CNF

Good day, and welcome to the CNFinance Holdings Limited First Half of 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to IR Manager, Matthew Lou. Please go ahead.

Thank you, and welcome to the CNFinance First Half of 2025 Financial Results Conference Call. Our Director and Vice President, Mr. Jun Qian, will walk us through the operating and financial results. 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 U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminologies such as will, expects, anticipates, future, intends, plans, believes, estimates, target, going forward, outlook and similar statements. Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under law. Now please welcome Mr. Jun Qian.

[Interpreted] Hello, everyone. In the first half of 2025, amidst the complex and ever-changing market environment, CNF adhered to the guiding principle of survival first, victory first, actively tackled challenges and steadily advanced strategic adjustments and business optimizations. Now I'd like to report to you on our operational and financial performance for the first half of the year. As of June 30, 2025, our company has signed a total of 2,184 sales partners, marking a year-on-year increase of 2%. We had an aggregate of 1,485 sales partners who have introduced borrowers to us, representing a 3.3% growth. However, due to our proactive efforts to control loan issuance and focus on reducing nonperforming loans in our existing portfolio, the number of loan transactions decreased by 78.1% year-on-year and the total loan origination dropped by 85.4%. By the end of the second quarter, our loan balance stood at RMB 11.2 billion, a decrease of 29.6% compared to that of last year. We adhere to the strategy of leveraging existing assets and optimizing new ones, focusing our resources on risk mitigation and asset quality enhancement. Although this approach puts pressure on short-term performance, it lays a solid foundation for long-term steady growth. In the first half of the year, our interest income was RMB 416 million, a decline of 55% year-on-year. Financing costs decreased by 32% and operating expenses fell by 74%, demonstrating the company's strong cost control capabilities. Our net loss was RMB 40.4 million, primarily due to an impairment loss provision of RMB 31.3 million. As of June 30, 2025, the nonperforming loan ratio of the company's loan was 16.9%. Although the NPL ratio rose, the increase of new NPLs was effectively contained. Through diversified NPL reduction measures, the company achieved 103% NPL recovery rate in the first half. During the first half, the company optimized its organizational structure and streamlined personnel, resulting in a significant reduction in operating costs. In one word, our key priorities in the first half included: first, reducing NPLs by innovating and leveraging effective reduction tools. Second, we've stabilized our funding source by bringing in a bunch of new institutional investors, mainly local AMCs to ensure smooth financing channels. Third, we have expanded into new business areas. We refined our existing products and launched new ones that meet market demands. Facing continued market challenges, the company will uphold the survival first, victory first principle. With containing nonperforming loans and optimizing new growth as the core strategy, we will persist in the 3 key priorities; dedicating resources to NPL reduction, ensuring stable funding channels and supporting new business development.

[Operator Instructions] There are no questions at this time. I'd like to hand the call back over for any closing remarks.

you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Hello, and welcome to the CNFinance Holdings Limited First Half of 2024 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to [Simon Tong] (ph), Manager of the Capital Markets Department. Please go ahead.

Thank you, Joe. Good morning and welcome to the CNFinance First Half of 2024 Financial Results Conference Call. In today's call, our Director and Vice President, Mr. Jun Qian, will walk us through the operating results, followed by the financial results from our Acting CFO, Ms. Li. After that, we will have a Q&A section. Before we started, 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. These forward-looking statements can be identified by terminology such as will, expects, anticipates, future, intends, plans, believes, estimates, targets, going forward, outlook, and similar statements. Such statements are based upon management's current expectation and current market and operating conditions and relate to the events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the company's filings with the US Securities and Exchange Commission. The company does not take any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law. Now, please welcome Mr. Jun Qian.

[Foreign Language] Good day, everyone. Thank you for joining us today. In the first half of 2024 our focus was [squarely] (ph) on navigating the microeconomic uncertainties by reinforcing our business fundamentals and ensuring the quality of our assets. During this period, we originated loans of RMB6.9 billion. As of June 30, 2024, our outstanding loan principal was approximately RMB16 billion, reflecting a year-over-year growth of about 10%. To manage the potential risks, we continue refining our credit approval strategy and strengthened our efforts in collecting and disposing of non-performing loans. As a result, we maintained our non-performing loans ratio at approximately 1.2% as of June 30, 2024, consistent with the level at the end of last year. We recorded an interest income of approximately [RMB930 million] (ph), up 5% compared to the same period last year. However, while we benefit from a continued decline in interest rate of our [trust] (ph) financing, the increase in average daily loan principal under the trust model lead to a slight year-over-year rise in interest expense. Since the start of the year, we have enhanced our collaboration with third-party asset management institutions, particularly in area of overdue loan collections. This strategic move significantly boosted our recovery [method] (ph). This will also lead to a corresponding increase in operating expense due to service fees paid to the third-party institution. Despite these additional costs, our net income from operating activities for the first half of 2024 was approximately RMB220 million, remaining largely flat compared to the same period last year. We have maintained a prudent approach in provision for impairment, with the increase in our outstanding loan principal, the provision for credit losses increased to RMB172 million, consequently, our net profit for the period decreased to RMB48 million. [Foreign Language] Our key area of focus for the half year period includes, first; we continue to drive down our funding costs. With market interest rates trending downward, we actively engaged in negotiation with our funding partners to secure more favorable financing terms. Leveraging our long-term relationships, we achieved a reduction in our average financing rate by approximately 4% year-over-year. The reduction allowed us to [pass] (ph) on benefit to our customers with end-user interest rate decreasing by about 1 percentage point. [Foreign Language] Second, we strengthened our support for sales partners. This quarter, we observed a further easing of liquidity pressure on our sales partners. It's more often resuming their repurchase obligation to protect the long day recommended. This share benefit, share risk model has been instrumental in reducing our risk exposure. [Foreign Language] Third, we maintain our focus on asset quality. We concentrate our business efforts on the core area of first-tier and new first-tier cities, with over 90% of our loan in the period being originated in these [areas] (ph). In addition, we deepened our co-operation with third-party asset management companies, enhancing our capability in collecting delinquent loans. Through these efforts, we successfully maintained our NPL ratio at 1.2% as of June 30, 2024, while achieving a recovery rate of 110% during the period. [Foreign Language] As we look ahead, we recognize the ongoing uncertainty in the macroeconomic environment and the adjustment in the real estate market. We are committed to adjust liquidity pressure of our existing loan and navigating the uncertainty surrounding new loans. To that end, we will continue to adjust our strategy, focusing on ensuring asset quality and enhancing operational efficiency. Our goal is to improve both quality and profitability of our business. Our specific measure moving forward includes; [Foreign Language] Enhancing our focus on asset quality, we will rigorously manage our credit approval standard for new loans, ensuring the quality of forward and closings. Additionally, we will continue to improve the efficiency of our delinquent loan recoveries, particularly through settlement recoveries, which offer the advantage of fast recovery and high recovery rates. We plan to deepen our cooperation with third-party asset management company to further leverage its advantage, improving both recovery speed and recovery rates. [Foreign Language] Strengthening our product innovation, we will maintain the high quality and fast advantage of our product whilst expanding our product portfolio to adapt to various scenarios. To support these new business scenarios and enhancing overall efficiency, we will continue to optimize our sales system and adjust our credit approval policy. Incorporating additional dimensions into our approval models. [Foreign Language] Further strengthening our compliance efforts, we are committed to continuously improving our risk control and compliance process through target actions, which will help us prevent the non-market risk cases. [Foreign Language] Now I will hand over the time to our CFO, Ms. Li Jing, and she will introduce the financial results for the first half of 2024 to you.

Our 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 from RMB366.3 million. The increase in total interest and fees expenses was mainly due to the increase in average daily balance of interest-bearing borrowings. Net interest and fees income was RMB524.8 million, representing an increase of 1.3% from RMB518.2 million. Net revenue under the Commercial Bank Partnership model was RMB58.4 million as compared to RMB50.1 million in the same period of 2023. In the first half of 2024, the majority of borrowers were introduced by sales partners and the commission paid to sales channels has decreased, which has ultimately led to an increase in the net revenue under the commercial bank partnership model. Collaboration costs for sales partners 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 in the same period in 2023. The increase was mainly due to the increase in outstanding loan principles. Other expenses increased by 62.2% to RMB97 million from RMB59.8 million in the same period of 2023, primarily due to the increase in fees paid to third-party asset management company to collect delinquent loans. The net income was RMB48 million as compared to RMB93.1 million in the same period of 2023. As of June 30, 2024, the company had cash and cash equivalents and restricted cash of RMB1.6 billion, including RMB1 billion from structured funds as of June 30, 2024, which could only be used to grant new loans and activities. The deliverance ratio for loans originated by the company increased from 15.5% as of December 31, 2023, to [16.4%] (ph) as of June 30, 2024. The NPL ratio for loans originated by the company was 1.2% as of June 30, 2024 compared to 1.1% as of December 31, 2023. With that, we would like to start the Q&A session.

[Operator Instructions] Okay, at this time, I understand that this will conclude the question-and-answer session. I would like to turn the conference back over to Simon Tong for any closing remarks.

That's all for today. Thank you for joining us. If you have any more questions, please feel free to reach us at [email protected]. Thank you.

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

Hello, and welcome to the CNFinance Fourth Quarter and Fiscal Year of 2023 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation there will an opportunity to ask questions [Operator Instruction] Please note this event is being recorded. I would now like to turn the conference over to Matthew Lou, Investor Relations Manager. Please go ahead.

Good morning and evening, and welcome to the CNFinance fourth quarter and fiscal year 2023 financial results conference call. In today's call, our Director and Vice President, Mr. Jun Qian will walk us through the operating results followed by the financial results from our CFO, Mrs. Li. After that, we will have a Q&A session. 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 U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminologies such as will, expect, anticipates, future, intends, plans, believes, estimates, target, going forward, outlook and similar statements. Such statements are based upon management's current expectations and current market conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law. Now please welcome Mr. Jun Qian.

[Foreign Language]

Thank you for taking this time to join this conference call. We will discuss CNFinance fourth quarter and fiscal year of 2023 operating and financial results and followed by a Q&A session.

[Foreign Language]

2023 is another important year in the history of CNFinance. As the condition of China's macro economy and real estate market continue to be complex we were still able to deliver a solid result at year-end. We concluded the year facilitating loans of RMB 17.3 billion, representing a year-on-year growth of 18%. In 2023, our interest income increased slightly as compared to that of 2022. Yet, our interest expense was 8% lower than that of 2022. In 2023, the liquidity pressure of our sales partners have eased due to the installment policy we have given them. Also, as we started to involve sales partners under the commercial bank partnership, the protection to the loans are much stronger, which led to a 23% decrease of provision for credit losses. As a result, we have recorded a net income of RMB 165 million in 2023, representing a year-on-year growth of 21%.

[Foreign Language]

The company has faced many challenges in 2023. We have completed the following tasks to ensure smooth operations.

[Foreign Language]

First, promoting the commercial bank partnership and enriching the product mix. Since its launch, the commercial bank partnership has gradually gained recognition from the market and our partners due to its high-quality borrower base and low financing cost. In 2023, we originated loans of RMB 5 billion under the commercial bank partnership and recorded a net revenue of approximately RMB 88 million. As of December 31, 2023, the outstanding loan principle under the commercial bank partnership was RMB 4.3 billion.

[Foreign Language]

Second, optimizing funding structure. As the market environment evolves, the management started negotiating with our funding partners to optimize funding structure. Based on the mutually beneficial relationship between the founders and CNF, our funding partners were very supportive on that subject. As a result, our interest expense in 2023 was 8% lower as compared to the same period of 2022. We believe this has laid the foundation for us and the founding partners to continuously expand the business.

[Foreign Language]

Third, continue to support our sales partners. In 2023, to help those partners alleviate their liquidity pressure, we continue to refine our installment policy for repurchasing delinquent loans. As a result, some sales partners who failed to fulfill their obligations were able to recommence the installments and start to introduce new borrowers to the company.

[Foreign Language]

Fourth, improving asset quality due to the uncertainty associated with the real estate market, the management has decided to strategically shift CNF’s business to core areas of Chinese core cities. 90% of loans CNF facilitated in 2023 with in Tier 1 and Tier 2 cities. In addition, in the fourth quarter of 2023, the company disposed of a bulk of nonperforming loans, which helped the company to reduce its risk exposure and recover cash.

[Foreign Language]

Fifth, using technology to refine credit assessments. In 2023, we have applied the property rating system to make more accurate evaluation of collaterals. We have also applied a risk control model designed by one of our commercial bank partners by adding more variables to -- we can give more thorough analysis of applicants. As a result, our delinquency ratio dropped to 15.6% as of the end of 2023 as compared to 19.2% as of the end of 2022.

[Foreign Language]

We believe that the company will continue to face challenges in 2024 as there are still uncertainties associated with China's real estate market, it is equally important for us to maintain growth and contain risks. Our major tasks for 2024 includes the following:

[Foreign Language]

First, we will keep mix innovation in product mix. In the year of 2023, we have optimized our geographic footprint. Our goal for 2024 is to diversify our product offerings to meet borrowers' needs in different scenarios and target high-quality collaterals as well as borrowers with better risk profile. At the same time, we will further optimize our sales team to accommodate with the adjustment of product mix.

[Foreign Language]

Second, facing the complex property market, we will prioritize asset quality. First, we will refine our risk control mechanism except for collateral value, we will also assign greater importance to evaluating borrowers in decision making. For example, we will take into account the applicant industry as that may impact its ability to make payments. Other than that, we will apply differentiated review procedures for large cases. In addition, we will continue to dispose of nonperforming loans to contain our risk exposure.

[Foreign Language]

Third, as one of the leaders in the industry, CNFinance fully recognizes the importance of compliance building for company's sustainable growth. In 2024, we will continue to strengthen the compliance building. First, we will continue to refine our internal control mechanism. Second, we will conduct compliance training on a regular basis to enhance our employees' awareness and also apply regular inspections, case audits and other critical means.

[Foreign Language]

Now I will hand the call over to our CFO, Mrs. Li, to walk you through fourth quarter and fiscal year of 2023 financials.

Thank you, Mr. Qian, and welcome to our conference call. Now I would like to walk you through the fourth quarter and fiscal year of 2023 financials. Please note that the currencies that we use within RMB and all the comparison will be made on a year-over-year basis unless otherwise stated. For the first quarter of 2023, the total interest and fees income remained rather stable at RMB 445 million. The interest income charge to sales partner increased by 11% to RMB 36 million from RMB 33 million in the prior year. It's primarily attributable to an increase in the delinquent loan staff were recruited by sales partner in installments. Total interest and fee expense decreased by 7% to RMB 187 million as compared to RMB 201 million in last year. And this is primarily due to the lower funding cost of trust company partners. Net interest and fees income increased by 2% to RMB 258 million as compared to RMB 253 million in last year. Net revenue under the commercial bank furnishing model was RMB 10 million as compared to RMB 56 million in last year. The decrease was primarily due to the decrease of loan recommended by the commercial banks in the fourth quarter of 2023 as compared to last year. Collaboration cost for the sales partners increased to RMB 91 million from RMB 80 million, primarily attributable to an increase of daily average outstanding loan principles under the trust lending model during the fourth quarter of 2023 as well as the involvement of sales partner and the commercial bank partnership model since the beginning of this year. Provision for credit losses was RMB 42 million as compared to RMB 143 million in last year, primarily attributable to the lower delinquency ratio. Besides the fourth quarter of 2023, some sales partner who forfeited their credit risk mitigation position due to the inability to fill their obligation to repurchase the delinquency loans during the first half of 2023. And then in the year-end -- before the year-end, they were able to recommend the payment. In addition, we start to involve sales partner under the commercial bank partnership since the beginning of 2023, which has jointly led to an increased guarantee asset and also provide more protection to the loans. Net loss on sales of loans was RMB 12 million as compared to RMB 1 million in last year. Total operating expense increased by 15% to RMB 97 million compared to RMB 84 million in last year. Net income decreased by 33% to RMB 19 million from RMB 28 million. For the fiscal year of 2023, the total interest fees income increased by 1% to RMB 1,755 million as compared to RMB 1,731 million. Interest income charged to sales partner increased by 10% to RMB 125 million from RMB 122 million in last year. This is primarily due to an increase in the delinquent loans we were repurchased by the sales partner in installment. Total interest and fees expense decreased by 8% to RMB 723 million as compared to RMB 785 million, primarily due to the lower funding course of trust company partners. Net revenue under the commercial bank partnership model increased by 53% to RMB 88 million from RMB 58 million. The increase was primarily due to the increase of loan recommended by the commercial banks in this year as compared to the last year. Collaboration cost for sales partners increased by 7% to RMB 334 million as compared to the RMB 321 million in last year, primarily attributable to an increase of daily average outstanding loan principal under the trust lending models in 2023 and also the involvement of sales partner in the commercial bank partnership model since the beginning of this year. Provision for credit losses was RMB 183 million as compared to RMB 238 million in last year, primarily due to the lower delinquency ratio despite in the fiscal year of 2023, some sales partners who forfeited their credit risk mitigation positions due to the inability to fulfill their obligation to repurchase delinquency loans during the first half of 2023. We're able to recommend their payments. In addition, we started to involve sales partner under the commercial bank partnership since the beginning of 2023, which has jointly led to an increase of guarantee assets and also provide more protection to the loans. Other gains was RMB 5 million for this year and compared with RMB 90 million in last year. Turning to -- starting in the second half of 2023, the balance of credit risk mitigation position forfeited by the sales partner has been decreased. As we refine our installment policy to ease the liquidity pressure of the sales partners when the credit risk mitigation position deposit by trust partner are complicated by the company. The company will recognize the amount of future profit and other gains. In the first quarter of 2023, some sales partners who forfeited their credit risk mitigation positions were able to continue to fulfill their guarantee responsibility and associated with the credit risk mitigation positions will not be deemed as confiscated. Total operating expenses was RMB 381 million as compared to RMB 339 million, and the net income increased by 22% to RMB 165 million as compared to the RMB 135 million in last year. As of December 31, 2023, the company held cash and cash equivalents of RMB 2 billion as compared with RMB 1.8 billion as of December 31, 2022. The delinquency ratio for loans originated by the company decreased from 19.2% as December 31, 2022 to 15.6% at the year end of 2023. And the NPL ratio for the loans originated by the company increased was 1.2% of as of the end of this year compared with 1.1% as of December 31, 2022. With that, we would like to start the Q&A session.

[Operator Instructions] The first question comes from William Gregozeski with Greenridge Global. Please go ahead.

With the continued decrease in the borrowing costs, do you think that the rate you've seen in the last quarter is the rate that we should expect you guys to be borrowing at going forward?

[Foreign Language]

[Foreign Language]

So the average rate that we charge our borrowers in 2023 was 16.1%, down from 16.3% from 2022. And going forward, in 2024, I think based on the market conditions, our goal is to keep lowering the financing cost of our borrowers.

Can you talk kind of generally about the demand for the loans that you're seeing in terms of the size and the split between trust and commercial?

[Foreign Language]

[Foreign Language]

So in 2023 due to uncertainties associated with the real asset market, the loan demand from MSE owners are actually not as expected. And so in the first 2 months, we don't see the strength to recover in the first 2 months in the year of 2024. If you take a look in the release data, China's new RMB loans in the first 2 months of 2024 was actually RMB 1100 billion lower than that of the same time of 2023. In the year of 2023, we facilitated loans of RMB 12.2 billion under the trust lending model and RMB 50 billion under the commercial bank model. So the commercial bank, the loan facilitation under the commercial bank model was actually 30% of the total loans originated, which well met our goals set in the beginning of 2023. And also for the year of 2024, we still target the ratio between loans facilitated under trust lending and commercial lending to be RMB 723 million, mainly the commercial bank model will take up 30% of our loan originations. And our target for loan origination for 2024, we want to achieve growth and we target to be RMB 20 billion in total.

You mentioned doing some things like the compliance training and the audits and the increase borrower quality evaluation. Does that tie in at all to the technology upgrades for the platform you've been talking about? Or is that something different?

[Foreign Language]

[Foreign Language]

So those are two different tasks. So as a participant in the financial industry, we believe that compliance building is one essential thing that we should do. And so for the year of 2024, we will surely enhance our compliance building, and we want to make all the audits we want to do the trainings and make compliance one essential thing for the culture and the culture of the company. As for the investment in the technology, so in the year of 2023, we basically invested in two things. One is to enhance our evaluation of collaterals to make more accurate evaluation of the value of the collaterals. And the other thing is that, as we said, we worked with one of our commercial bank partners to bring in this one big data model to give more thorough ratings to our borrowers. And also in the year of 2024, we will keep on investing in technology. And we want to use the actual practical data that we collect from our daily operations to make adjustments to the aforementioned to those two systems and to make it more suitable to our business and to adjust if there is anything that needs to be removed or anything that needs to be added into that model.

And then last question. The share repurchase plan looks like it expired. Is there any plans to renew that?

I'm sorry, could you say that again?

Yes. The share repurchase plan looks like the term on that expired like 1.5 weeks ago. Is there any plans to renew that?

[Foreign Language]

So that was absolutely from our CFO, Mrs. Li. And she said we will go into present it in front of our Board of Directors hoping to extend this per share repurchase plan for another year.

This concludes our question-and-answer session. I would like to turn the conference back over to Matthew Lou for any closing remarks.

Thank you, Drew, and thank you, everybody, for joining us today in this conference call. If you have any questions, please feel free to contact us at ir.cashchina.cn. Thank you.

Good day, and welcome to the CNFinance Holdings Limited Third Quarter of 2023 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. [Jae] (ph), Manager of Capital Marketing. Please go ahead.

Good morning and good evening, and welcome to CNFinance third quarter Financial Results Conference Call. In today's call, our Director and Vice President, Mr. Jun Qian, will walk us through the operating results followed by financial results from our acting CFO, Ms. Li. After that, we will have a Q&A session. 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 and Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminologies such as will, expect, anticipates, future, intends, plans, beliefs, estimates, targets, going forward, outlook and similar statements. Such statements are based upon management's current expectations and current market and operating conditions and relate to the events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding this and other risks, uncertainties and factors is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under law. Now please welcome Mr. Qian Jun.

[Foreign Language] [Interpreted] Thank you for taking the time to join this conference call. We will discuss CNFinance quarter of 2023 operating and financial results, and followed by a Q&A section. During the third quarter of 2023, the company focused on expanding business scale and improving asset quality and achieved year-on-year growth and all important indicators. During the quarter, the company facilitated loans of RMB5.1 billion, increased by 20% year-on-year, and achieved a net income of RMB53 million, increased by 15% year-on-year. Furthermore, as a result of its [Indiscernible] risk control mechanism, the company’s recovery remained at 110%. The company’s highlights for the quarters including the following. [Indiscernible] expanding business scale during the quarter the company's total loan organization volume was RMB5.1 billion, representing a year-on-year increase of 20% and a 12% increase, as compared to the second quarter of 2023. Among the RMB5.1 billion loans facilitated RMB3.9 billion was under trust lending model and RMB1.2 billion was under commercial bank partnership. Continuing to refine our surface to sales partners and help ease their liquidity pressures. Due to our installment policy, sales partners' liquidity has significantly improved. During the quarter, a few historically defaulted sales partners was able to recommend their install payments. This has effectively reduced the risk exposure of the company. Optimizing products and helps making finance more inclusive. In the third quarter of 2023, the company's average funding and costs were slightly lower than that in the beginning of the year. And the company adjusted [portions] (ph) of the lower interest rate products in its product mix accordingly. By optimizing the product mix and lower customer interest rates, we were able to give real benefits to the MSC owners and lay a good foundation for serving the needs of followers with better credit history. In order to improve the asset quality the company has done continuously refining the factors in this credit adjustments and have fully [Indiscernible] technology to improve the accuracy of the assessment of borrowers and collaterals. In addition, the company has drastically shift its business to core regions. During the quarter, loan facilitated in the first Tier and new first Tier cities has reached 80% of overall loan facilitation. Management believes that China’s market is currently in the period of recovery and the price of real estate market is still fluctuating. At the same time, we believe that China will continue to introduce similar policies and China's inclusive finance industry is still in the opportunity period. We will continue to adopt the guiding principle of high quality development, which emphasizes scale, qualities, and compliance, with the following specific objectives in mind. Optimize the product mix, improve sales capabilities, refine the risk control system, reach to prospective followers with high quality collaterals as well as good credit records. In order to match this goal, the company needs to continuously broaden its financing channels, bringing in new founders and launch new loan products. Continue to promote the application of models, systems, and data in credit approval, make the whole process more standardized, generative, systematized, and intelligent, to reduce human intervention and improve overall efficiency. Continue the transform to the platform model by accelerating the disposal of non-performing loans. The company plan to transfer a bulk of defaulted loans to third-parties before the end of the year to recover cash and reduce the company's risk exposure. Now I'd like to hand the call over to Ms. Jing Li and she will walk you through the third-party financials.

Thank you. Now we will go over the financials. Please note that the currency we use will be in RMB and all comparisons will be made on a year-on-year basis unless otherwise stated. For the third quarter of 2023, total interest and fees income was RMB425 million, as compared to RMB445 million. Interest and financing service fees on loans were RMB388 million, as compared to RMB413 million. The decrease was due to the decrease of weighted average interest rate of loans outstanding. Interest income charged to sales partners was RMB32.7 million, as compared to RMB33.5 million. Total interest and sales expenses decreased by 13% to RMB117 million, as compared to RMB195 million. The decrease was mainly due to the lower funding cost of trust company partners as a result of recent regulatory development. Net interest and fees income increased slightly from RMB254 million to RMB255 million. for the third quarter of 2023, an increase of 0.4% from RMB254.3 million in the same period of 2022. Net revenue under the commercial bank partnership model was RMB27.6 million, as compared to RMB0.4 million. The outstanding loan principle under the commercial bank partnership was RMB5 billion as of September 30, 2023, as compared to RMB0.6 billion as of September 30, 2022. Collaboration cost for sales partners was RMB87 million, as compared to RMB85 million. Next interest and fees income after collaboration cost increased 15.5% to RMB196 million fromRMB117 million. Provision for credit losses decreased by 72% to RMB12 million from RMB41 million. In the third quarter of 2023 some sales partners who forfeited their credit risk mitigation position due to the inability to fulfill their obligation to repurchase delinquent loans in the last few quarters, were able to recommend their payments, which had provided more protection to the loans. Total operating expenses increased by 27% to RMB106 million from RMB83 million. Employee compensation and benefits was increased 16% to RMB58 million from RMB50 million, due to an increase in the performance-based bonuses as a result of an increase in loan origination volume during the third quarter of 2023. Other expenses increased by 71% to RMB35 million from RMB20 million, mainly due to the increase in fees paid to local channels, who are rewarded for referring sales partners to the company and will also receive commissions of a certain percentage of loans recommended to the company by the sales partners they have referred. Net income increased by 15% to RMB53 million from RMB46 million. Now, we would like to start the Q&A session. Operator, please.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from William Gregozeski of Greenridge Global. Please go ahead.

Hey, great quarter. With regards to the trust lending at RMB3.9 billion, that's up quite a bit from where it has been. Can you just talk about where the -- I guess, the demand you saw for that growth came from? And if you expect it to continue going forward?

[Foreign Language] [Interpreted] So, as for the increase of loan originations under the trust lending model, I think the main reasons are two-fold. I think the first one is that in the beginning of the year, we have decided to shift our business more to, you know, Tier 1 and new Tier 1 cities. And also, the second reason was because we kind of focused on our most competitive products, which is large ticket size products with higher value as the collateral. I think those are the two main reasons that gave us the chance to grab the amounts of the borrower in such uncertainties in economy, as well as the fluctuation in property prices. Also, since we have been able to manage to decrease the overall financing cost, it allowed us to reach to customers with better collateral, as well as better credit records. And it also helped to broaden our customer reach as well.

Okay, great. As far as the origination, since we're getting close to 2024, do you guys have any forecast for where you're looking for that for next year on a total basis or broken out by trust and commercial?

[Foreign Language] [Interpreted] So based on the current uncertainty of the current market we have said a rather realistic and also conservative goal for the year of 2024. So our projected loan origination for next year is RMB20 billion with loans under facilitated under the commercial bank model taking up 30% to 35%.

Okay so roughly flat on an overall basis from this year?

[Foreign Language] [Interpreted Yes.

Okay, and last question is with the sales partners flying back into their position in the quarter, is that -- are you seeing your sales partners with more cash to be a little more flexible to not fall behind on payments or what can you just kind of briefly talk about the health of the sales partners financially?

[Foreign Language] [Interpreted] So the first thing that helps to improve their liquidity is we can loosen the terms on their installment payments. And the second reason is that we have made our effort to help the sales partners to dispose their non-performing loans. We have made our efforts to push the legal proceeding, as well as the settlement with borrowers, which also helped the sales partners to get rid of the non-performing assets and also recover cash.

Okay, great. Thank you.

There are no other questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Ms. Jae for closing remarks.

Thank you for joining us today. If you have any questions, please feel free to contact us at [email protected]. Thank you.

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