Good day, and welcome to the CNFinance Fourth Quarter and Fiscal Year 2022 Unaudited Financial Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to Ms. [indiscernible] Manager of Capital Markets.

Good morning and good evening, and welcome to CNFinance Fourth Quarter and Fiscal Year of 2022 Financial Results Conference Call. In today's call, our Director and Vice President, Mr. Qian Jun, 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 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 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 the forward-looking statements as a result of new information, future events or otherwise, except as required under law. Now please welcome Mr. Qian Jun.

Thank you, everyone, for joining us in this conference call. On today's call, we will introduce the company's financial and operational results in the fourth quarter and fiscal year of 2022 followed by a Q&A session. The company generated interest income of RMB 1.7 billion and net revenue under the commercial bank partnership model of RMB 58 million for fiscal year of 2022, [indiscernible] achieving a net profit of RMB 140 million, an increase of 111% over the same period of last year. Given the strict pandemic prevention and control policies maintained in 2022, the company still achieved year-on-year growth in business sales as well as profitability, mainly due to the accomplishment of the following. We rigorously promoted the new products and expanded our customer base through it. Since the launch in 2021, the commercial bank partnership model has gradually gained recognition from the market and our partners. After demanding cooperation with private banks, including [indiscernible] Bank in 2022, the commercial bank partnership model began to grow rapidly in the second half of 2022 and took shape at end of the year. In 2022, the company recommended a total of RMB 2.5 billion of loans to banks, meeting the target set at the beginning of the year. The net revenue under the commercial bank partnership model also increased. We have reduced the funding costs. Management made a judgment at the beginning of the year that most conditions may change this year and that there would be a relative abundance of funds. The subsequent development were in line with the management's expectations at the beginning of the year. And therefore, in order to take full advantage of the fee reductions by financial institutions, the company continued to negotiate with its trust company partners through the year and reached an agreement to…

Thanks, Mr. Qian, and thanks again to everyone joining us today. I will through the fourth quarter and fiscal year of 2022 financials. We believe year-over-year comparison is the pathway to review our performance. Unless otherwise stated, all percentage change I'm going to give will be on that basis. And also, unless otherwise stated, all number I'm going to give will be in RMB. We will start with fourth quarter of 2022 first and followed by the result of the fiscal year. During the fourth quarter of 2022, total loan origination volume was RMB 3 billion and the total volume of loans recommended to commercial bank was RMB 2 billion. Total interest and fees income were RMB 455 million. Interest income charged to sales partners was RMB 33 million, which represents the fee charged to sales partners who chose to repurchase the default loans in installments. Collaboration cost for sales partners represents the sales incentives paid to sales partners decreased to RMB 80 million from RMB 120 million in the same period of last year. This primarily attributed to a lower average rate the company paid to its sales partner in the fourth quarter of 2022 as compared with last year. The net revenue under the commercial bank partnership model representing fees charged to commercial bank for service, including introducing borrowers, initial credit assessment, facilitating loans from banks to borrowers and providing technical assessment to borrower and banks. The net of fees paid to third-party insurance company was RMB 58 million. The company has started to collaborate with commercial banks since last year and such collaboration grew and scaled in the second half of this year. The net income was RMB 30 million comparing with a net loss of RMB 105 million in the same period of last year. And…

[Operator Instructions]. And our first question will come from William Gregozeski of Greenridge Global.

Could you talk about your expectations for origination for the current year, especially between the split between trust and commercial? Because you did so much commercial origination in the fourth quarter, what is that percentage going to look like across this current year?

So our targeted total loan origination volume in 2023 is around RMB 20 billion, which is about 40% increase in that of 2022. And we're hoping 40% of that RMB 20 billion has come from loans recommended to commercial banks.

Okay. Great. And then on the -- given the general economic uncertainty and property market uncertainty, are you guys seeing any more sales partners coming to the platform because of the additional services you guys provide in terms of the risk management and the installment plan compared to doing it on their own as they may have been doing before?

Okay. So based on the data, very happy to see that the number of active sales partners as of the end of 2020 actually increased about 100, which is a 10% increase as compared to the same period of -- as compared to the end of 2021. And also, I want to mention that besides the better services we can provide them, the better risk management and external fundings, I think there are 2 major reasons why the sales partners are more willing to join our platform. The first thing is their confidence in how China's economy is going to pick up. And I think the second reason is that the repurchase by installment policy we rolled out in 2022, I think that really could help them ease their liquidity pressure and also help them to better manage their own risks.

Okay. Great. As far as your current loan to value, do you guys have that ratio where it stood at the end of the year compared to the year ago period?

So at the end of 2022, the average LTV ratio is around 60%, which remained rather stable through the past 3 years.

Okay. Given the -- you guys are now breaking up the income charge to sales partners for these installment loans, is this a number that you guys are expecting will rise over the course of the year? Or will it start to tail off as the economy and everything improves over the course of the year? How should we look at that line item?

Could you repeat the second part of the question, please?

Yes. More just wanting to get an idea of where you guys see the interest charge to sales partners line item going over the course of '23. Is it going to increase throughout or increase and then start tailing off?

Okay. So based on what we are seeing how the economy is picking up and recovery, I think the overall asset quality of the loans originated by us is going to be better and which is going to drive down the overall delinquency ratio. And therefore, I think the total scale of how much the sales partners have to repurchase is going to go down. And therefore, I think the interest income charged to our sales partners is going to remain rather stable in 2023 with a little going down.

Okay. And last question is more just general. Given the current environment, what do you guys see as the biggest risk for the company and biggest opportunity for the current environment?

Okay. So I think the major challenge to CNFinance is whether we can contain the increase of delinquency ratio given the adjustment -- post the adjustment of pandemic prevention and control policies. And that means we have to focus more on the asset quality. So to address this challenge, we're going to take a couple of measures, including I kind of want to focus more on expanding our businesses in Tier 1 and new Tier 1 cities and just to lower the proportion that we're doing in Tier 2 and Tier 3 cities. And also, we want to just use technology to refine the whole loan approval process and just to manage risks better. And also, I think the opportunities presented to us, including that the first thing, is how the -- how China's economy is going to pick up, going to recover post the adjustment to the pandemic prevention and control. And also the second thing is, so after the past 2 years, we have finally seen the trading volume and property price in core areas start to recover. And since the majority of our business was conducted in such regions, and I think that's another good news to us.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Ms. Jane for any closing remarks.

Thank you for joining us today. If you have any questions, please feel free to contact us at ir@cashchina.cn. Thank you.

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