CNFinance Holdings Ltd. Q2 FY2024 earnings call

Key Focus Areas

• Navigated microeconomic uncertainties by reinforcing business fundamentals and ensuring asset quality. Originated loans of RMB6.9 billion; outstanding loan principal grew ~10% YOY. Maintained NPL ratio at 1.2%.
• Interest income up 5% YOY. Enhanced collaboration with third-party asset management institutions for overdue loan collections, though it increased operating expenses, net income from operating activities was flat YOY.
• Drove down funding costs by ~4% YOY, passing benefit to customers with end-user interest rate down ~1 percentage point.
• Strengthened support for sales partners, easing liquidity pressure and reducing risk exposure.
• Focused on asset quality, with over 90% of loans originated in first-tier and new first-tier cities. Achieved a 110% recovery rate during the period.

In the first half of 2024, CNFinance originated loans of RMB6.9 billion. As of June 30, 2024, outstanding loan principal was approximately RMB16 billion, a year-over-year growth of about 10%. Interest income was approximately RMB930 million, up 5% compared to the same period last year. Total interest and fees income increased by 4.7% to RMB926.5 million from RMB884.5 million. Total interest and fees expenses increased to RMB401.7 million. Net interest and fees income was RMB524.8 million, representing a 1.3% increase from RMB518.2 million. Net revenue under the Commercial Bank Partnership model was RMB58.4 million compared to RMB50.1 million in the same period of 2023. Collaboration costs decreased by 3.9% to RMB159.2 million from RMB165.6 million. Net interest and fees income after collaboration cost increased by 5.3% to RMB424 million from RMB402.7 million in the same period of 2023. Provision for credit losses increased to RMB170.8 million from RMB129.6 million. Other expenses increased by 62.2% to RMB97 million from RMB59.8 million. Net income was RMB48 million compared to RMB93.1 million in the same period of 2023. As of June 30, 2024, cash and cash equivalents and restricted cash were RMB1.6 billion. The deliverance ratio for loans originated increased from 15.5% as of December 31, 2023, to 16.4% as of June 30, 2024. The NPL ratio remained at 1.2%.

Future Plans

• Continue to adjust strategy focusing on asset quality and operational efficiency. Rigorously manage credit approval standards for new loans.
• Improve efficiency of delinquent loan recoveries via settlement recoveries and deeper cooperation with third-party asset managers.
• Strengthen product innovation, expand product portfolio, optimize sales system, and adjust credit approval policy.
• Further strengthen compliance efforts to prevent non-market risk cases.

• Macro-economic uncertainties. - Adjustment in the real estate market. - Known/unknown risks, uncertainties, and factors beyond the company's control that may cause actual results to differ from forward-looking statements.