Hello and welcome to the CNFinance fourth quarter and fiscal year of 2023 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Matthew Lu, Investor Relations Manager. Please go ahead.
Thank you. Good morning and evening, and welcome to the CNFinance fourth quarter and fiscal year of 2023 financial results conference call. In today's call, our Director and Vice President, Mr. Jun Qian, will walk us through the operating results followed by the financial results from our CFO, Mrs. Jing Li. After that, we will have a Q&A session. Before we start, I would like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as will, expect, anticipate, future, intends, plans, believes, estimates, targets, going forward, outlook, and similar statements.
Such statements are based upon management's current expectations and current market conditions and relate to events that involve known or unknown risks, uncertainties, and other factors, all of which are difficult to predict, and many of which are beyond the company's control, which may cause the company's actual results, performance, or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties, or factors is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events, or otherwise, except as required under law. Now, please welcome Mr. Jun Qian.
谢谢大家抽出宝贵的时间来收听此次电话会议。本次电话会议上我们将向大家介绍泛华金融2023年第四季度，以及全年的经营和财务情况。随后我们将会回答大家的问题。
Thank you for taking this time to join this conference call. We will discuss CNFinance fourth quarter and fiscal year of 2023 operating and financial results, followed by a Q&A session.
2023年是泛华金融发展道路上的又一重要的年份。在中国的宏观经济和房地产市场存在不确定性的情况下，我们仍然取得了一定的成果。2023年全年公司共投放贷款173亿元，较2022年增长了约18%。本年度公司的利息收入比2022年微增，但利息的支出较去年下降了8%。本年度我们在分期回购政策的支持下，合伙人的流动性得到了一定的改善。同时公司在银行模式下引入合伙人，合伙人对于公司贷款提供了保护增强。因此2023年全年的贷款减值的损失同比下降了23%。综上这个影响因素，我们在2023年共录得利润净利润1.6亿元，比2022年增加了21%。
2023 is another important year in the history of CNFinance. As the condition of China's macroeconomy and real estate market continued to be complex, we were still able to deliver a solid result at year-end. We concluded the year facilitating loans of CNY 17.3 billion, representing a year-on-year growth of 18%. In 2023, our interest income increased slightly as compared to that of 2022. Yes, our interest expense was 8% lower than that of 2022. In 2023, the liquidity pressure of our sales partners has eased due to the installment policy we had given them. Also, as we started to involve sales partners under the commercial bank partnership, the protection to the loans are much stronger, which led to a 23% decrease of provision for credit losses. As a result, we have recorded a net income of CNY 165 million in 2023, representing a year-on-year growth of 21%.
2023年对于公司来说是充满挑战的一年。为了维持稳健的经营，本年度公司重点完成了以下的工作。
The company has faced many challenges in 2023. We have completed the following tasks to ensure smooth operation.
第一，推动银行模式的发展，丰富产品结构。自推出银行模式以来，银行的产品凭借其优质的客群与低融资成本双重优势，逐渐获得了市场和合作伙伴的认可。2023年全年银行模式放款约54亿元人民币，贡献净收入约8,800万元人民币。截止到2023年末，银行模式下的贷款余额已经达到了43亿元人民币。
Third, promoting the commercial bank partnership and enriching the product mix. Since its launch, the commercial bank partnership has gradually gained recognition from the market and our partners due to its high-quality borrower base and low financing costs. In 2023, we originated loans of CNY 5 billion under the commercial bank partnership and recorded a net revenue of approximately CNY 88 million. As of December 31st, 2023, the outstanding loan principal under the commercial bank partnership was CNY 4.3 billion.
第二，不断优化资金结构。随着市场大环境的变化，管理层迅速与各资方就优化资金结构展开沟通。各资金方基于与泛华金融多年来的良好合作关系，对此积极响应并支持。本年公司的整体资金成本同比下降了8%，融资成本的下降为公司与各资金方持续扩大合作规模打下了基础。
Second, optimizing funding structure. As the market environment evolved, the management started negotiating with our funding partners to optimize funding structure. Based on the mutually beneficial relationship between the founders and CNF, our funding partners were very supportive on that subject. As a result, our interest expense in 2023 was 8% lower as compared to the same period of 2022. We believe this has laid the foundation for us and the funding partners to continuously expand the business.
第三，不断加强对贷款合伙人的支持力度。2023年为了帮助贷款合伙人缓解流动性的压力，我们不断完善对预期贷款的分期回购政策。随着流动性压力得到了缓解，一些历史上违约的贷款合伙人已经重新开始履约，继续为公司推荐新的借款人，并对预期贷款进行分期回购。
Third, continue to support our sales partners. In 2023, to help sales partners alleviate their liquidity pressure, we continued to refine our installment policy for repurchasing the liquid loans. As a result, some sales partners who failed to fulfill their obligations were able to recommence the installments and start to introduce new borrowers to the company.
第四，不断提升资产质量。由于房地产市场的不确定性依然存在，管理层在年初提出要将业务向核心城市的核心区域集中。2023年公司在一二线城市的放款量已经达到了整体放款量的90%。同时公司还在本年四季度批量处置了一批不良资产，既回笼了资金，也降低了自身的风险敞口。
Fourth, improving asset quality. Due to the uncertainty associated with the real estate market, the management has decided to strategically shift CNF's business to core areas of China's core cities. 90% of loans CNF facilitated in 2023 was in Tier 1 and Tier 2 cities. In addition, in the fourth quarter of 2023, the company disposed of a bulk of non-performing loans, which helped the company to reduce its risk exposure and recover cash.
[Foreign language] 第五，利用科技手段激进性的政策。2023年我们引入并全面推广了楼盘评级系统，以便对抵押物价值进行更准确的评估。我们还引入了一家优秀的商业银行的风控模型，使得我们能够从更多的维度对借款人进行分析。截止到2023年底，公司发放贷款的预期率为15.6%，较2022年底的19.2%有所下降。
Fifth, using technology to refine credit assessments. In 2023, we have applied the property rating system to make more accurate evaluation of collaterals. We have also applied a risk control model designed by one of our commercial bank partners. By adding more variables, we can give more thorough analysis of applicants. As a result, our delinquency ratio dropped to 15.6% as of the end of 2023, as compared to 19.2% as of the end of 2022.
[Foreign language] 我们认为公司在2024年仍将面临各种挑战。在房地产市场仍存在不确定性的情况下，我们不光面临着增长的压力，也需要充分防范风险。我们在2024年的工作重点包括以下几点。
We believe that the company will continue to face challenges in 2024. As there are still uncertainties associated with China's real estate market, it is equally important for us to maintain growth and contain risks. Our major tasks for 2024 include the following.
[Foreign language]第一，继续推动产品创新。2023年我们基本上完成了对业务区域的调整。在2024年我们将会致力于完成业务场景的升级，聚焦优质实际资产以及优质借款人。在完善产品矩阵的同时，我们还将继续加强销售体系的建设，从而保证业务的增长。
Third, we will keep making innovations in product mix. In the year of 2023, we have optimized our geographic footprint. Our goal for 2024 is to diversify our product offerings to meet borrowers' needs in different scenarios and target high-quality collaterals as well as borrowers with better risk profiles. At the same time, we will further optimize our sales team to accommodate the adjustments of product mix.
第二，面对房地产市场的不确定性，我们会更加关注市场质量。首先我们将优化发放贷款的风控管理，除关注抵押物质量之外，同时加强对借款人资质的综合评判，充分考虑借款人所从事的行业对于其还款能力的影响。不仅如此，我们还将对大额按揭进行差异化的审批。此外，我们还将继续推动对于不良资产的处置，保持整体的风险可控。
Second, facing the complex property market, we will prioritize asset quality. First, we will refine our risk control mechanism. Except for collateral value, we will also assign greater importance to evaluating borrowers in decision-making. For example, we will take into account the applicant's industry as that might impact its ability to make payments. Other than that, we will apply differentiated review procedures for large cases. In addition, we will continue to dispose of non-performing loans to contain our risk exposure.
第三，作为行业的领先者之一，泛华金融一直相信合规建设是一家企业可持续发展的重要基础。2024年我们将会继续加强合规建设。首先我们继续完善内部制度。其次我们会持续性地开展合规培训，增强员工的合规意识。最后我们将通过常规的检查、断裂稽核等多种手段保持合规的运营。
Third, as one of the leaders in the industry, CNFinance fully recognizes the importance of compliance building for a company's sustainable growth. In 2024, we will continue to strengthen the compliance building. First, we will continue to refine our internal control mechanism. Second, we will conduct compliance training on a regular basis to enhance our employees' awareness and also apply regular inspections, case audits, and other practical means.
现在我将时间交给我们的CFO李静女士，并由她为您介绍公司2023年第四季度及全年的财务状况。
Now I will hand the call over to our CFO Mrs. Li to walk you through fourth quarter and fiscal year of 2023 financials.
Thank you, Mr. Qian, and welcome to our conference call. Now I would like to walk you through the fourth quarter and fiscal year of 2023 financials. Please notice that the currency that we use will be in CNY and/or the comparison will be made on a year-over-year basis, unless otherwise stated. For the first quarter of 2023, the total interest and fee income remained rather stable at CNY 445 million. The interest income charged to sales partner increased by 11% to CNY 36 million from CNY 33 million in the prior year. It's primarily attributable to an increase in the delinquent loans that were repurchased by the sales partner in installments. Total interest and fee expense decreased by 7% to CNY 187 million as compared to CNY 201 million in last year. This is primarily due to the lower funding cost of trust company partners.
Net interest and fee income increased by 2% to CNY 258 million as compared to CNY 253 million in last year. Net revenue under the commercial bank partnership model was CNY 10 million as compared to CNY 56 million in last year. The decrease was primarily due to the decrease of loans recommended by the commercial banks in the fourth quarter of 2023 as compared to last year. Collaboration costs for the sales partners increased to CNY 91 million from CNY 18 million, primarily attributable to an increase of daily average outstanding loan principals under the Trust Lending model during the fourth quarter of 2023, as well as the involvement of sales partners in the commercial bank partnership model since the beginning of this year. Provision for credit losses was CNY 42 million as compared to CNY 143 million in last year, primarily attributable to the lower delinquency ratio.
Besides, in the fourth quarter of 2023, some sales partners who fulfilled their credit risk mitigation position due to the inability to fulfill their obligation to repurchase the delinquency loans during the first half of 2023, and then in the year before the year end, they were able to recommend their payments. In addition, we started to involve sales partners under the commercial bank partnership since the beginning of 2023, which has jointly led to an increased guarantee asset and also provided more protection to the loans. Net loss on sales of loans was CNY 12 million as compared to CNY 1 million in last year. Total operating expense increased by 15% to CNY 97 million compared to CNY 84 million in last year. Net income decreased by 33% to CNY 19 million from CNY 28 million.
For the fiscal year of 2023, the total interest and fee income increased by 1% to CNY 1,715 million from CNY 1,660 million as compared to CNY 1,731 million. Interest income charged to sales partners increased by 10% to CNY 135 million from CNY 132 million in last year. This is primarily due to an increase in the delinquent loans that were repurchased by the sales partners in installments. Total interest and fee expense decreased by 8% to CNY 733 million as compared to CNY 785 million, primarily due to the lower funding costs of trust company partners. Net revenue under the commercial bank partnership model increased by 53% to CNY 88 million from CNY 58 million. The increase was primarily due to the increase of loans recommended by the commercial banks in this year as compared to the last year.
Collaboration costs for sales partners increased by 7% to CNY 344 million as compared to the CNY 321 million in last year, primarily attributed to an increase of daily average outstanding loan principals under the Trust Lending Model in 2023, and also the involvement of sales partners in the commercial bank partnership model since the beginning of this year. Provision for credit losses was CNY 183 million as compared to CNY 238 million in last year, primarily due to the lower delinquency ratio. Besides, in the fiscal year of 2023, some sales partners who fulfilled their credit risk mitigation positions due to the inability to fulfill their obligation to repurchase delinquency loans during the first half of 2023 were able to recommend their payments.
In addition, we started to involve sales partners under the commercial bank partnership since the beginning of 2023, which has jointly led to an increase of guarantee assets and also provided more protection to the loans. Other gains were CNY 5 million for this year as compared with CNY 19 million in last year. Starting in the second half of 2023, the balance of credit risk mitigation positions fulfilled by the sales partners has been decreased as we refined our installment policy to ease the liquidity pressure of the sales partners. When the credit risk mitigation positions deposited by sales partners are confiscated by the company, the company will recognize the amount of future profits and other gains.
In the fourth quarter of 2023, some sales partners who fulfilled their credit risk mitigation positions were able to continue to fulfill their guarantee responsibilities, and associated with the credit risk mitigation positions will not be deemed as confiscated. Total operating expenses were CNY 381 million as compared to CNY 339 million, and the net income increased by 22% to CNY 165 million as compared to the CNY 135 million in last year. As of December 31st, 2023, the company held cash and cash equivalents of CNY 2 billion as compared with CNY 1.8 billion as of December 31st, 2022. The delinquency ratio for loans originated by the company decreased from 19.2% as of December 31st, 2022, to 15.6% at the end of 2023. The NPL ratio for the loans originated by the company increased by 1.2% as of the end of this year compared with 1.1% as of December 31st, 2022.
With that, we would like to start the Q&A section.
We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Again, it is star then one to ask a question. At this time, we will pause momentarily to assemble our roster. The first question comes from William Gregozeski with Greenridge Global. Please go ahead.
Hi. With the continued decrease in the borrowing costs, do you think that the rate you've seen the last quarter is the rate that we should expect you guys to be borrowing at going forward?
随着融资成本的不断下降，这个贷款的利率未来是否还会继续下降？
公司2023年发放贷款的平均利率是16.1%。那么较2022年发放贷款的平均贷款利率约为16.3%。整体是呈下降的趋势。我们认为在2024年，我们根据整个市场的需求的变化，我们积极地调整利率对抗的市场政策。主要的方向和宗旨也是往较低贷款利率的方向去发展。
The average rate that we charge our borrowers in 2023 was 16.1%, down from 16.3% from 2022. Going forward in 2024, I think based on the market condition, our goal is to keep lowering the financing cost of our borrowers.
Okay. Can you talk kind of generally about the demand for the loans that you're seeing in terms of the size and the split between Trust and commercial?
您能否大致介绍一下对于贷款的需求量现在您看到的情况是怎么样子的？就是在整体的需求的量上面，以及在你的信托模式和银行模式之间，这个是怎么分别是什么样子？
从2023年全年来看的话，由于整个经济和房地产市场的不确定性，小微企业主、个体工商户整体的融资需求是有所下降的。2024年目前前两个月整个社会融资的数据表明，目前整体的社融的增量也是低于去年同期的。较2023年同期是少了1.1万亿。那么我们也相信整个2024年这个趋势应该来讲的话是不会有太大的改变，下降的趋势不会有太大的改变。那么整个2023年的话，我们整个信托模式的放款约为122亿元，与去年的同期是基本持平。那么贷款的增量主要是来于银行模式的放款，约为50亿元左右。较去年是翻了一番。整个银行模式的放款约占整体放款量的29%左右，也与我们为2023年设定的目标基本是一致的。我们分析和判定放话金融在2024年，我们继续维持正增长的发展要求。同时的话，我们也希望我们整个的信托模式和银行模式的这种占比依然维持在7:3左右。较我们对于整个2024年我们的放款目标仍然预设为是200亿元左右。
So in 2023, due to uncertainties associated with the real estate market, the loan demand from MSE owners are actually not as expected. And so in the first two months, we don't see this strength to recover in the first two months in the year of 2024. If you take a look in the released data, China's new RMB loan in the first two months of 2024 was actually CNY 1,100 billion lower than that of the same time of 2023. But in the year of 2023, we facilitated loans of CNY 12.2 billion under the Trust Lending model and CNY 50 billion under the commercial bank model. So the loan facilitation under the commercial bank model was actually 30% of the total loans originated, which well met our goals set in the beginning of 2023.
And also for the year of 2024, we still target the ratio between loans facilitated under Trust Lending and commercial lending to be 7:3, namely the commercial bank model will take up 30% of our loan origination. And our target for loan origination for 2024, we want to achieve growth, and we target to be CNY 20 billion in total.
Okay. Great. You mentioned doing some things like the compliance training and the audits and the increased borrower quality evaluations. Does that tie in at all to the technology upgrades for the platform you've been talking about, or is that something different?
您刚刚提到过的关于这些什么合规区链那一些和您之前一直在这些几个季度一直在说的科技的进展以及更新，这是同一件事吗？还是说是两件不同的事情？
这是两件完全不同的事情。合规建设应该说是从事金融行业来讲的话，是一个持之以恒、一直坚持要去做的事情。当然今年我们把整个公司定为合规建设年，也是希望在合规建设方面能够在培训、宣导，包括企业文化的这种价值提升，方方面面进行更多的进行合规方面的这种教育和培养。那么至于科技方面来讲的话，我们整个2023年乃至2024年，我们的重点建设的重点依然是围绕着如何有效地增强风险控制能力这个方面来进行有效的工作和投入。那么从目前来看的话，我们整个科技手段加对风险控制加强能力，我们主要是在两个方面进行了建设和投入。一个是我们对整个的压评，也就是我们的抵押物这一块，我们的这种价值的评定方面引入了更科学、更系统的评估体系。那么第二来讲的话，我们对于借款人的这种信用评定，那么引入了合作银行的大数据的风控模型，同时结合我们公司近20年从事房地业务的历史的因子参数，那么对我们现有的风控模型系统进行了大规模的调整和整这个建设。那么我们也希望在2024年通过在业务实操过程当中不断地去检验和校正我们整个科技手段投入的这种系统方面，对于我们整个风险控制能力是否有所加强，进行充分和更精准的评估。
So those are two different tasks. As a participant in the financial industry, we believe that compliance building is one essential thing that we should do. For the year of 2024, we will surely enhance our compliance building. We want to make all the audit. We want to do the trainings and make compliance one essential thing for the culture in the culture of the company. As for the investment in the technology, in the year of 2023, we basically invested in two things. One is to enhance our evaluation of collaterals, to make more accurate evaluation of the value of the collaterals. The other thing is that, as we said, we worked with one of our commercial bank partners to bring in this one big data model to give more thorough ratings to our borrowers.
Also in the year of 2024, we will keep on investing in technology. We want to use the actual practical data that we collect from our daily operations to make adjustments to those two systems and to make it more suitable to our business and to adjust if there is anything that needs to be removed or anything that needs to be added into that model.
Okay. Great. And then, last question, the share repurchase plan looks like it expired. Is there any plans to renew that?
I'm sorry. Could you say that again?
Yeah. The share repurchase plan looks like the term on that expired a week and a half ago. Is there any plans to renew that?
我们目前的股份回购计划似乎已经到期了。我们是不是会继续延长股份回购计划？
这个问题我来回答吧。我们也会跟我们的董事会申请继续这个计划，会延期一年。
That was actually from our CFO, Mrs. Li. She said we were going to present it in front of our board of directors, hoping to extend this share repurchase plan for another year.
Okay. Great. Thank you, guys.
Again, if you have a question, please press star, then one. Again, if you have a question, please press star, then one. This concludes our question and answer session. I would like to turn the conference back over to Matthew Lu for any closing remarks.
Thank you, Drew. Thank you, everybody, for joining us today in this conference call. If you have any questions, please feel free to contact us at ir@cnfinance.com. Thank you.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.