Good day, and thank you for standing by. Welcome to the LexinFintech's Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. And now I would like to hand the conference over to Ms. Echo Yan, IR Director of LexinFintech. Thank you. Please go ahead.

Thank you, operator. Hello, everyone. Welcome to Lexin's third quarter 2022 earnings conference call. With us on the line today are our CEO, Jay Xiao; President, Jared Wu; and the CFO, Sunny Sun. Before we get started, I'd like to remind you that the call and presentation contain business outlook and forward-looking statements, which are based on assumptions as of today. The actual results may differ materially, and we undertake no obligation to update any forward-looking statements. Jay will first provide an update on our performance, Sunny will cover the financial results in more detail and lastly, Jared then will discuss risk management. I'll now turn the call over to Jay. His remarks will be in Chinese, and then English translation will be followed. Jay, please?

Hello, everyone. It is my pleasure to speak with you again. In the third quarter, [hence variety] of COVID resurgence and somewhat pressured macro economy will achieve a result that not only continue the recovery trend, but also the past [Technical Difficulty]. Our second and third quarter results demonstrated that our previous obstacles [indiscernible] the sustainable track of clear change for the better. Our loan volume exceeded the previous guidance at RMB53 billion, reaching RMB56.2 billion for the last quarter, representing an increase of 14% quarter-over-quarter [Technical Difficulty] revenue at RMB2.7 billion, representing an increase of 12% quarter-over-quarter; net profit at RMB280 million, representing an increase of 65% quarter-over-quarter; overall outstanding loan balance at RMB94.6 billion, representing an increase of 9% quarter-over-quarter; total registered users at 180 million, representing an increase of 19% year-over-year. Since the beginning of this year, our asset quality, funding cost and the loan volume improved quarter-over-quarter, providing improvement in our profitabilities. Net margin improved steadily from 4.8% in the first quarter to 10.2% in the third quarter. The improvement continued in the fourth quarter based on our confidence in strategy [Technical Difficulty] potential, the company’s repurchase program remains in execution. As of September 30, 2022, the company had repurchased approximately 20 million ADSs for approximately US$44 million under this repurchase program. In addition, a new share repurchase program has been authorized under which the company could purchase up to an aggregate of US$20 million of [Technical Difficulty] over the next 12 months from November 17, 2022. Our ongoing recovery trend is accomplished. Thanks to our asset quality prioritized [indiscernible] strategy that’s been defined insistently, which is lowering our risk level, refining operations and backing asset quality to the improvement of the profitability. In particular, the asset quality will continue to strengthen our risk management team…

Thank you, Jay. Good morning, and good evening, everyone. It is my pleasure speaking to you, again. I am excited to report that despite external uncertainties, our third quarter performance continued with [indiscernible] and upward trend guided by our principle of pursuing sustainable and quality growth. We continue to build up a diversified revenue structure, advanced risk identification capabilities, and operational efficiencies. Our never ending efforts on technology innovation and digital transformation also contributed to the achievement of Q3 performance. Now let me go through some key financial and operational metrics with you. Total loan origination in the third quarter was RMB56.2 billion, representing a 14.4% growth quarter-over-quarter. The outstanding loan balance stood at RMB94.6 billion, delivering a 9.2% increase compared with last quarter. If we look at the result at the end of fiscal year 2021, our outstanding loan balance as of Q3 already increased by 10.1%, demonstrating the ongoing resilience of our business. We are delighted to see that the positive momentum of both our loan origination and outstanding loan balance has continued for two consecutive quarters and based on current information, it is on course for the rest of the year. While driving a solid growth continuity, we are keeping a close eye on potential saturations externally, such as COVID resurgence-related economic impact, and are confident to make the corresponding adjustments if needed. At the current point of time, the management believes quality over quantity is the right approach to sustain a healthy status of our business. Total operating revenue was RMB2.7 billion, achieving 11.5% increase quarter-over-quarter. Revenue from new consumption-driven location-based services was RMB525 million, an increase of 31.3% from the same period of last year, a modest decrease of 2.5% quarter-over-quarter. It is worth noting that the June 18, online shopping festival made meaningful contribution…

Thank you, Sunny. Good morning, and good evening, everyone. It is a great pleasure to speak to all of you today. Now let me elaborate on the risk management performance of our business. Last quarter resulted to be a quarter of improvement amid market environment uncertainties and residual impact of sporadic COVID resurgence. We are witnessing a continued lowered day-one delinquency rate as of the end of the September and our 30-plus day delinquency was at 4.61% this quarter, representing a decrease of 0.24 percentage points from the last quarter. As for our 90-plus day delinquency, it held relatively steady at 2.66% this quarter, which fell into our prediction at up 3 basis points and we expect the impact from second quarters COVID restriction has been fitted out, and our 90-plus day delinquency has picked in the third quarter. Should no interruptions caused by external force – happened, we are prudently optimistic to state that our delinquency metrics are to go on a stable downward trend to reach a more balanced level, and our overall risk level to continue to fell in a more favorable direction. In the last quarter, further assuming high-quality users and boosting the contribution of our high-quality users was one of our priorities. Surrounding such with standard the best and breadth of the use of our more high-quality data resources and post our strengthening, the exploration and application of credit reports from the PDOC as well as further upgrading the refinement model for different user segment. These measures helped us identify high-quality users more accurately and match them with lower interest rates. So our API has continued to decline for multiyear significant increase in customer unit price of high-quality users. In the last quarter, the multipoint resurgence of the pandemic has in fact impacted our risk…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Hans Fan from CLSA. Please ask your question.

I got two questions – first of all, this is Hans Fan, CLSA. Congrats to the improvement in the results on a quarterly basis. I got two questions. One is on regulation, another one is on APR. So can you give us some updates regarding the regulation process, especially the decoupling of the data feeds to the banks, especially that over the recent days and weeks, we have noticed some signs of pivots in China FinTech regulation, so just wondering what's our progress there? Number two is about the APR. The APR of our company has been coming down in the past few quarters based on regulatory requirements and also our adjustment of the customer base. So just wondering what's the outlook for the APR and also what's the exact APR in the third quarter? That's my question. Thank you very much.

Let me take the question. The first one is about the regulations, [as you were] not in the first batch of the name list. So currently, there is no specific requirements to our company yet. But however, we are closely working the situations and want to get the ideas of what is the specific requirements to the first batch of name list. Meanwhile, we are maintaining very close communications with [indiscernible] two vendors in the industry, and we are very aware of the solutions of these two companies. And currently, we are already [about all the plans] as long as the requirements from the authorities can be clear and the current conducted plans have been approved. We can take very quick initiative to be connected as well. In this quarter, our APR is very close to 24% – 24.3%, only a little bit above 24% and the pricing, which is above 24 percentage is very, very limited. And going forward, we'll continue to further decreasing our APR. And we believe together with the increased percentage of our high-quality customers and the increase of our asset qualities, our pricing will continue to be decreased. From our perspective, we believe the higher quality customers, the better quality of the asset management is actually in line with the further decreasing of our APR. Only with a better APR, we have attracted a higher quality of the customers.

Thank you very much.

Great. Thank you. Our next question comes from the line of Frank Zheng from Credit Suisse. Please ask your question, Frank.

This is Frank from Credit Suisse. Thank you management for giving me the opportunities to ask questions. I've got two questions. The first one is on credit quality. We see that in this quarter 90-day kept flattish quarter-on-quarter, 30-day started to fall already and a company suggested it's likely to improve going forward. If the credit quality continues to improve, should we see some sizable ride backs on the provision expenses in the next few quarters? And the second question is on funding costs. This quarter, funding costs improved by 20 basis points. What is the main driver behind this? And also, recently we have seen some marginal tightening in the monetary market. Do we expect further optimization on the funding costs in the fourth quarter? Thank you.

I will translate myself for the English speaking audience. For the first question, we are also very happy to see that our asset quality remained stable and is going a upward trend. However, we were probably not in a position to say that there will be significant reduction in provision due to the uncertainties of the external environment, particularly the COVID resurgence-related economic impacts. Of course, we do see the possibility of such a reduction of the provisions, but at the moment, we think that it will remain stable. We will closely – we will keep a close eye on the external conditions in the markets. So at this moment, I think there are uncertainties. And the second questions regarding the drivers of the cost of funding, we are also happy to say that we have 20% – basis point reduction for the last quarter. And this is of course, due to the favorable policies adapted by government on one hand, and also thanks to the years of a relationship that we have built up with our partners and we are having close and close co-operations. And so I guess this is a result of both drivers.

Thank you. Our next question comes from the line of Alex Ye from UBS. Please ask your question, Alex.

So I will translate for my question. The first one is on our customer mix migration. So I've noticed that our per customer loan volume, the [take rate] side has increased sizably Q-on-Q. So I would presume that was largely driven by our customer mix upgrade. But just want to get more color on the – for example, what's the percentage of our – the high-quality customers per our definition and how does they change Q-on-Q and what's our outlook from here? And second question is on the take rate. So given our ongoing customer mix appraisal, how has been the impact to our take rate, so specifically want to know more about the take rate for this quarter on the new volume perspective, and how does it compare to our total take rate from our total portfolio? And could we say that we have probably seen our take rate bottom from here? Thank you.

Talking about the premium or high-quality customers, we divided our customers into different dimensions from the risk levels. And currently, internally, we are mainly focusing on the level one to three as our major targeted high-quality customers. We are from three dimensions. First of all, we are – further understand via good performance customers – attracted back our original existing customers. And in the future together we further provide better services and better – based on the better understandings of our current high-quality customers, we are also taking the assets to further limit the high risk customers. Internally, we divide them as the risk level from six to eight. So together with all these assets, we believe our overall risk management structures or asset structures will be continued to be optimized. Talking about the take rate, together with the further optimization of our risk management and asset structures, we believe our take rate will be also on app trend in the future. At the beginning of this year, we have the overall view of our take rate level for the whole year, which is 3%. Currently, this whole year view has now changed.

Thank you. [Operator Instructions] All right. There are no further questions. I'd like to turn the call back to the management team for closing remarks.

Thank you, all, again everyone for joining us today. If you have further questions, please contact us. Well our contact information available on our IR website. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.