Hello, ladies and gentlemen. Thank you for participating in the First Quarter 2023 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.

Hello, everyone. And welcome to our first quarter 2023 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 for the company e-mail alerts by visiting the IR section of our website at ir.finvgroup.com. Mr. Tiezheng Li, 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 view 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. Tiezheng Li. Please go ahead, sir.

Hello, everyone, and thank you for joining us on the earnings call. This is Tiezheng Li, CEO of FinVolution. We are happy to speak with you today. The first quarter of 2023 was a challenge one domestically, given the complex macro environment. The Chinese New Year holiday, coupled with China reopen post-pandemic created short-term turbulence throughout the economy. However, despite various headwinds, we delivered another quarter of healthy growth, with the total transaction volume up 9.3% year-over-year to reach RMB43.4 billion and the total outstanding loan balance up 15.8% year-over-year to reach RMB62.3 billion. We also steadily and successfully executed our Local Focus, Global Outlook Strategy throughout the Pan-Asian markets in which we operate, expanding our borrower base to $28 million cumulatively across China, Indonesia and the Philippines. In line with our mission of leveraging innovative technologies to make financial services better, we have cumulatively invested over RMB2 billion in technology over the last five years. We remain committed to exploring areas such as data tools, natural language processing and other AI technologies to improve our data analysis capabilities and drive the holistic digitization of consumer finance across multiple aspects. As such, we have integrated our natural language processing models into our chatbots and our AI team developed a real-time data platform combined with strong integrated computing capability to support their applications. These generative pre-trained models have created a tremendous opportunity for our business to improve user experience and operational efficiency. We are also pleased to share that FinVolution has officially launched the plans to build an open source model platform, aiming to improve the efficiency and effectiveness of our intelligent marketing and customer service operations. We are confident that as we continue to refine and implement natural language processing and speech-related algorithms into our intelligent chatbots. They will greatly…

Thank you, Li, and hello, everyone. Welcome to our first quarter 2023 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 we mentioned, the domestic macro environment continues to present challenges during the first quarter despite the acceleration in the recovery towards the end of the quarter, reflected by improvements in the Purchasing Managers’ Index across a variety of industries such as retail, transportation, business service, dining and tourism. However, the index fell to 49.2% in April. Below the threshold that separates construction from expansion, indicating that the economic recovery is still friendly and in early stage. Sales of larger ticket items such as automobiles, telecommunication, equipment and the real estate also lagged due to the slow recovery of global competition [ph]. During the first quarter, the total social financing amount grew by RMB14.5 trillion. However, April’s total social financing amount only grew by RMB1.2 trillion, which was way below market expectations. Although there are some near-term fluctuations in the macro data, the overall recovery trend remains positive. On a brighter note, during the first half of May, we also experienced a sequential increase in our user demand and loan application grade compared to the first quarter and in the month of April. As such, our outlook remains cautiously optimistic. We will closely monitor the progress of recovery and expect the growth will accelerate in the second half of 2023. Domestically, our first quarter transaction volume rose year-over-year to RMB141.8 billion, representing an increase of 8%. Meanwhile, our total outstanding loan balance stands at RMB61.3 billion, up 15% year-over-year. Given the lingering sluggishness in parts of the domestic economic, we maintained our prudent approach to risk management during…

Thank you. [Operator Instructions] Your first question comes from Yada Li with CICC. Please go ahead.

[Foreign Language] Then I do the translation. Hello, management. This is Yada from CICC and thanks for taking my questions. The first one is about the loan pricing and I was wondering when the price will be relatively stable and from the regulation and the funding side, is there any pressure on further decline on pricing lately? And the second question is, what is the trend of our vintage delinquency and there is still room for significant improvements in the future? That’s all. Thank you.

[Foreign Language] hi. Let me do the translation for Alexis. And for the pricing, we had shared that in the previous quarter that all loans originated on our platform in China are already under 24%, which means fully compliance. In the first quarter, the average borrowing rate was 23.7% and 40% [ph]. In this category of better quality borrowers, there are multiple benefits. For example, our funding partners actually value these high-quality customers and there is actually a significant reduction in our funding cost. Funding cost in the first quarter was actually better than expectation. And in the future, there are also opportunities to leverage on technology such as ChatGPT, IGC to optimize the funding cost. Our intention is to provide the borrowers with more attractive pricing in order to attract higher quality borrowers who are able to have better credit risk performance and they are able to have greater loyalty and have more stickiness on our platforms. This will eventually lead to a positive cycle between the companies and the borrowers. And we expect the funding -- the borrowing rate in the future is expected to be between the range of IR, 22% to 23%. In the first quarter, the take rate was stabilized at 3.5% and going forward, we expect take rate to be around the range of 3.3% to 3.5%. [Foreign Language] Okay. Now, let me do the translation. Our vintage delinquency in the first quarter remained stable at 2.3% and the current cohort and given the current stable macro situation, we are confident to maintain our vintage delinquency at this level. And I would also like to share the performance of our vintage performance during the lockdown last year. And looking back right now, we have realized that the performance of the vintage during the lockdown period was actually better than our expectation at below 2.3%. And over the last consecutive eight quarters, we have managed to keep our vintage delinquency low and we have done a lot of work such as optimizing various metrics of our operation in order to achieve this level. And we can also say that this validates our prudent attitude towards credit risk assessment and also our proven capabilities to successfully navigate through different economic cycles.

Okay. Yada, is that okay for you?

[Foreign Language]

Thank you, Yada.

Thank you.

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

[Foreign Language] Okay. I’ll translate for my question. My first question is on China’s growth. So the Q1 loan volume shows a current year decline and a year-on-year growth of around 8%. So this appear to be checking behind of our full year guidance of 10% to 20% for the domestic business. So would you say the recovery so far you have seen is below your expectation and is there any bankers with [ph] -- for the full year guidance? And second question is on the take rate. So could I just confirm that the 3.5% take rate you mentioned is just for China business only, because we noticed your -- for your P&L, your take rate appear to be showing some slightly improvement. So is that coming from the rising contribution from overseas business? And third question is on international business. Can you give us some color about your funding partners, so for example, how much -- how many funding partners you are cooperating and the combined credit lines that have been granted to that? Thank you.

[Foreign Language] Okay. Okay. Alex, let me do the translation. From the macro data, you can see that April data has the total social financing data for April had some fluctuations but was very strong in Q1 and this data was actually slowed down in April. And we can now see that there is some recovery in the Consumer Confidence Index, but still below 100%. And according to the Quarterly Bureau Meeting [ph], it also stated that the economy recovery has projected a positive trend, but the interim dynamics and demand is still weak. From internal data perspective, considering the borrower demand data, we can see that the user application rate on a daily basis in the first quarter increased by 2% compared to the same period last year. Entering into the second quarter, user demand has also been increasing steadily with April daily loan application rate increasing by 3% year-over-year and in the first half of May, these metrics further increased by 5.4% on a year-over-year basis. And all these improvements indicate a recovery of consumption loans and higher user demand. We can share that the loan recovery will be weak in the first half, but strong in the second half, which is in line with our guidance.

[Foreign Language]

Your understanding is correct. The take rate that we reported is of 3.5% is only for our domestic take rate and the take rate for our international business will be much higher.

[Foreign Language]

Alex, let me do the translation for you for these questions. With regards to our international funding partners, we have already cooperated with three banks, mainly OCBC, Bank Permata, and Bank Jago, and the fourth partner which is SeABank, which is a well-known tech bank in the region. And you can see that as we have better quality borrowers, the proportion of loans facilitated by local banks have also increased from 15% in the last -- in the same period last year to 64% in the first quarter of 2023 and we expect this proportion will continue to increase. We do not have the credit petition numbers online. I will follow up with you later in the offline calls.

Okay. Alex, do you have other questions?

No. Thank you. That’s it.

Thank you.

Okay. Thank you. Operator?

[Operator Instructions] Your next question comes from Frank Zheng with Credit Suisse. Please go ahead.

[Foreign Language] Thank you management for taking my questions. I have two questions. The first one is on a follow-up on the domestic loan volume growth. You mentioned it was due to the softer than expected credit demand. And I’m wondering from a supply perspective, with the relatively mild year-on-year growth also due to the reduced risk appetite and also strengthened screening criteria on credit approval? And the second question was also a follow-up on the take rate of international markets. The topline contribution was around 15%, but it only accounts for around 4% loan volume. So, obviously, it has a higher take rate. But can you provide some more color on the sustainability of such high take rate in the long-term in the future? Thank you.

Hi, Frank. [Foreign Language] Hello, Frank. Let me do the translation for you. For our domestic re-strategy for our borrowers, we are maintaining a prudent strategy and you should know that, it is related to pricing. And all loans for this year -- since the beginning of this year, all loans are already priced under 24%. Under this strategy, our loan approval rate remained stable without much fluctuation. [Foreign Language] Frank, let me do the translation. For our international take rate line, it mainly depends on three factors, pricing, funding costs and also risk performance. All these might have some fluctuations, but it is hard to determine right now, because we are also in the process of shifting towards better quality borrowers. Take rate can also be optimized when we have better quality borrowers, which in line -- which in turn leads to better funding costs with better credit risk performance. We believe we are able to adjust accordingly to the situation. And I would like to say, remind that all our pricing right now in the international markets is in line with regulations compliance.

Okay. Frank, do you have any other follow-up questions?

That’s all. Thank you very much.

Thank you, Frank.

Thank you.

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

Hello. Thank you all for joining the call today. If you have any further questions, please feel free to contact our IR team. Thank you.

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