X Financial
Q3 2020 Earnings Call Transcript

Published: 2 Dec 2020

[Operator:]

Good day and welcome to the X Financial Third Quarter 2020 Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Tanya Wen. Please go ahead.

[Tanya Wen:]

Thank you, operator. Hello, everyone, and thank you for joining us today. The company's results were released earlier today and are available on the company's IR website at ir.xiaoyinggroup.com. On the call today from X Financial are Mr. Simon Cheng, President; and Mr. Frank Fuya Zheng, Chief Financial Officer. Mr. Cheng will give a brief overview of the company's business operations and highlights followed by Mr. Zhang, who will go through the financials. They are all available to answer your questions during the Q&A Session.

[Simon Cheng:]

Hello everyone. Despite the impact from COVID-19 and tightened regulatory environment in China, we delivered encouraging operational and financial results in the third quarter. Thank you to the solid recovery in loan facilitation amount of Xiaoying Card Loan, our total loan facilitation amount increased by 30.4% quarter-over-quarter to RMB8,027 billion. We continued to adhere to our prudent risk management approach. The delinquency rates for all outstanding loans that are past due for 31 days to 90 days and 91 days to 100 days as of September 30, 2020 decreased further to 2.13% and 4.62%, respectively, compared to 3.53% and 9.44%, respectively, as of June 30, 2020. As the pandemic continues to ease and the macro economic environment recovers gradually in China, our credit risk profile continues to improve. Based on the solid progress we have made on the operational front, we improved both our top and bottom lines. Our total net revenue increased by 44.3% quarter-over-quarter and net loss contributable to X Financial shareholders narrowed to RMB113.0 million from RMB343.7 million in the previous quarter, demonstrating our strong capability to navigate in an uncertain regulatory environment and a challenging economy. In August 2020, the Supreme People's Court or PRC lowered the ceiling of the private lending interest rate protected by law. We believe this new policy is currently only applicable to private lending, which mainly refers to loans made to individuals or companies by private organizations or individuals instead of financial institutions. The regulation does put pressure on the whole lending sector, but it's not directly applicable to our business at this moment as we are a financial institution regulated by local financial regulatory authorities.

[Frank Fuya Zheng:]

We are pleased to have seen gradual recovery during the third quarter, thanks to the overall improving market conditions and our continuous efforts to enhance the top line growth and reduce costs across various parts of our business. We continued to strengthen our risk management capabilities and focused on expanding the quality of our borrower base. The improvement in our credit risk profile has brought a significant decrease of RMB56.3 million in the bad debt provisions for accounts receivable and loans receivable in the third quarter when compared with the previous quarter. Together with other cost control measures, we successfully narrowed the net loss for the quarter. So far into the fourth quarter, we are seeing more positive signs on the borrower side. As of October 31, 2020, the delinquency rates for all outstanding loans that are past due for 31 days to 90 days and 91 days to 180 days further dropped to 1.94% and 3.84%, respectively, an outstanding performance showing the high effectiveness of our risk control model and improvements in the quality of our borrowers. In addition, our efforts to expand and deepen our cooperation with financial institutional partners continued to bear fruit. The total number of financial institutions which we cooperate with continued to increase during the third quarter, and at the same time, we also managed to reduce overall funding costs in this quarter. We will continue to engage with more financial institutions to further optimize our cost structure. And in the meantime, we continued to diversify our partnerships with third-party financial guarantee companies. In conclusion, we will continue to closely monitor regulations and market conditions, ensure we will adapt quickly in response to any potential impact on our business due to changes in the macro environment. In addition, we will continue to provide more attractive loan products, further improve the credit quality of our borrower base and explore additional cooperation opportunities with financial institutions to capture untapped growth in the personal finance industry.

[Operator:]

Thank you. We will now begin the question-and-answer session.

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[Operator:]

Showing no further questions at this time, this concludes our question-and-answer session. I would like to turn the conference back over to Tanya Wen for any closing remarks.

[Tanya Wen:]

Thank you, everyone, for joining us on the call today. If you haven't got a chance to raise your questions, we will be pleased to answer them through follow-up contacts. We look forward to speaking with you again in the near future. Thank you.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.