Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- FinVolution Group (FINV, Financial) achieved a 6% year-over-year increase in transaction volume in China, reaching RMB92.5 billion.
- International transaction volume soared by 32% year-over-year to RMB4.5 billion, showcasing strong global growth.
- The number of new borrowers in the Philippines grew robustly by 198% year-over-year and 69% sequentially.
- The company reported a stable average borrowing rate in China at 22.2%, indicating strong financial inclusion efforts.
- FinVolution Group (FINV) has a robust balance sheet with short-term liquidity maintaining a healthy level at RMB8.1 billion.
Negative Points
- China's overall retail sales slowed to 2% growth year-over-year in June, reflecting a less than optimal recovery trajectory.
- The daily application rate of repeat borrowers in China declined by mid-single digits, indicating weak consumer confidence.
- Sales and marketing expenses increased by 5% sequentially to RMB473 million, reflecting higher costs.
- Despite improvements, the macro environment in China remains uncertain, posing ongoing challenges.
- The company faces increased competition in the China consumer market, which has slowed down and entered a stage of heightened competition.
Q & A Highlights
Q: Could you give us some color on the trend of your China borrowers' loan demand in the second quarter and also in July?
A: During the second quarter, the trend of our borrowers' demand is largely in line with the weakness in residential credit demand. The daily application rate of repeat borrowers declined by mid-single digit around 6% on an annual basis and quarterly comparison, reflecting weak consumer confidence. In July and August, we have observed that the application rate of our repeat borrowers has increased by mid-single digit between 6% to 7% on a daily basis. The demand of our borrowers is concentrated in the area of daily necessity. Therefore, when the economy is weak, it will show more resilience and we expect demand will gradually improve in the second half of the year. β Tiezheng Li, CEO
Q: In Indonesia, what is your customer acquisition strategy after the APR meets the requirement? Any updates on the regulation front of the interest rate requirement in 2025?
A: After the Indonesian election, political situations have normalized with an improving economy such as GDP increase. During the second quarter, transaction volume for the Indonesian market reached RMB1.64 billion, up about 6% to 7% annually, with outstanding loan balance between RMB1 billion, up about 4%. Revenue for the quarter reached RMB430 million. Number of borrowers reached 530,000 up 4% sequentially, and number of new borrowers reached 200,000, up 9% sequentially. Our Indonesian operations have completed its pricing transition in just five months, and we have made adjustments in borrowers' costs, model iteration and credit risk has improved by 28%, meaningfully offsetting the impact of interest rate reduction. Therefore, our take rate returned to 10%, reflecting our business entering a more stable stage. β Tiezheng Li, CEO
Q: What's the plan and growth target for the company's domestic business? How likely can the company maintain such growth?
A: China market has some changes this year, and it is very different from the previous years. The scale of China consumer market has slowed down and entered into a stage of increased competition. We have certainty for success on acquiring new borrowers through information fees, leveraging on data and behavior. We continue to optimize the information fees in China and improve the algorithms, and conduct joint modeling to enhance ROI. Transaction volume contributed by new borrowers was up 2% and 27% year-over-year. Our percentage of new customers was between 12% to 15%. At the same time, we are able to have better cost control and a healthy LTB level. β Jiayuan Xu, CFO
Q: What are the key drivers behind the recent improvement in asset quality? Should we be worrying about any potential uptick in NPR in the second half?
A: During the initial phase of restoration last year, we leveraged on our years of experience and accurate predictions of industry trends and higher approval rates for riskier borrowers. In the first quarter, risk performance stabilized, and we are one of the earliest platforms in the industry that are able to contain risk at a lower level. During the second quarter, we further optimized, adjusted and iterated on the overall credit limit, and explored solutions for different types of users, while maintaining growth in transaction volume and balancing risk. We don't think this situation will happen in the second half as the overall environment is much more stable now. β Jiayuan Xu, CFO
Q: What have been the key drivers behind the sequential trend on the take rate? What is the outlook for the second half?
A: During the second quarter, our average borrowing rates remained at 22.2%. Funding cost optimized by 90 bps in the second quarter while vintage delinquency remained stable at 2.5% and take rate further improved to 3.1%. For the second half of 2024, we expect average borrowing rate to remain stable and funding cost and vintage delinquencies to have further optimization. Our asset quality is popular in such an environment and we are one of the few platforms that are able to maintain growth. β Jiayuan Xu, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
