CNFinance Holdings Limited
Q1 2021 Earnings Call Transcript

Published: 27 May 2021

[Operator:]

Good morning and welcome to CNFinance First Quarter 2021 Financial Results Conference Call. All participants will be in a listen-only mode. Please note that this event is being recorded. Now I'd like to turn the conference over to Mr. Matthew Lou. Please go ahead.

[Matthew Lou:]

Good morning everyone and welcome to the CNFinance First Quarter 2021 Financial Results Conference Call. In today's call, our CEO Mr. Zhai will walk us through the operating results followed by the financial results from our CFO, Mr. Li. And after that we will have a Q&A section. Before we start, I would like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended. And as defined in the US Private Securities Litigation Reform Act of 1995.

[Li Ning:]

Okay. Thank you everyone for joining us today. I will first walk you through our first quarter of 2021 financials. We believe year-over-year comparison is the best way to review our performance. Unless otherwise stated all percentage changes I'm going to give will be on that basis. Also unless otherwise stated, all numbers I'm going to give will be in RMB. First, total loan origination volume was RMB 2,841.8 million during the first quarter of 2021, among which 37% was first lien and 63% were second lien. Total outstanding loan principal was RMB 10.3 billion as of March 31st, 2021 with RMB 8.7 billion under collaboration model and RMB 1.6 billion under the traditional facilitation model. Interest and financing service fees on loans decreased by 13.7% to RMB 422 million from RMB 489.2 million, primarily due to lowered interest rates on loan facilitated in an effort to comply with the rules and regulations issued by relevant PRC regulatory authorities, including the decisions of the Supreme People's Court to amend the provisions on several issues concerning the application of law in the trial of private lending cases issued in August 2020. Interest and fees expenses decreased by 22.2% to RMB156.3 million, compared to RMB200.9 million primarily due to the lower average interest rate of the borrowings under agreement to repurchase and other borrowings in the first quarter of 2021. Collaboration costs for sales partners, representing sales incentive paid to sales partners increased by 4% to RMB98.1 million compared to RMB94.3 million, attributable to the increased loan balance under the collaboration model.

[Matthew Lou:]

And now please welcome our CEO, Mr. Zhai Bin to introduce our operational results for the first quarter of 2021. Mr. Zhai can start. Mr. Zhai? Sorry will be a couple of minutes. Our CEO is having a bad connection.

[Operator:]

Go ahead, please.

[Bin Zhai:]

Thank you operator and thank you everyone for joining us in the conference call. On today's call, we will introduce the company's -- I will be introducing the company's operational results of Q1 2021. And then I will take your questions with our CFO. And I -- sorry, I had a better connection just now. And please, I will be elaborating our operational results now.

[Matthew Lou:]

And that was the operational results by our Vice President of Capital Market Department on behalf of CEO, Mr. Zhai Bin. Now, we would like to open the Q&A session. Operator? Operator, we would like to open the Q&A session please.

[Operator:]

We'll now begin the question-and-answer session. First question comes from William Gregozeski with Greenridge Global. Please go ahead.

[William Gregozeski:]

Hey guys. Great quarter. Can you disclose what the total number of transactions were in the quarter? And what the duration of the loans are that you're seeing right now?

[Matthew Lou:]

Mr. Li will take your questions.

[Li Ning:]

During the first quarter the total number of transactions was over 5,000 nearly -- over 5,000. And the total loan origination volume was RMB 2.8 billion just as we noticed and it was a significant increase compared to the same quarter of last year. And the average duration of the loans we have facilitated during the quarter was a bit shorter than we expected, primarily due to the regulation changes last year, especially the limit on the APR. So, we are focusing on facilitating loans with a duration of one year during the quarter.

[William Gregozeski:]

Okay. And then the interest expense you guys reported was quite a bit lower than what I was looking at. What was the -- can you give the average rate you guys were paying on your loans in the quarter?

[Li Ning:]

So, the interest expense mainly consists of the interest we paid to our trust partners. And if you are speaking of the 12-month duration capital from the trust companies, it is around 5.5% to 9%. For capital that's duration is longer than the year is around 9.5% to 10%.

[William Gregozeski:]

Okay. All right. And then the -- with the forfeited sales partner position income that you reported, do you think it's fair to look at that and say that shows how derisked you guys are on these loans through your platform?

[Matthew Lou:]

It was a little blurry. Could you repeat the question again?

[William Gregozeski:]

Yeah. With how high the forfeited sales partner position income was in this quarter. Is it fair to look at that and think that it shows how derisked you guys are as a company for loans that go through your platform?

[Ning Li:]

So if you look at a measure on our financial statements, there is a provision for credit losses. And if we look at -- if you separate the collaboration model and the traditional facilitation model, you will see the provision -- the provision for credit losses as a percentage of the revenue. Under the collaboration model, it was around 0.8% to 1%, which is way lower than that under the traditional facilitation model. So I think it is fair to say we are derisked.

[William Gregozeski:]

Okay. And last question, do you have expectations you can provide for origination volume for all of 2021 and 2022?

[Ning Li:]

First of all, the year-over-year growth of loan origination in the first quarter of 2021 was mainly because Q1 last year China was heavily -- under heavily effect of the pandemic. So there was a significant increase in this quarter year-over-year. But as compared to the fourth quarter of 2020, when we -- during which we facilitated RMB2.7 billion and this quarter we recorded RMB 2.8 billion.

[Matthew Lou:]

[Li Ning:]

So considering that if we don't see huge market fluctuations and we are able to securing sufficient fund as we are doing now I'm projecting, CNY3 billion loan origination every quarter go.

[William Gregozeski:]

Okay.

[Li Ning:]

And that's the bottom-line.

[William Gregozeski:]

Okay, great. Thank you, guys.

[Li Ning:]

Thanks.

[Operator:]

Thank you. Our next question comes from Rongrong Zhang of Cathay Capital. Please go ahead.

[Rongrong Zhang:]

[Bin Zhai:]

Hello Mr. Lee. I noticed that in your balance sheet you have around $330 million of cash and that number is actually higher than your market -- market cap. So is that number could you -- is that number -- could you elaborate that number on the balance sheet of cash?

[Matthew Lou:]

[Li Ning:]

So we had cash-on-cash and cash equivalents if we present that in renminbi it is around RMB2.2 billion. And that's the number you said in dollar.

[Matthew Lou:]

[Li Ning:]

So in my part of introducing the financial results of the quarter, I also had a part mainly introducing the, cash and cash equivalents and restricted cash. So among that RMB2.2 billion of cash, we had RMB1.3 billion actually was under -- was from structured funds, which could only be used to grant new loans. So yeah, that's the -- that's what consisting in our balance of cash.

[Rongrong Zhang:]

[Matthew Lou:]

I appreciate it. Thank you.

[Operator:]

At this time, we have no further questions. I'd now like to turn the call back over to management for closing remarks.

[Matthew Lou:]

Thank you everyone again for joining us in this conference call. If you have any further questions please feel free to reach us at IR at cashchina.cn. Thank you. Thank you everyone.

[Bin Zhai:]

I appreciate it.

[Li Ning:]

Thank you.