect your lines. Thank you.

今天的電話會議到此結束。感謝您的加入。您現在可以斷開線路。謝謝。