Lufax Holding Ltd (LU) 2023 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Lufax Holdings Limited fourth quarter 2023 and 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.

女士們、先生們，感謝大家的支持，歡迎來到陸金所控股有限公司2023年第四季並致電。此時，所有參與者都處於僅聽模式。在管理階層準備好發言後，我們將舉行問答環節。請注意此事件正在被記錄。

Now I'd like to hand the conference over to your speaker host today, Ms. Xinyan Liu, the company's Head of Board Office and Capital Markets. Please go ahead, madam.

現在我想將會議交給今天的演講主持人，公司董事會辦公室和資本市場部主管劉欣燕女士。請繼續，女士。

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. Yong Suk Cho, who will provide an update of our latest business strategies, the macro-economic trend, recent developments of our business and a special dividend. Our Co-CEO, Mr. Gregory Gibb will then go through our fourth quarter results, provide more details on our business priorities and outlook. Afterwards, our CFO, Mr. David Choy, will offer a closer look into our financials before we open up the call for questions.

非常感謝。大家好，歡迎參加我們的 2023 年第四季財報電話會議。我們的季度財務和經營業績由我們的新聞專線服務發布，目前可在線上取得。今天。您將聽到我們的董事長兼執行長 Yong Suk Cho 先生的講話，他將介紹我們最新的業務策略、宏觀經濟趨勢、我們業務的最新發展和特別股息。然後，我們的聯合執行長 Gregory Gibb 先生將回顧我們第四季度的業績，提供有關我們業務優先事項和前景的更多詳細資訊。隨後，我們的財務長 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 make forward-looking statements.

在我們繼續之前，我想請您參閱我們的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，因為我們將做出前瞻性聲明。

With that, I'm now pleased to turn over the call to Mr. Yong Suk Cho, Chairman and CEO of Lufax.

現在，我很高興將電話轉接給陸金所董事長兼執行長曹鑭錫先生。

Thank you.

謝謝。

Thanks for joining for this call. During the fourth quarter, the economy environment remains complex and SBO continue to come under pressure. Nevertheless, as we prioritize quality over quantity, we have now completed our major derisking actions, and we'll continue to carry out a prudent strategy. We are confident that the strategic initiatives we have implemented for 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.

感謝您參加本次通話。第四季度，經濟環境依然複雜，SBO持續面臨壓力。不過，我們重質輕量的原則已經完成了主要的去風險行動，我們將繼續實施審慎的策略。我們相信，我們實施的策略性舉措將為長期成長和獲利能力奠定堅實的基礎，並相信策略升級的累積影響將優化和重新調整我們的風險回報狀況，以適應中國當前的宏觀環境。

Now let me provide some updates to our quarter for the quarter. First, the broader macro environment remained challenging in 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.

現在讓我提供本季的一些最新情況。首先，更廣泛的宏觀環境對 SBO 來說仍然充滿挑戰。中國中小企業協會公佈的中小企業發展指數反映了這一點，2023年第四季該指數小幅下降至89.1。

Furthermore or the SME business conditions index published by [Tim concretely] School of Business declined from 49.9 in September to 47.8 in December. This indicates that SBO segment is likely to recover at a somewhat slower pace.

此外，[Tim具體]商學院公佈的中小企業經營狀況指數從9月的49.9下降至12月的47.8。這表明 SBO 業務的復甦速度可能會稍慢一些。

Next, let's say, let's turn to our business. Throughout 2023, we've made five major de-risking and diversification actions, including four mix changes and one business model adjustments. First, we have changed our segment and product mix. Our heavier concentration in the SBO segments and offerings or whole SBO loans generated pace profit prior to 2022.

接下來，讓我們談談我們的業務。2023年全年，我們實施了五個主要的去風險和多元化行動，其中包括四項組合調整和一項業務模式調整。首先，我們改變了我們的細分市場和產品結構。我們更集中於 SBO 細分市場和產品或整個 SBO 貸款，在 2022 年之前產生了快速利潤。

However, with the change of -- micro environment. Such concentration drove or deterioration in both our operational and financial resource in the past 18 months. To address this, we have strategically adjusted both product offerings and segments. In terms of final place, we have shifted from a predominant focus on SBO loans (inaudible) to a more balanced offering of business and consumption laws.

然而，隨著──微觀環境的變化。過去 18 個月，這種集中度導致我們的營運和財務資源惡化。為了解決這個問題，我們對產品供應和細分市場進行了策略性調整。就最終排名而言，我們已從主要關注 SBO 貸款（聽不清楚）轉向更平衡地提供商業和消費法。

For our product portfolio. We've expanded our offerings to be more comprehensive, encompassing enforce e-store month and revolving payment options. We didn't have to execute segment. We refined our focus by targeting customers with better risk profiles, specifically those in R1 to R3 rating range.

對於我們的產品組合。我們已將我們的產品擴展為更全面，包括強制電子商店月和循環付款選項。我們不必執行段。我們透過瞄準具有更好風險狀況的客戶（特別是 R1 至 R3 評級範圍內的客戶）來完善我們的重點。

Second, we have adjusted our regional mix. Since the second half of 2022, we will resolve significant variations in credit performance and resilience of course, different areas. Accordingly, we have completed the reduction in our footprints and are focusing on higher-quality geographies with expected greater economic resilience.

二是調整區域結構。自 2022 年下半年以來，我們將解決不同領域信用表現和彈性的重大差異問題。因此，我們已經完成了足跡的減少，並專注於更高品質的地區，預計經濟彈性更大。

Third we have optimized our tenant mix, especially our direct channel, which is the most important of our business. We recognize that our repeat historically expansion has resulted in lower productivity and higher risk with that excess team and responded by optimizing the scale of our direct sales team.

第三，我們優化了我們的租戶組合，特別是我們的直接管道，這是我們業務中最重要的。我們認識到，我們歷史上的重複擴張導致了過剩團隊的生產力降低和風險升高，並透過優化我們的直銷團隊的規模來應對。

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 our 2023. Of course, we have adjusted our industry mix, reflecting the relative sustainability of industries under the changing macro environment. In our internal risk assessments, we have assigned greater importance to conservation of each industry economic cycle stage within one within our borders and increase KYB. And industry factors for enhanced model predictiveness.

因此，直銷團隊的數量從2022年底的47,000人減少到2023年底的21,000人左右。當然，我們也調整了產業結構，體現了宏觀環境變遷下產業的相對永續性。在我們的內部風險評估中，我們更加重視保護境內各產業經濟週期階段，並增加 KYB。以及增強模型預測能力的產業因素。

Finally, we have completed migration of our business model. As discussed previously, the high CJ premium charges by our business partners had negatively impacted our revenue and profit. We, likewise, the high. So the party Reliance reduced our technical freedom. Therefore, we started negotiations with our funding partners at the end of 2022 and successfully completed transition into a 100% guarantee base moderate by the end of third-quarter 2023.

最後，我們完成了業務模式的遷移。如前所述，我們的業務合作夥伴收取的高額 CJ 保費對我們的收入和利潤產生了負面影響。我們，同樣，高。所以 Reliance 一方減少了我們的技術自由。因此，我們在2022年底開始與融資合作夥伴進行談判，並於2023年第三季末成功完成100%適度擔保基礎的過渡。

In the fourth quarter of 2023. All the new rules were either granted by our consumer finance subsidiary as on-balance sheet loans or enabled by our guarantee company under the 100% risk bearing piece model, thus eliminating the drag factor of CGI. On a single account basis, new laws enabled on the 1% to motors are expected to realize lifetime profitability, however, may record net accounting loss for the fourth 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'll remain prudent and core and prioritize quality over quantity throughout 2024.

2023年第四季。所有新規則要麼由我們的消費金融子公司作為表內貸款發放，要麼由我們的擔保公司在100%風險承擔件模式下啟用，從而消除了CGI的拖累因素。在單一帳戶基礎上，對汽車徵收1% 的新法律預計將實現終生盈利，但由於與CGI 模型的貸款相比，預提撥備較高，因此可能會在第四個日曆年錄得淨會計虧損。雖然這項策略轉變使我們能夠獲得更大的經濟價值，但也增加了我們的風險敞口。因此，2024年我們將保持審慎、核心的態度，重質輕量。

In terms of asset quality compared to the third quarter, C-M3 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.

從資產品質來看，與第三季相比，第四季C-M3流量有所上升。這主要是由於我們未償還貸款餘額的減少以及直銷團隊和分支機構重組的短期影響，隨著所有重組措施的完成，我們看到一季度的流量逐漸改善。2024 年。

To sum up during the fourth quarter with the completion of deal with key initiative. The dollar size of our business is under control, and we have strong visibility of our businesses. However, the upside, we still need more time due to our prudent strategy and transformation of our base model.

總結一下四季處理重點舉措的完成情況。我們業務的美元規模受到控制，並且我們的業務具有很強的可見性。然而，好的方面是，由於我們的審慎策略和基礎模型的轉型，我們仍然需要更多時間。

Finally, over the past quarters, we have consistently heard our shareholders request for us to improve investor returns and capital efficiency considering the progress in our business derisking 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 in an estimated dividend size of approximately RMB10 billion.

最後，在過去的幾個季度中，考慮到我們的業務去風險和業務模式轉型的進展，我們不斷聽到股東要求我們提高投資者回報和資本效率。以及我們對未來幾年成長和資本需求的展望，我們相信我們有能力、現在正是透過特別股息向股東回報價值的最佳時機，預計股息規模約為人民幣100億元。

Thanks. I will now return the call over to Gregory Gibb.

謝謝。我現在將把電話回覆給格雷戈里·吉布。

I'll provide more details on our fourth quarter and full year 2023 results and our operational focus for this year. Please note all figures are in RMB unless otherwise stated.

我將提供有關我們第四季度和 2023 年全年業績以及今年營運重點的更多詳細資訊。請注意，除非另有說明，所有數字均以人民幣為單位。

I'd like to start with an overview of our performance during the fourth quarter. During the fourth quarter 2023 key, our performance remained under pressure from the complex macro environment and challenges faced by SBOs.

我想先概述一下我們第四季的業績。2023年第四季度，複雜的宏觀環境和SBO面臨的挑戰，我們的業績仍面臨壓力。

Our overall new loan sales were RMB47 billion, representing a year-on-year decline of 39.6% this is mainly due to subdued demand for high-quality loans from SBOs, coupled with our prudent strategy as we transition to the 100% guarantee model. Among total new sales, approximately 40% was contributed by consumer finance as we transition our portfolio mix, fourth quarter revenue was RMB6.9 billion, a decrease of 44.3% year-over-year. This is primarily due to the reduction of our outstanding loan balance, which stood at RMB315 billion at the end of 2023, a decline of 45% on an annual basis.

我們的整體新增貸款金額為 470 億元，年減 39.6%，這主要是由於 SBO 對優質貸款的需求疲軟，加上我們轉型為 100% 擔保模式的審慎策略。在新銷售總額中，隨著我們的投資組合轉型，消費金融貢獻了約40%，第四季營收為人民幣69億元，年減44.3%。這主要是由於我們的貸款餘額減少，截至2023年底，貸款餘額為人民幣3,150億元，年減45%。

We recorded a net loss of RMB832 million in the fourth quarter. This was mainly driven by elevated credit losses stemming from front-loaded provisions associated with loans enabled under the 100% guarantee model, heightened risk exposure under the model and certain one-off non-operating losses.

第四季淨虧損8.32億元。這主要是由於與100%擔保模式下的貸款相關的前期準備金導致信用損失增加、該模式下風險敞口加大以及某些一次性非經營性損失。

Now let's delve into our de-risking initiatives. That we have made progress on in 2023. As why, as just explained, we have executed on five major derisking strategies, which included four significant changes to our business mix and transition to the new business model.

現在讓我們深入研究我們的去風險舉措。2023 年我們已經取得了進展。正如剛才所解釋的，我們執行了五項主要的去風險策略，其中包括對我們的業務組合進行四項重大變革以及向新業務模式的過渡。

First, our segment adjustments have fundamentally shifted the new business mix in favor of what R1 to R3 rated customers. In 2023, 73% of unsecured loan new customers were rated R1 to R3 compared to 49% in 2022. In addition, strategic adjustments to our product offerings have resulted in a new business mix that reflects our significant derisking measures. This has prompted a gradual transformation of our existing portfolio mix.

首先，我們的細分市場調整從根本上改變了新的業務組合，有利於 R1 至 R3 評級的客戶。2023 年，73% 的無抵押貸款新客戶被評為 R1 至 R3，而 2022 年這一比例為 49%。此外，對我們產品的策略調整帶來了新的業務組合，反映了我們重大的去風險措施。這促使我們現有的投資組合逐漸轉變。

In 2023, consumer finance sales accounted for 34% of new loan sales, up from 12% in 2022. Concurrently, the proportion of unsecured loans and secured loans decreased to 44% and 22% respectively, from 64% and 24% in 2022. As a result, our balanced mix has shifted with consumer finance balance as a percentage of total balance rising to 12% at the end of 2023, compared to 5% at the end of 2022.

2023年，消費金融銷售佔新增貸款銷售的34%，高於2022年的12%。同時，無擔保貸款和擔保貸款的比例分別從2022年的64%和24%下降至44%和22%。因此，我們的平衡結構發生了變化，消費金融餘額佔總餘額的百分比將從 2022 年底的 5% 上升到 2023 年底的 12%。

The proportion of unsecured loans decreased from 66% from 73% as of the end of 2022. While the proportion of secured loans remained flat. During 2024, we anticipated continued consumer finance diversification and majority of the unsecured balances will fall under the 100% guarantee model by the end of 2024.

截至 2022 年底，無抵押貸款比例從 66% 下降至 73%。而擔保貸款佔比則持平。2024 年，我們預期消費金融將持續多元化，到 2024 年底，大部分無擔保餘額將屬於 100% 擔保模式。

Next, our regional adjustments have involved the targeted reduction of our footprint in less economically resilient regions characterized by relatively higher risk. This strategic shift is reflected in our geographic coverage, which is decreased from over 300 cities at the end of 2022 to 246 cities at the end of 2023.

接下來，我們的區域調整包括有針對性地減少我們在經濟彈性較差、風險相對較高的地區的足跡。這項策略轉變體現在我們的地理覆蓋範圍上，從2022年底的300多個城市減少到2023年底的246個城市。

In terms of channel adjustments, we have concluded the restructuring of our direct sales. The number of direct sales team members was reduced from 47,000 at the beginning of the year to 21,000 by the end of the year. In 2023 the direct sales channel contributed 63% of new sales, up from 57% in previous year.

在通路調整方面，我們已經完成了直營的重組。直銷團隊人數從年初的4.7萬人減少到年底的2.1萬人。2023年，直銷通路貢獻了新銷售額的63%，高於前一年的57%。

Turning to our business model, starting in the fourth quarter, we completed the strategic pivot as we fully transition to the 100% guarantee model. This move has transformed our portfolio mix and increased our risk bearing as vintages runoff and the loans under the new model take shape.

說到我們的業務模式，從第四季開始，我們完成了策略支點，全面過渡到100%擔保模式。隨著年份流失和新模式下貸款的形成，此舉改變了我們的投資組合，並增加了我們的風險承受能力。

As a result, our risk-bearing by balance increased to 39.8% at the end of 2023, up from 23.5% at the end of the previous year. During the fourth quarter, our overall C-M3 increased to 1.2% from 1.1% in the prior quarter. This was primarily due to a reduction in our proven business, outstanding balance and temporary negative impact from our geographic and direct sales restructuring in the past quarter.

因此，我們的風險承擔餘額從上年末的 23.5% 上升至 2023 年底的 39.8%。第四季度，我們的整體 C-M3 從上一季的 1.1% 上升至 1.2%。這主要是由於我們已證實的業務減少、未償餘額以及上一季地理和直銷重組帶來的暫時負面影響。

Although we have seen improvement in the C-M3 ratio in the first quarter. Given our increased disclosure under the new model, we continue our prudent strategy prioritize quality over quantity in 2024.

儘管我們看到第一季C-M3比率有所改善。鑑於我們在新模式下揭露的資訊增加，我們將在 2024 年繼續實施審慎策略，將品質置於數量之上。

Now let's turn to our outlook for 2024. We expect new loan sales of 2024 to be in the range of RMB190 billion to RMB220 billion and the ending balance to be between RMB200 billion to RMB230 billion. Meanwhile, although we expect loans under 100% guarantee model will be lifetime profitable on a single account basis. It is important to highlight that loans under this modeled may record accounting loss in the this operations, capital and liquidity requirements.

現在讓我們展望 2024 年。我們預計2024年新增貸款規模將在1,900億元至2,200億元之間，期末餘額將在2,000億元至2,300億元之間。同時，儘管我們預計 100% 擔保模式下的貸款將在單一帳戶的基礎上實現終身盈利。需要強調的是，該模型下的貸款可能會在該業務、資本和流動性要求中記錄會計損失。

At the end of 2023, the leverage ratio of our guaranty subsidiary was 1.8 times, far below the regulatory limit of 10 times. Our consumer finance capital adequacy ratio stood at approximately 15.3%, well above the required 10.5%. As with the balance sheet, we hold liquid assets of RMB84 billion.

截至2023年末，擔保子公司槓桿率為1.8倍，遠低於監管規定的10倍上限。消費金融資本充足率約為15.3%，遠高於10.5%的要求。與資產負債表一樣，我們持有流動資產840億元人民幣。

With our cash and bank balance outstanding at RMB39.6 billion. With a strong capital position and visibility into our business growth in the medium term, we are well positioned to further respond to our shareholders consistent feedback to increased shareholder returns and on top of the regular dividend and share buybacks that we have performed over the past three years.

我們的現金及銀行餘額為人民幣396億元。憑藉強大的資本狀況和對中期業務成長的洞察力，我們有能力進一步響應股東的一致反饋，以增加股東回報，並在過去三年進行的定期股息和股票回購的基礎上年。

Our Board of Directors has approved subject to shareholders' approval, a special dividend of USD2.42 per ADS or $1.21 per ordinary share, with a total estimated size of approximately RMB10 billion. To offer our shareholders full flexibility. Each shareholder may elect to receive the dividend either all in cash or all in script.

我們的董事會已批准派發每股美國存託股2.42美元或每股普通股1.21美元的特別股息，預計總規模約為人民幣100億元，但須經股東批准。為我們的股東提供充分的彈性。每位股東可以選擇全部以現金或全部以腳本形式收取股利。

As we are dual listed in the US and Hong Kong stock markets. The shareholders of each market will have to follow the respective procedures for receiving the special dividends. More details will be disclosed in our announcements and the statutory circulars in due course, the special dividend is subject to the approval of shareholders at the Annual General Meeting, which will be held on May 30, with a record date of April 9.

由於我們在美國和香港股票市場雙重上市。每個市場的股東必須遵循各自的程序來收取特別股利。更多詳情將在我們的公告和法定通函中適時披露，特別股息須經股東在將於5月30日舉行的年度股東大會上批准，股權登記日為4月9日。

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

我現在將把電話轉給我們的財務長大衛，以了解有關我們財務業績的更多詳細資訊。

Thank you, Gregory. And I will now provide a closer look into our fourth quarter results. Please note that all numbers are in RMB terms and all comparisons on a year-over-year basis, unless otherwise stated. That's why, as Greg mentioned before, our performance was impacted by macro-economic environment in which the small business owner sector has been under pressure through the period.

謝謝你，格雷戈里。現在我將仔細研究我們第四季的業績。請注意，除非另有說明，所有數字均以人民幣計算，並且所有比較均以同比為基礎。這就是為什麼，正如格雷格之前提到的，我們的業績受到宏觀經濟環境的影響，小企業主部門在此期間一直面臨壓力。

Through strategic adjustments to 100% guarantee model and prioritizing higher quality customer segments and better to have profitable regions. We sacrifice some of our business scale for better loan quality in the future.

透過對100%保證模式的策略調整，優先考慮更高品質的客戶群和更好的獲利區域。我們犧牲一些業務規模來換取未來更好的貸款品質。

This strategic transition in actively cause our average loan balance and total income to continue to decrease. Whilst the expected credit loss provision is required to be booked upfront in day one, boosting the accounting loss in early for the life cycle under the new business model. In the fourth quarter 2023 out of the income was RMB6.9 billion, increasing by 44.3%.

這項策略轉型積極導致我們的平均貸款餘額和總收入持續下降。雖然預期信用損失撥備需要在第一天提前記入，但在新業務模式下，增加了生命週期早期的會計損失。2023年第四季營收69億元，成長44.3%。

During the quarter, our technology platform based income was RMB3 billion, representing a decrease of 49%. Our net interest income was RMB2.3 billion, a decrease of 47%, and our guarantee income was RMB886 million, a decrease of 47% or a basically in line with decrease of outstanding loan balance, in which guarantee income decreased by a lesser magnitude due to the offsetting effect, [I think increase the spending by the company.]

本季，我們的技術平台營收為人民幣30億元，下降49%。利息淨收入23億元，下降47%；擔保收入8.86億元，下降47%，與貸款餘額下降基本一致，其中擔保收入下降幅度較小由於抵消效應，[我認為增加公司的支出。]

Turning to our expenses. We remain committed to cost optimization. Our total expenses, excluding credit and asset impairment losses, finance costs and other losses decreased by 33.2% year-over-year to RMB4.4 billion this quarter. As we continue to enhance operational efficiency.

轉向我們的開支。我們仍然致力於成本優化。本季我們的總費用（不包括信貸和資產減損損失、財務成本和其他損失）年減 33.2% 至人民幣 44 億元。隨著我們不斷提升營運效率。

In the fourth quarter, total expenses decreased by 13.5% to RMB10.9 billion from RMB12.9 billion a year ago. This decrease was primarily due to a decrease in credit impairment losses and sales and marketing expenses. Highlighting just a few of the key expense items here. Our total sales and marketing expenses. It may include expenses for our acquisition costs as well as general sales and marketing expenses decreased significantly by 45.9% to RMB2 billion in the fourth quarter.

第四季總支出由去年同期的人民幣129億元下降13.5%至人民幣109億元。這一減少主要是由於信用減損損失以及銷售和行銷費用的減少。這裡僅強調一些關鍵費用項目。我們的總銷售和行銷費用。其中可能包括我們的收購成本以及一般銷售和行銷費用，第四季大幅下降 45.9% 至 20 億元人民幣。

The decrease was mainly due to increased loan related expenses as a result of the decrease in the new loan sales and decreased retention expenses because we process on the platform service attributable to the decreased transaction volume.

減少的主要原因是新貸款銷售減少導致貸款相關費用增加，以及交易量減少導致我們在平台服務上處理而導致保留費用減少。

Our credit impairment losses decreased by 43% to RMB3.6 billion in the fourth quarter, primarily due to the decrease in provision of loans and receivables. As a result of that, increasing the loan balance. Our finance costs decreased by 9.1% to RMB50 million in the fourth quarter from RMB501 million for the same period of 2022.

第四季我們的信用減損損失下降43%至人民幣36億元，主要是因為貸款和應收帳款撥備減少。因此，貸款餘額增加。第四季我們的財務成本從 2022 年同期的 5.01 億元 5.01 億元下降 9.1% 至 5,000 萬元。

Mainly due to the decrease of interest expenses as a result of the repayment of King and Suzhou convertible promissory notes during the year. As a result, net loss for the fourth quarter was RMB832 million, basically flat as compared to RMB806 million net loss in the same quarter of 2022. [Meanwhile, our basic and diluted loss per ADS we were Q4, both be 1.48, our USD2.31.] (technical difficulty)

主要是由於本年償還King及蘇州可換股票據導致利息支出減少。因此，第四季淨虧損為人民幣8.32億元，與2022年同季淨虧損人民幣8.06億元基本持平。[同時，我們第四季每份 ADS 的基本損失和攤薄損失均為 1.48，我們的 2.31 美元。]（技術難度）

Turning now to our balance sheet with abundant cash, we had repaid outstanding bond of RMB2.1 billion, an optionally convertible promissory notes of RMB8.1 billion for the year to free up all the standard payments as of December 31, 2023. We have total equity attributable to owners of that company of RMB92.1 billion and a cash balance of RMB49.6 billion.

現在看看我們的資產負債表，現金充裕，截至2023年12月31日，我們已償還了21億元人民幣的未償還債券和81億元人民幣的選擇性可轉換本票，以釋放所有標準付款。我們歸屬於該公司所有者的權益總額為 921 億元，現金餘額為 496 億元。

Financial assets at fair to fair value through P&L of RMB28.9 billion in terms of capital as of the end of December 2023. to two main operating entities are well capitalized as I'll go into subsidiaries. Leverage ratio was only 1.8 times as compared to a maximum retro limit of 10 times. And our consumer finance company capital adequacy ratio stood at approximately 15.3%, well above the required 10.5% spectrum requirements.

截至 2023 年 12 月末，以公允價值計量且其變動計入損益的金融資產按資本計為人民幣 289 億元。兩個主要營運實體資本充足，因為我將進入子公司。槓桿率僅1.8倍，而最高追溯限額為10倍。我們的消費金融公司資本充足率約為15.3%，遠高於10.5%的頻譜要求。

Both was speaking, we are in line cash position after taking into account all the external payments. All of these factors offer substantial backing for the company to navigate through the challenging macro-economic environment and the transition period while providing foundations for us to continually wanting back to our investors.

兩人都說，考慮到所有外部付款後，我們的現金狀況良好。所有這些因素都為公司度過充滿挑戰的宏觀經濟環境和轉型期提供了堅實的支持，同時也為我們不斷回報投資者提供了基礎。

That concludes our prepared remarks for today. Operator, we are now ready to take questions.

我們今天準備好的演講到此結束。接線員，我們現在準備好回答問題。

Thank you. We will now begin the question-and-answer session. (Operator Instructions)

謝謝。我們現在開始問答環節。（操作員說明）

Emma Xu, Bank of America Securities.

艾瑪·徐，美國銀行證券。

Thank you for giving me the opportunity to ask the first question. I think first and foremost to everybody care about these special dividends. So what's the consideration to be behind these RMB10 billion, our special dividend, what are the key numbers or information that you rely on to a [life these are] RMB10 billion special dividend.

感謝您給我機會提出第一個問題。我認為首先也是最重要的是每個人都關心這些特別股利。那麼我們這100億元人民幣特別股息背後的考慮是什麼，你依賴什麼關鍵數字或資訊來獲得100億元特別股息。

And I have another question about your asset quality. So on your flow rate, a leading indicator for the delinquency continued to rise in the fourth quarter to 1.2%. But I also noticed in your report, you also mentioned that you actually see improvement of the flow rate in first quarter or quarter today. So could you tell us how much improvement you already seen in first-quarter? And what's your expectation for the overall asset quality trend in the coming quarters?

我還有一個關於你們資產品質的問題。因此，就流動率而言，拖欠率的領先指標在第四季度繼續上升至 1.2%。但我也注意到，在你的報告中，你也提到，你實際上看到第一季或今天第四季的流量有所改善。那麼您能告訴我們第一季您已經看到了多少進步嗎？您對未來幾季整體資產品質趨勢有何預期？

Thanks for your question. Let me answer. So let me start with why we believe now is the right time for the special dividends. With our successful completion of our five major de-risking initiatives I mentioned, including for mix changes, and one this is adjustments. We believe now that risk is under control and we have a clear visibility of our capital requirements for our for the coming next two to three years to three years.

謝謝你的提問。讓我來回答一下。首先，讓我談談為什麼我們認為現在是發放特別股利的最佳時機。隨著我們成功完成我提到的五項主要的去風險舉措，包括組合變化，其中之一就是調整。我們相信，現在風險已受到控制，我們對未來兩三年到三年的資本要求有清楚的認知。

And that our stock has been trading at a less than 0.2 times [PV]. And then we have been continuously requests by investors to enhance our investor return. Now, you see that our ADS price is if you compare with our the cash per ADS is [firewall]. So market has not even reflected the available cash on our book in our valuation. So we hope for to unlock hidden value behind our cash on hand by increasing our shareholder value through dividends. And if I explain why we highlight how we are at this amount, why RMB10 billion that make this number.

我們的股票交易價格不到 0.2 倍[PV]。然後投資者不斷要求我們提高投資者回報。現在，如果您與我們每份 ADS 的現金進行比較，您會看到我們的 ADS 價格是[防火牆]。因此，市場甚至沒有在我們的估值中反映我們帳上可用的現金。因此，我們希望透過股利增加股東價值，釋放手頭現金背後的隱藏價值。如果我解釋為什麼我們要強調我們目前的金額，為什麼 100 億元會達到這個數字。

Of course, we first we first started our future fear development potential and how much capital we need to support that development and then we also assumed in this calculation, we also assume a reasonably large buffer to preach to our stable operation in the future. So this is how we are adding RMB10 billion and then the size of dividend, it seems maybe it looks like a very big compared with our the market cap, but I want to emphasize. Actually it is only just roughly 10% of our net asset. So this is a reasonably good amount, I believe.

當然，我們首先開始擔心我們未來的發展潛力，以及我們需要多少資金來支持這個發展，然後我們在這個計算中也假設，我們也假設有一個相當大的緩衝來宣揚我們未來的穩定運作。所以這就是我們增加100億人民幣，然後是股息的規模，看起來與我們的市值相比，它看起來可能非常大，但我想強調一下。實際上它只占我們淨資產的10%左右。所以我相信這是一個相當不錯的金額。

And then to answer your last question about asset quality, let me explain for us about what's going on with our consumer finance business. The NPL ratio has been consistent at around 1.5%, 1.4%, and then if I say mix now about pool side, we said sequentially net flow ratio for prudent loan increase from 1.11% in third quarter last year to 1.25% in the fourth quarter last year.

然後，為了回答您關於資產品質的最後一個問題，讓我為我們解釋一下我們的消費金融業務的情況。不良貸款率一直穩定在1.5%、1.4%左右，如果我現在說池方混合的話，我們說審慎貸款的淨流量比率從去年第三季度的1.11%增加到第四季度的1.25%去年。

Right. And then our increase is mainly due to a reduction of our is outstanding on balance and then temporary negative impact from our adjustments in our geography and direct sales restructuring. But first-quarter, we see improvements in net flow and there, we believe with accomplish all those restructuring measures, we see gradual improvements of overflow rate in the coming quarters.

正確的。然後，我們的成長主要是由於我們的未償餘額減少，以及我們地理調整和直銷重組帶來的暫時負面影響。但第一季度，我們看到淨流量有所改善，我們相信，隨著所有這些重組措施的完成，我們看到未來幾季的外溢率逐漸改善。

And also along you understand the old portfolio that we put out before, 2023 is of worse quality, and that portfolio is now running off. So when you get to the end of 2024 our debt, our leverage portfolio line otherwise accounts, we booked before 2023, we picked up nearly 10% of total portfolio. So in that sense, I think our gradual continuous improvement is of no doubt.

而且您也了解我們之前推出的舊投資組合，2023 年的品質較差，而且該投資組合現在正在流失。因此，當你到 2024 年底時，我們的債務、我們的槓桿投資組合線（否則），我們在 2023 年之前預訂的，我們獲得了總投資組合的近 10%。所以從這個意義上來說，我認為我們的逐步持續改進是毫無疑問的。

Richard Xu, Morgan Stanley.

理查徐，摩根士丹利。

Thanks for the opportunity for the question. A couple of questions for me. First of all, on capital, again, after the special dividend, what do you think the capital move for to support the growth for loans? Will there still be enough buffer given and obviously most of the loans will be guaranteed by your own capital at the moment.

感謝您提供提問的機會。有幾個問題問我。首先，關於資本，同樣，在特別股息之後，您認為資本將用於支持貸款成長？是否還會有足夠的緩衝，顯然目前大部分貸款將由您的自有資金擔保。

So on the flip side, given the projections on the reduced loan volume, are there sort of room to further reduce somewhat, maybe the cavitation and do more special dividends with the smaller loan balance. So you have to pay in advance the question.

因此，另一方面，考慮到貸款量減少的預測，是否有進一步減少的空間，也許是空化，並以較小的貸款餘額發放更多特別股息。所以你必須提前支付問題。

You were just cutting off their kickoff. (technical difficulty) Could you just repeat the last two sentences.

你剛剛打斷了他們的開球。（技術難度）你能重複最後兩句話嗎？

George, what I see like one, are there enough capital to support the low volume growth after the special dividend? And secondly if there are they're still in a potentially excessive and access capital. If the loan volume will be smaller, rainy weather, there's opportunities for another special dividend down the road. And lastly, is the funding cost trends that we're seeing at the moment. Two on the Capital. One is on the funding costs.

喬治，我認為，特別股息後是否有足夠的資本來支持低銷售成長？其次，如果有的話，他們仍然處於潛在的過度和獲取資本的狀態。如果貸款量較小、陰雨天氣，未來還有機會獲得另一筆特別股息。最後，是我們目前看到的融資成本趨勢。兩個在首都。一是資金成本。

Right, Richard. It's Greg speaking here. Over all, we have gone through as why US is just laying out quite a comprehensive process looking out over the next couple of years, unexpected industry trend, our relative growth trend, capital requirements, liquidity requirements buffer. You know, we operate multiple licenses we obviously have the guaranteed license. We have the consumer finance license, and we always keep our mind open for other licenses in the future.

對，理查德。說話的是格雷格。總的來說，我們已經了解了為什麼美國剛剛制定了一個相當全面的流程，展望未來幾年、意想不到的行業趨勢、我們的相對成長趨勢、資本要求、流動性要求緩衝。您知道，我們經營多個許可證，我們顯然擁有有保證的許可證。我們有消費金融執照，未來也對其他牌照持開放態度。

So after going through all of that we arrived at a given our significant cash position, a view on what we could release today that it gives us still very substantial buffer going forward over the next couple of years. Obviously, our outlook for the market right now is still quite prudent. We're still focusing on quality over quantity.

因此，在經歷了所有這些之後，我們得出了給定的大量現金頭寸，對我們今天可以發布的內容的看法是，它為我們未來幾年的發展提供了非常可觀的緩衝。顯然，我們目前對市場的前景仍然相當謹慎。我們仍然注重品質而不是數量。

But you know, in a year or two that macro situation were to change, in there were more opportunities. We certainly retain enough capital that we could deploy in our current licenses to meet higher growth. So I think that's your question is whether or not there could be additional capital relief down the road. We're not considering that for the moment. We want to keep our flexibility for maybe a more positive market outlook, let's say 12 to 24 months down the road.

但你知道，一兩年後宏觀情勢就會發生變化，機會會更多。我們當然保留了足夠的資本，可以在現有許可證中部署，以滿足更高的成長。所以我認為你的問題是未來是否會出現額外的資本減免。我們暫時不考慮這個。我們希望保持靈活性，以應對更積極的市場前景，假設未來 12 至 24 個月。

So I think you know, our strategy here has been to provide the reward to make it meaningful to deliver in a way that allows investors to make a choice on whether they want to take some cash or they actually want to effectively double down with the company and taking shares and to make that a meaningful number today, but while leaving the company flexibility to continue to do the right thing in top capture opportunities going forward with sufficient buffer. So that's I think the but the grounding or the or the ranging on this.

所以我想你知道，我們的策略是提供獎勵，使其有意義，讓投資者可以選擇是想要拿走一些現金還是實際上想要有效地加倍投資公司並持有股份，並使其成為今天有意義的數字，但同時讓公司能夠靈活地繼續在高層捕獲機會中做正確的事情，並有足夠的緩衝。這就是我認為的基礎或範圍。

In terms of funding costs, we did see funding cost over the last 12 months continue to come down. There's been two drivers of that. One has been the overall lower rate environment. The second, though, has been the change in the mix of our new business between guarantee and a consumer finance. Consumer finance, able to tap the interbank market, multiple funding sources has a lower net funding cost than the facilitation model by working with banks and trust companies.

就融資成本而言，我們確實看到過去 12 個月的融資成本持續下降。這有兩個驅動因素。其中之一是整體較低的利率環境。不過，第二個問題是我們的新業務在擔保和消費金融之間的組合發生了變化。消費金融能夠利用銀行間市場，資金來源多樣，淨融資成本比與銀行、信託公司合作的便利模式更低。

So as we continue to see the mix change so that there is a greater proportion of consumer finance, even though we don't think the rate environment will necessarily drop that much in the foreseeable future. We do think that our mix change will continue to optimize slightly the overall cost of funds in the model.

因此，儘管我們認為利率環境在可預見的未來不一定會下降那麼多，但隨著我們繼續看到結構發生變化，消費金融的比例會更大。我們確實認為我們的組合變化將繼續略微優化模型中的整體資金成本。

Yada Li, CICC.

李亞達，中金公司。

Hello, management. Thank you for taking my question. And my first question is by fiscal 2023, the company has completed a transition into 100% guarantee model, but the bottom line was still under pressure. And I was wondering what are the main causes and how long does it take before profits could be released? And what are the main drivers for the profitability recovery?

你好，管理層。感謝您回答我的問題。我的第一個問題是，到2023財年，公司已完成向100%擔保模式的過渡，但獲利仍面臨壓力。我想知道主要原因是什麼？需要多長時間才能釋放利潤？獲利能力復甦的主要驅動力是什麼？

And secondly, for the consumer finance company, how was the profitability and the future developments, how we could balance the growth of the SBO and consumer finance segments and which one could be the strategic focus.

其次，對於消費金融公司來說，獲利能力和未來發展如何，如何平衡SBO和消費金融板塊的成長，哪個是策略重點。

And lastly, I was wondering, are we considering additional buybacks and what is the main cause that we choose the special dividend you instead of buying back?

最後，我想知道，我們是否正在考慮額外回購，我們選擇特別股利而不是回購的主要原因是什麼？

That's all. Thank you.

就這樣。謝謝。

Let me pick up your first question and this is Yong speaking and because of our decline in new loan volume and the revenue we generate from new book cannot offset the decrease caused by all the book shrinkage. And so in the under 100% guarantee model for new model that we have to accrue a higher or a higher upfront provision that delay the public launch of our new business, but also in account basis, a new launch that we enable and I want to put in your model is delivering lifetime profitability, but it just we'll record a net accounting loss for the first calendar year because of the higher phones FibroGen. So that's a reason of delay of recognition. (inaudible - microphone inaccessible)

讓我回答你的第一個問題，這是 Yong 的發言，因為我們新貸款量的下降和新書產生的收入無法抵消所有書籍縮減造成的下降。因此，在新模式的 100% 擔保模式下，我們必須累積更高或更高的預付款，以延遲我們新業務的公開推出，而且在帳戶基礎上，我們啟用新業務，我想放入模型中的是提供終身獲利能力，但由於FibroGen 手機的銷量較高，我們將在第一個日曆年記錄淨會計虧損。這就是延遲識別的原因。（聽不清楚 - 麥克風無法存取）

And if I speak about what are the main drivers for profitability recovering how Kenny understand is ahead. And I would say three things, right? The first is activity portfolio credit performance, which we can measure by mid-April rates. And the second is optimization for the automation of what Greg mentioned, operating cost and also importantly, funding costs. And lastly, our pace, of new sales alone gross will decide three factors will make once you decide our profitability recovery in coming years.

如果我談到獲利能力復原的主要驅動力是什麼，肯尼對未來的理解是怎樣的。我想說三件事，對吧？第一個是活動組合信用表現，我們可以用四月中旬的利率來衡量。第二個是格雷格提到的自動化最佳化，營運成本，以及重要的融資成本。最後，一旦你決定我們未來幾年的獲利能力復甦，我們的新銷售總額將決定三個因素。

And then if I was to answer your last question, it was about why special dividends overall our buyback Have you considered buybacks. If you compare dividends versus buyback, we believe considering the situation we are in our dividend several more advantages. First, the our ability to deliver return to shareholders through buyback is quite limited because of low liquidity. As equities as a pure primary listed companies in US and also in Hong Kong, we to maintain at least 25% public float by Hong Kong listing rules and our current public float is only less than 32% now.

然後，如果我要回答你的最後一個問題，那就是為什麼我們回購的整體特別股利你考慮過回購嗎？如果將股息與回購進行比較，我們相信考慮到我們的股息情況，我們還有更多優勢。首先，由於流動性較低，我們透過回購為股東帶來回報的能力相當有限。作為美國和香港的純粹主要上市公司，我們按照香港上市規則維持至少25%的公眾持股量，而我們目前的公眾持股量只有不到32%。

So we have very, very limited space for buyback at this moment. And this time our dividends, you know that it comes with option to choose cash or scrip. So we believe this provides more flexibility than buyback to our shareholders. So that's the reason why we decide to provide special dividends or buybacks.

所以目前我們的回購空間非常非常有限。這次我們的股息，你知道它可以選擇現金或股票。因此，我們相信這為我們的股東提供了比回購更大的靈活性。這就是我們決定提供特別股利或回購的原因。

Greg, here. And on consumer finance, basically 2023 was the third kind of full year of operation for the company, and it has been scaling up from scratch when the license was acquired. So 2023 is a profitable year for consumer finance as the scale of that business continues to increase its relative efficiency. There is still some room there as it continues to scale up and we'd change the overall mix of the portfolio.

格雷格，在這裡。而在消費金融方面，基本上2023年是該公司第三個全年營運年，拿到牌照後就一直在從無到有規模擴張。因此，2023 年對於消費金融來說是獲利的一年，因為該業務的規模不斷提高其相對效率。隨著它繼續擴大規模，仍有一些空間，我們將改變投資組合的整體組合。

The question, how do we balance this and what is our being a strategic focus going forward?

問題是，我們如何平衡這一點以及我們未來的策略重點是什麼？

So I think the way for us to describe this is our main, our strategic focus, our differentiation in the market remains around serving the small business owner. This is still our core element, where we see consumer finance playing an important role is really in two ways.

所以我認為我們描述這一點的方式是我們的主要策略重點，我們在市場上的差異化仍然圍繞著為小型企業主服務。這仍然是我們的核心要素，我們認為消費金融在兩個方面都發揮著重要作用。

One is that we do believe that there are good consumer finance opportunities to work through multiple channels to diversify our product offering into providing more a smaller ticket shorter term loans that makes us to be more nimble in a dynamic environment, but also providing these capabilities to a small business owners as well because small business owners sometime after the capacity of their company needs, which we cover under the proven business model and sometimes they have their individually.

一是我們確實相信，存在良好的消費金融機會，可以透過多種管道使我們的產品多樣化，提供更多小額短期貸款，使我們在動態環境中更加靈活，同時也提供這些能力小型企業主也是如此，因為小型企業主有時會滿足其公司需求的能力，我們在經過驗證的商業模式下對此進行了介紹，有時他們也有自己的能力。

Of course, we're looking at these customers from a full credit view, right, but we sometimes find that small business owners, once they have taken a long-term loan, they may still have smaller interim needs. And so we want to be in a position to serve these customers kind of on a longer lifecycle with more opportunities to interact with them and through the interaction, creating more data points to understand them and their needs.

當然，我們是從完整的信用角度來看待這些客戶，對吧，但我們有時會發現小企業主，一旦他們獲得了長期貸款，他們可能仍然有較小的臨時需求。因此，我們希望能夠在更長的生命週期中為這些客戶提供服務，提供更多與他們互動的機會，並透過互動創建更多數據點來了解他們及其需求。

So it is a way of consumer finance as a way to diversify our product offering. It provides some nimbleness in terms of ticket size to provide some additional data in terms of behavior as well as additional touch points to our existing customers as well as deeper reach into the market. So we will continue you have SBO as a core capability. But if you look at the mix between the two way model and the consumer finance. While you've seen that mix change quite a bit over the last 12 months and that transition to a more balanced development, you'll probably see continue in the near to medium term.

因此，這是消費金融的一種方式，也是我們產品供應多元化的一種方式。它在門票規模方面提供了一定的靈活性，可以提供一些行為方面的額外數據以及我們現有客戶的額外接觸點以及更深入的市場覆蓋。因此，我們將繼續將 SBO 作為核心能力。但如果你看看雙向模式和消費金融之間的結合。雖然您已經看到這種組合在過去 12 個月中發生了相當大的變化，並且向更平衡的發展過渡，但您可能會在中短期內看到這種情況繼續下去。

Thank you. That concludes our question-and-answer session for today. I'll now turn the call back over to management for closing remarks.

謝謝。我們今天的問答環節到此結束。現在，我將把電話轉回給管理階層，讓其結束語。

Thank you. This concludes today's call and 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，感謝您參加電話會議。如果您有更多問題，請隨時聯絡公司的 IR 團隊。再次感謝。

Thank you. This conference is now concluded. You may now disconnect.

謝謝。本次會議現已結束。您現在可以斷開連線。