Good morning, ladies and gentlemen. Thank you for participating in the Fourth Quarter and Full Year 2021 Earnings Conference Call for FinVolution Group. [Operator Instructions]. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Jimmy Tan, Head of Investor Relations for the company. Mr. Jimmy, please go ahead.

Hello, everyone, and welcome to our fourth quarter and full year 2021 earnings conference call. The company results were issued via news services earlier today and are posted online. You can download the earnings release and sign up for the company 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 the 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. Finally, 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 our earnings call. We're happy to speak with you today following the completion of another challenging year on a strong note. 2021 was a complicated year given the fluctuating macro environment, but our strategic transition towards better-quality borrowers positions us for success amidst rapidly evolving market dynamics. By leveraging our in-house developed technologies and industry-leading digital capabilities throughout our business process, we continue to deliver consistent and robust growth over the past several quarters with stellar performance across multiple operating metrics. We achieved another set of record-breaking results in the fourth quarter to cap off the year. As we effectively and vigorously execute our strategy, our fast expanding global borrower base supported our strong transaction volume growth over the past several quarters. For 2021, our total transaction volume reached an all-time high at RMB 137 billion with a year-over-year increase of 111%, exceeding the upper end of our transaction volume guidance range of between RMB 130 billion and RMB 135 billion. We attribute our success in acquiring new borrowers primarily to our real-time application proactive monitoring technology, which gives us advanced insight into customers' borrowing habits. Generally speaking, RTA enables us to strategically make efficient and appropriate adjustments, increasing our target screening efficiency by 20% and operational efficiency by 25%. Furthermore, during the quarter, we surpassed the benchmark of 1 million newly acquired borrowers across the globe for the fourth consecutive quarter. We are also pleased to share that as of December 2021, we have successfully registered 189 software copyrights and filed 150 patents in fintech-related areas. Building on our core technology capabilities and execution strength, we are confident that we will keep our growth momentum rolling into 2022. Now let me share our major achievements for the fourth quarter. Total…

Thank you, Feng, and hello, everyone. Welcome to our fourth quarter and full year 2021 earnings call. In the interest of time, I will not go through all of the financial line items on this call. Please refer to our earnings release for further details. As Feng mentioned, we are delighted to report that we closed 2021 on a strong note along with another quarter of record profitability. Our accomplishments for 2021 were highlighted by transaction volume growth in 7 consecutive quarters and diversification of funding sources as well as a substantial increase of 4.4 million individual borrowers, reflecting our capabilities to continually gain market share, both domestically and internationally. Driven by our ongoing efforts to optimize our operations, robust execution of our overall strategy and skillful deployment of our technological capabilities across business, our net revenues for the fourth quarter rose to RMB 2.4 billion, up 32% year-over-year. We also delivered a healthy non-GAAP operating profit of RMB 5.6 billion and maintained a solid balance sheet with RMB 10.7 billion in total shareholders' equity. During this quarter, our average borrowing cost reached 24.3% compared with 25.3% in the third quarter of 2021 and 26.4% a year ago. We are certain that we have the capability, and we are on track to facilitate all of our loans to be at or below 24%. Despite the rising contribution from our capital-light model and the regulatory cap on borrowing rates, we have successfully maintained the overall take rate at around 4% compared with 4.2% in Q3. Given our partner support and our ongoing efforts to enhance operational efficiency, we are confident that the borrowing cap's impact on our financials will be minimal, while our capital-light model proportion has grown throughout the year from 2.3% in the first quarter to 18% in the…

[Operator Instructions]. The first question comes from Yada Li with CICC.

Okay. Then I'll do the translation. The first one is regarding our international business. Could you please elaborate more about our future product metrics and how much international business will contribute to our revenue and transaction volume at the end of 2022? And the second one is compared with what we've been doing before, what is -- when the pricing is going downward, how are we shifting our customer acquisition strategy?

Let me translate for my CFO. Okay. First of all, while we have made tremendous progress for our international business in 2021. Our transaction volume for the year reached RMB 3.7 billion, an increase of 270% year-over-year. And looking forward, we are confident to increase our international loan balance. And for 2021, we acquired 1.4 million new international borrowers, representing a year-over-year increase of 122%. Our local partners have also recognized our capabilities, and for example, we have cooperated with local players such as Bank Jago. In the stage 1 of our cooperation, we have reached an agreement of USD 7 million as our credit facility. Okay. In 2021, we have achieved strong loan volume growth for our international business. At the same time, we are also thinking how we should move the business going forward. And based on our China experience of transiting to better-quality borrowers, we would think that our priority for the international business would be on a transition to better-quality borrowers as well in order to scale our international business to greater heights on a higher strategic level. Okay. Our focus for international business, right, would be to shift to higher-quality borrowers and also increase the proportion of loans facilitated for them. For example, in the Q4 of 2020, this proportion was about 30%, and we expect it to increase to 70% by the end of 2022. And some of the traits of these higher-quality borrowers would be -- include a higher ticket size and longer loan tenure. And for the outstanding loan balance in the fourth quarter, it was around USD 50 million, which was around RMB 330 million, and we are confident to increase it by 100% by the end of 2022. Okay. Our numbers of new borrowers has exceeded 1 million in 4…

Our next question comes from Frank Zheng with Credit Suisse.

This is Frank from Credit Suisse. I have 2 questions. The first one is regarding the loan volume guidance for 2022. The guidance indicates robust growth of around 30% year-over-year. Could management share a bit more color on what are the drivers behind this growth in view of the COVID resurgence and macro slowdown, et cetera? And the second question is, could management provide some color on potential new license acquisition, for example, national micro-lending license? Any kind of preparation work down on that front?

The macro environment in China is complicated. If you actually observe the impact on our operation, it's minimal. The more relevant factors affecting our operations would be COVID, which affects our loan volume and also our risk metrics. But these challenges remain manageable. And from the country's perspective, the GDP growth in Q4 was only 4%, while the overall economy is under pressure and with both the central and local government encourage consumption to drive the economy. And this provides tremendous opportunities for us in the future. Okay. Let me translate. The second point is that we can view it from a structural perspective. For example, the restrictions on the internet giant in the consumer credit market is much more obvious. In the future, we think the structure is likely to be more diversified and even eventually reaching a more balanced stage, providing more opportunities for midsized platforms. And the third point can be from the regulator perspective. The fintech industry has been under regulatory focus since 2018. And during the past 5 years, regulators have issued multiple documents to regulate the industry and ensure compliance. These measures played a positive role in consumer protection and increased the cost of compliance for some enterprises. As the industry becomes more regulated, weaker companies will be eliminated. And the remaining companies, especially for those with competitive edge, will experience better development in the future. And lastly, the monetary policy generally lags, and there is also a potential of interest rate increase amidst -- and coupled with a stable credit environment, it is unlikely to have a huge fluctuation. And hence, we are confident of the potential of the consumer finance market in the future, which gives us the confidence to give us a loan origination guidance of between 21% to -- 27% to 31%.

I believe you guys know that we already have a micro-lending license in Anhui. First of all, we can choose to increase the registered capital to 5 million -- 5 billion and achieve an insurance license like what many of our peers are doing. And also, we can explore other micro -- we can explore -- we can look to explore and acquire other micro-lending license in other parts of the country in order to have more flexibility when conducting our business operations. Regardless of the routes that are available to us, right, we are confident to achieve a license, a micro -- nationwide micro-lending license for our operations.

The next question comes from Hanyang Wang with 86Research.

So my first question is regarding our guidance. So can management help us break down the proportion of the loan position amount that comes from the new users, existing and return users? So what's our borrower retention rate in China and international markets in Q4? Second question is given the current market condition, will we continue to pay out dividends? And will we accelerate current share repurchase? Any initiative new share buyback plan? So any plan for the Hong Kong primary listing?

Okay. Let me translate. As you know, Hanyang, our business has been -- is in a very stable state with about 80% of our customers are repeat borrowers and 20% are new borrowers. This is likely going to be the trend with fluctuation adjustment needed whenever we need to adjust our operations. For example, we will tend to acquire more new customers when the market is good, and we will tend to focus more on repeat borrowers when the market is facing some challenges. And on a stickiness level, we believe it will be about the same as before going forward. Okay. Let me do the translation, Hanyang. We have been consistently returning value to our shareholders since 2018. This is our fourth consecutive annual dividend, and we have cumulatively returned about USD 200 million to our shareholders. And in terms of buyback, since 2018 until now, we have cumulatively bought back or deployed about USD 140 million to repurchase our stock. And for the period of December to March 10, we have deployed about USD 8 million to repurchase our stock. In total, share repurchase and our dividend policy, we have cumulatively deployed around 341 million. And regarding our repurchase plan, we still have an existing repurchase plan until the end of the year. And currently, there is still about USD 30 million of unutilized amount.

Our next question comes from Alex Ye with UBS.

So I will translate for myself. First question is about your interest rate and take rate outlook. So what is the average interest rate pricing for Q4? And how far are we versus our target pricing? And how much downside do we still expect on our revenue take rate? And the second question is on asset quality. We noticed there is a slight uptick on your asset quality indicated in Q4. So I'm wondering, what are the underlying reasons behind? And could you also give us some color in terms of your latest day 1 delinquency ratio in Q1? And also, when do you expect your asset quality to pick up and improve going forward?

Alex, let me do the translation. In the fourth quarter, our average borrowing rate was around 24.3%. And by the way, 80% of our loans are facilitated at or below 24%. And plus, you can see that we are actually very confident to achieve the target of 24%. However, I would like to highlight that we will maintain a certain degree of flexibility going forward. And plus, our average pricing for the remaining of the year will be in the range of 23% to 24% going forward. Alex, let me do the translation for you. The take rate is impacted by several factors such as pricing, loan tenure, risk and funding costs. Okay. For example, our loan tenure in the fourth quarter has increased from 8.2 months in the third quarter to 8.9 months in the fourth quarter, and this has resulted in a positive take rate. And our vintage risk delinquency is expected to be around 2.3%. And funding costs in the first half of 2022, we expect that larger liquidity with room for improving our funding costs. And let's assume that if our average pricing dropped to 23%, we are able to maintain our take rate at 3.6% with room for further improvement when funding cost and risk metrics improve. Alex, let me do the translation for you now. In our previous quarter earnings call, right, we have mentioned that we have observed there is some uptick in our risk delinquencies, and our risk department has also made some timely adjustments to our risk assessment policies. For example, we have seen the day 1 delinquency metrics in October was around 5.6%, and now it is at 5.3%. This proves that our risk model is actually working. And also for our day 1 to 30 loan collection rate, we have maintained it at above 90%. And going forward, we are confident to maintain our vintage delinquency at around 2.3%.

Our next question comes from Thomas Chong with Jefferies.

I have a question regarding the overseas business. Given buy now, pay later is very popular these days, I just want to get a sense about our strategies in coming years and how we should think about the competitive landscape because we are seeing overseas players are also aggressively investing in these areas. And which countries are we focusing or allocating more resources on? And my second question is about the full year guidance. Can management break out about the growth rate in domestic market and the growth rate in overseas?

This is Feng. I'll take the first question and leave the second one for Alex. Yes, I think for the overseas market, the BNPL business, I think overall, we are exploring, but we take a cautious view. So we do see that it is a pretty hot area and trend in some of the markets. The valuation in the market is also pretty high. But on the other side, we also feel the competition and also the valuation in some of the markets is a little bit overheated. So on that regard, we are a little bit cautious. So we are exploring some opportunities in some markets, including Indonesia and Vietnam. We have strike some partnerships with some local partners. But we have been taking one step at a time. And at this point, we do not have very high or very concrete target for this particular business. I think we are kind of like just testing the water and staying opportunistic on this. And with regard to the -- to which country, I think the biggest market that we see that has the best balance for market growth, regulatory environment and market readiness as well as size is Indonesia, which is also where we have the biggest business size and we are most optimistic about. We are also pretty optimistic about Philippines and Vietnam as well, in which countries we have presence already. At the same time, we are also exploring opportunities in other Southeast Asian countries as well as a few South American countries.

Our loan volume for 2021 in the international market was around 3.7 billion. If you compare to our domestic market, this percentage is actually not very high. And also, our priority for this year 2022 for our international markets would be the transition to better-quality borrowers. We have also mentioned that our outstanding loan balance for our international market was around USD 50 million in 2021, and we expect it to grow by 100% this year by the end of 2022.

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

Thank you once again for joining us today. If you have further questions, please feel free to contact FinVolution Investor Relations team. Thank you, everyone.

The conference has now concluded. You may now disconnect your line. Thank you.