Hello, ladies and gentlemen. Thank you for participating in the Third Quarter 2021 Earnings Conference Call for FinVolution Group. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference call is being recorded. I will now turn the call over to your host Jimmy Tan, Head of Investor Relations for the company. Jimmy, please go ahead.

Thank you, Andrew. Hello, everyone, and welcome to our third quarter 2021 earnings conference call. The company results were issued via newswire services earlier today and are posted online. You can download the earnings release and sign up for the company's e-mail alerts by visiting the IR section of our website at ir.finvgroup.com. Mr. Feng Zhang, our Chief Executive Officer; and Mr. Jiayuan Xu, our Chief Financial Officer, will start the call with their prepared remarks and conclude with a Q&A session. During this call, we will be referring to several non-GAAP financial measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP measures and reconciliation to GAAP measures, please refer to our earnings press release. Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties are included in the company's filings with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Additionally, we post a slide presentation on our IR website providing details of our results for the quarter. I will now turn the call over to our CEO, Mr. Feng Zhang. Please go ahead, sir.

Thanks Jimmy. Hello everyone and thank you for joining us today. I hope you and your families remain safe and healthy in the new norm COVID-19 environment. Thanks to our advanced technologies, industry-leading digital capabilities, and a strong corporate strategy execution, we continue to expand our business with robust momentum across each of our segments, both domestically and internationally. Given our strong – stronger than expected results, greater confidence in business trends, and successful strategy execution, we have raised our total transaction volume outlook for 2021. We now expect transaction volume for the year to reach between RMB130 billion and RMB135 billion, representing a year-over-year increase of 103% to 111%, above our prior guidance of RMB100 billion to RMB120 billion. Let me now outline some of our third quarter highlights. Total transaction volume maintained its strong growth trajectory reaching a new record high of RMB38.1 billion, representing an increase of 120% year-over-year and 14% sequentially. Notably, our total outstanding loan balance expanded to RMB45 billion in the quarter, representing an increase of 101% compared with the same period last year. This growth was primarily driven by a new fast-growing and a higher-quality customer base. We gained over 1.18 million new individual customers in Q3 making the third consecutive quarter during which we've exceeded 1 million new borrowers globally. Our domestic business demonstrated a progressive growth on the clear regulatory guidance – guideline. Looking at our transaction volume composition, China accounted for RMB37.1 billion, up 118% year-over-year and 14% sequentially. We are also pleased to share that in October, as we continued to acquire better quality borrowers, our percentage of loans facilitated at or below IRR of 24% further increased to 80% compared to just 29% – compared with just 29% in Q2, while our average IRR borrowing cost further reduced…

Thank you, Feng and hello everyone. We are pleased that FinVolution delivered respectable financial and operational results for the third quarter of 2021. As a result of our continued efforts to transform our business and the technology to meet the needs of credit service industry. Our net revenues grew to about RMB2.5 billion up 6% quarter-over-quarter. Our profitability also continue to improve during this quarter, leverage ratio across our business is relatively low at 3.9 times. While our balance sheet remains solid with RMB5.1 billion in unrestricted cash and short-term investments. In September, we successfully issued at least our first ABS on China's Shenzhen Stock Exchange, marking an important milestone in our transaction towards bad quality borrowers. Funding on our platform continue to be ample and stable. We have accumulatively cooperated with around 60 licensed financial institutions and will constantly maintain a strong and a robust pipeline of potential partners. We expect future improvements in funding efficiency as we continue to diversify our funding partners. These results are also testament to our effective business strategy and the skill for execution. We are confident that we will gain momentum as we continue to accelerate our overseas expansion, strengthen our services for small business owners and increased investment in technology advances. We will also continue to invest in our core capabilities and infrastructure, big data insights, AI capabilities, and our people to better serve our customers, partners and the communities around the world. Now turning to the financial results for the third quarter, in the interest of time, I will not go through each item line by line on this call, please refer to our earnings release for more details. Net revenue increased by 41% to RMB2.5 billion in the third quarter of 2021 from RMB1.8 billion in the same period of…

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Eric Lu with China Renaissance. Please go ahead.

Good evening, management. Thanks for giving me this opportunity to ask questions and congrats on the solid results in the third quarter. So, my question is about the outlook for 2022. So can you please give us some color about 2022 in terms of the loan pricing target, for example, the target IRR by the end of June 2022, also about the loan origination plan and development plan overseas market. Thanks.

[Foreign Language] Specific numbers for 2022 after early at this stage, we will provide the guidance for 2022 at a later time. [Foreign Language] We will also take the opportunity to share our thoughts with the market. We think the macro environment this year has been very good. And the macro environment for next year will have some volatility and is unlikely to exceed this year. Regulations directions have slightly been clarified. However, we still need to wait and execute the orders at ground level. Platform companies, we have more workload when executing these orders and ground level. Overall, we will have a more cautious attitude in 2022. [Foreign Language] We have achieved strong results this year. In 2020, we have successfully complete our P2P transition and shift towards better quality goals, which results in our transaction volume, growing more than 100% year-on-year. Our key operational metrics has also shown significant improvements. For example, our 90-day plus delinquency ratios improved by around 70% to 1.04% in this quarter from 3.4% in the same period last year. Also, our funding costs fell by 7% to 7.6% in this quarter from 8.2% in the same period last year. As a leading technology platform, we are confident to maintain our stellar operational metrics and achieve stronger growth than our peers. Our objective is to achieve long-term sustainable development. [Foreign Language] As you can see, our average pricing in the third quarter was 25.3%. And in October, our borrowing costs further reduced to 24.3%. And for next year, we expect our borrowing cost to be below 23%. [Foreign Language] In terms of reducing borrowing risk to 24%, our platform progress a hit of our peers and we are very well prepared. If we are talking about the 24%, we have basically achieved this goal. [Foreign Language] Thanks.

The next question comes from Hanyang Wang with 86Research. Please go ahead.

[Foreign Language] Thanks, management, for taking my questions. Congratulations on our great third quarter results. I have two questions, firstly, regarding on the funding source and cost. So, what is the current situation of ABS self-registration. And how should we project the funding cost as a portion of ABS funding to increase? Second is about the international business. So, can you share more updates on the FinVolution business and what were the overall growth of the international business look like going forward? Thank you.

[Foreign Language] As of late September, we have issued our first ABS, which is at RMB200 million with a coupon interest rate at 5.5%. And this is actually a milestone for the company. [Foreign Language] Our ABS shelf registration is in active process, and this will be a very important priority for us in 2022. We believe we are on track and the process has been smooth. We believe in the future AB – when the ABS shelf registration has been completed, ABS will become a very important composition in our funding sources. [Foreign Language] Let me take the opportunity to share some market data with you. The countries which we have already established in presence have massive market opportunities. For example, Indonesia, Philippines and Vietnam has a combined population of around 500 million. It is higher than the U.S. population, and it is not small compared to China. And its loan to GDP ratio is about 8.3% with a low credit card penetration rate of between 3% to 4%. And when compared with China, these countries have huge opportunities. For example, China loan to GDP ratio is about 14.8% and the credit card penetration rate is around 21%. And the U.S. loan to GDP ratio is about 20% with a credit card penetration rate of 66%. [Foreign Language] We are different from other smaller platforms. Our objective in between a quick back in the country and state. We are looking for long term sustainable development. We believe developing countries will gradually lower their interest rate cap over time. And we have already begun shifting towards better quality borrowers. And before we begin operations in a new country, we will ensure compliance by having the appropriate licensing place and source for the rights partners. From the operation perspective, we will…

[Foreign Language] So, may I have the follow up question on the shareholder return plan? So, do we have a detailed policy for the dividend payout in the future any incredible will be helpful. Thank you.

[Foreign Language] As you know, we have been distributing annual dividend over the last three years, and we are now actively exploring an annual dividend policy and will share it with the market during our next earnings quarter. Since 2018, we have cumulatively distributed around 143 million in dividends.

[Foreign Language] Very helpful. Thank you.

Thank you, Hanyang.

The next question comes from Alex Ye with UBS. Please go ahead.

Hi, management. Thanks for taking my question. I have two. First one is on take rates. So, you have mentioned that take rate has remained stable in Q3. So, I'm wondering how did you manage to achieve that even though your APR has been decreasing over the quarter? And could you also share with us some color on how does the take rate for your new loans priced under 24% versus the portfolio? So that would give us some color on your forward-looking trend. So – and given you're already 80% of the new loans is already priced at under 24% as of November, so when do you – should we expect your take rate to stabilize going forward? That's on first. And secondly, some of your peers have been discussing their details about – their discussion about working with [indiscernible] about the collaboration in terms of data transfer with the banks after the credit is growing, regulation was rolled out. So also wondering if you could share with us some details of the current progress from your side? Thank you

[Foreign Language] Okay. Let me translate, Alex. In the third quarter, our average pricing was around 25.3% with a take rate of 4.2%. In October, our average pricing was 24.3%. It is close to – it is really very close to 24% and our take rate was around 4%. Going forward, next year, our pricing, average pricing will be around 23%, and we believe our take rate will be around 3.6%. This is under the assumption that there is no improvement in funding cost or there's no improvement in our credit risk performance. However, we believe there's still room for improvement in these two segments. And from our observation for borrowers priced at or below 24%, they have better credit performance. For example, the day one delinquency ratio for this segment was 4.6% compared to 5.6% for the overall segment. [Foreign Language] We have been very proactive in our pricing reduction. However, please note that our loan origination – our total transaction volume has not been impacted at all. In fact, in October, our loan origination volume has reached 12.5 billion, which is another record high for us.

[Foreign Language] Okay. Let me translate. The British direct linkage between financial institutions is a top priority for us. And we have been in constant communications with [indiscernible] and many of our peers. At the moment we believe the work progress for most of the platforms regarding booking direct linkage between financial institutions and platforms is at about the same pace. The regulator has given a clear direction, but some degree of complexity remains in the ground lab execution, which needs to be further these costs. The regulator has given us sufficient grace period until June – end of June 2023 to implement the changes. And we believe the final proposal from the different platforms we have largely be similar. [Foreign Language] Let me first, let me translate the game. We have two different proposals, a) we will proactively corporate with credit rating agencies to determine the plan; and b) we will explore the possibilities of using a five financial license to conduct our business. For example, you do, you guys do know that we have eight micro lending company in our employee and we will also explore the possible ease of setting up the new shown my co-lending company.

[Foreign Language] That's all from me. Thank you.

Thank you, Alex.

[Operator Instructions] The next question comes from Thomas Chong with Jefferies. Please go ahead.

Thanks to management for taking my questions. I have two questions. First, how does macro headwinds and the property sector outlook affect our business trends? And my second question is that, how does data security and the privacy laws to affect our business? Thank you.

[Foreign Language] Okay. As we have mentioned earlier, we will adopt a prudent attitude. We have also mentioned that we have seen some volatility in brief and we will counted by – we would have some control measures such as controlling the approval rate. We will provide some guidance in the later stage and overall, we are still confident to have stronger operational metrics ahead of our peers. [Foreign Language] Okay. Let me share what the company has been doing to protect data privacy and security. From the perspective of information system and data security, we need to prevent external hacking and also actively prevent internal information linkage. From an information system security perspective, information system and data control is a lifelong process. Our network is equipped with firewalls, network intrusion detection system, vulnerability scanning system, auditing system, anti-computer virus software, and other security products to achieve in-depth defense. And together with our third-party security vendors, we have built a joint venture SRC, and with the introduction of external white-hat hackers we have established round-the-clock security inspection. The company has also self-developed a privacy self-check platform and is able to strengthen the whole inspection process for data privacy. [Foreign Language] From the perspective of data, the company attach great importance to the protection of user data privacy and have established a professional cross-departmental compliance team to evaluate and design the safety of the entire live process for user data. For example, collection, transmission, processing, storage, and destruction. Our in-house R&D team has developed a management platform to strengthen the control of database access. We have self-developed a system called Finway to check unauthorized access and it will prevent all unauthorized access. The company works with a number of security agencies such as taillamps, electronic spot, et cetera, to implement the app's mandatory policy for each update and provide compliance protection data. That's all. Thank you.

Thank you.

Thank you.

As there are no further questions. Now I'd like to turn the call back over to the company for closing remarks.

Thank you for joining our third quarter earnings conference call. If you guys have any further questions. Please feel free to reach out to our IR team. And have a nice day. Thank you.

This concludes this conference call. You may now disconnect your lines. Thank you.