CNFinance Holdings Ltd. Q3 FY2022 earnings call

• Built and empowered sales system by diversifying sales through channel partners and launching a mobile app to enhance efficiency.
• Reduced funding costs by proactively negotiating with trust company partners.
• Partnership with commercial banks scaled, with over RMB600 million introduced to banks in the first nine months of 2022 and RMB640 million outstanding as of September 30, 2022.
• Focus on supporting micro, small, and medium enterprises as per the 20th National Congress, aiming to provide affordable financing services.

In the third quarter of 2022, total outstanding loan principal was RMB10.5 billion as of September 30, 2022, compared to RMB10.4 billion as of December 31, 2021. Total origination volume was approximately RMB3.9 billion in Q3 2022, up from RMB3.1 billion in the same period of 2021. Interest and financial service fee decreased to RMB413 million, a 9% drop from the same period last year. Interest expense decreased to RMB195 million, an 11% decrease. Interest income charged to sales partners increased 213% to RMB34 million. Collaboration cost decreased to RMB85 million. Provision for credit losses increased to RMB42.3 million. Net income was RMB46 million, a 142% increase from the same period last year.

• Goal to have commercial bank loans be 20%-35% of total origination in 2023, targeting RMB500 million to RMB600 million monthly.
• Continue building sales system, reducing funding costs, and leveraging technology.
• Plan to participate more in capital market, including potential acquisitions via share exchanges.

• Heightened economic uncertainty due to COVID-19 pandemic and related prevention and control measures.
• Downward pressure on China’s real estate market.

Q: Can you provide an update on the number of active sales partners and their liquidity?

A: At the end of this quarter, there are about 1,267 active sales partners, 100 more than Q2 2021 and 30 more than Q2 2022. Liquidity improved with increased loan origination volume and fewer credit risk mitigation complications.

Q: Talk about commercial lending, which was about 10% of total origination. How do you see it growing?

A: Loans introduced to commercial banks in Q3 were RMB400 million, aiming for 20%-35% of total origination in 2023, with monthly volume of RMB500 million to RMB600 million.

Q: Update on demand from SME borrowers and collateral quality?

A: Demand is less than 2021 but improving. Delinquency and NPL ratios decreased, indicating collateral quality is under control.

Q: Any specific fintech acquisitions in mind?

A: No particular target yet, but looking to participate in capital market via potential acquisitions.