Please note that this event is being recorded today. I would now like to turn the conference over to Matt Lou, IR Specialist. Please go ahead.
Thank you. Good morning and evening. An d welcome to the CNFinance third quarter of 2022 financial results conference call. In today's call, our Director and Vice President, Mr. Qian Jun, will walk us through the operating results, followed by the financial results from our Acting CFO, Ms. Li. After that, we will have a Q&A section. 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, expects, anticipates, future, intends, plans, believes, estimates, target, going forward, outlook, and similar statements.
Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and may 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 filing with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events, or otherwise, except as required under law. Please welcome Mr. Qian Jun.
[Foreign language]
Thank you everyone for joining us in this conference call. On today's call, we will introduce the company's financial and operational results in the third quarter of 2022, followed by a Q&A session.
[Foreign language]
In the third quarter of 2022, as China's economy made a turn to the better, our business volume has increased as well. We facilitated loans of over RMB 3.8 billion under our collaboration with the trust companies and introduced loans of RMB 400 million to the commercial banks. Our revenue stream was more diversified as service fee associated with the commercial bank partnership and the interest income charged to sales partners both increased. The company's gross profit margin was also higher than that of same period of last year due to the decrease of collaboration cost and funding costs.
We continued to be conservative in evaluating potential losses and recorded a provision for credit losses of RMB 42 million during the quarter. As a result, we recorded a net income of RMB 46 million, which was RMB 27 million higher than the same period of last year. Now, I would like to give a more detailed introduction of the work we have done and also share the management thoughts on our future development.
[Foreign language]
During the quarter, China's economy made a turn to the better and its GDP increased by 3.9% from the second quarter of 2022. As for the company, both of the loans facilitated under the trust lending model and the loans introduced to commercial banks increased on a year-on-year basis. During the quarter, we mainly focused on building and empowering the sales system, reducing funding costs, and promoting our partnership with commercial banks. The works we have done include...
公 司 在 本 季 度 上 线 了 金 管 家 管 理 系 统 ， 使 得 公 司 的 前 、 中 、 后 台 能 够 实 时 地 同 步 地 获 取 客 户 、 渠 道 、 产 品 、 资 金 等 信 息 。 通 过 对 精 进 业 务 进 行 了 统 筹 安 排 ， 从 而 增 加 了 工 作 效 率 。
First, building the sales system and using technology to empower it. This quarter, we worked on diversifying our sales system by establishing collaboration with channeling partners and empower them using our platform . We launched a mobile app this quarter, allowing our service team to timely interact with sales and application reviewers about the status of borrower, channel information, loan product, and funding information, and therefore increased the overall efficiency as the full process can be timely coordinated.
第 二 ， 公 司 的 管 理 层 在 年 初 做 出 判 断 ， 今 年 的 市 场 形 势 将 会 发 生 变 化 ， 资 金 相 对 充 裕 。 为 了 充 分 地 把 握 金 融 机 构 减 费 让 利 的 时 机 ， 公 司 积 极 地 与 信 托 合 作 伙 伴 开 展 谈 判 ， 并 就 降 低 融 资 成 本 达 成 了 一 致 。 本 季 度 的 融 资 成 本 实 现 了 同 比 的 下 降 。
Second, the management made an estimation at the beginning of 2022 that the market condition will take a turn this year, and there will be adequate fundings. In order to take this opportunity, we proactively initiated dialogues with our trust company partners are reducing funding costs and reached agreements, which has driven down our funding costs as compared to the same period of last year.
第 三 ， 经 过 近 几 个 季 度 的 摸 索 ， 银 行 的 助 贷 模 式 已 经 初 具 规 模 。 公 司 在 2022 年 前 三 季 度 共 为 银 行 介 绍 贷 款 超 过 六 亿 元 人 民 币 ， 截 止 到 三 季 度 末 的 贷 款 余 额 约 为 六 点 四 亿 人 民 币 。 特 别 是 我 们 与 民 营 银 行 的 合 作 呈 现 出 良 好 的 势 头 。
首 先 ， 我 们 与 三 家 银 行 的 合 作 规 模 持 续 扩 大 ， 截 至 本 季 度 末 ， 我 们 为 三 家 银 行 推 荐 的 贷 款 余 额 已 经 超 过 了 一 点 五 亿 元 。 此 外 ， 公 司 还 在 本 季 度 开 始 与 一 年 银 行 合 作 ， 并 已 经 为 其 介 绍 放 款 超 过 八 ， 八 千 万 元 。
Third, as a result of the work we have done in the past few quarters, our partnership with commercial banks has started to scale. In the first nine months of 2022, we have introduced loans of over RMB 600 million to commercial banks, and the outstanding loan principal under the commercial bank partnership was approximately RMB 604 million as of September 30th, 2022. Our partnership with private banks was showing particularly good momentums. First, our partnership with Bank of Sanxiang continued to scale, and the outstanding loan principal has reached RMB 150 million as of September 30th, 2022. We have started collaboration with Yilian Bank this quarter and have already introduced loans of over RMB 80 million for it.
二十大 报 告 中 提 出 要 支 持 中 小 微 企 业 发 展 ， 这 也 再 次 印 证 了 管 理 层 一 直 以 来 的 判 断 ， 即 中 国 的 普 惠 金 融 事 业 将 会 继 续 处 于 战 略 机 遇 期 。 在 此 大 背 景 下 ， 我 们 将 立 足 于 构 建 销 售 体 系 ， 降 低 融 资 成 本 ， 并 以 科 技 赋 能 公 司 的 业 务 增 长 ， 以 期 为 更 多 的 小 微 企 业 提 供 优 质 便 捷 的 金 融 服 务 。 我 们 的 计 划 包 括.
Report to the 20th National Congress of the Communist Party of China stressed that we will support the development of micro, small and medium enterprises, which is a proof of the correctness of management's estimation that there are huge opportunities in China's inclusive financing industry. To embrace such opportunities, we will continue to work on building our sales system, reducing funding costs and leveraging technology to stimulate the business growth. Our goal is to provide affordable and accessible financing services to more MSE owners in China. Our plans are...
第 一 ， 在 继 续 精 进 对 于 一 般 合 伙 人 的 管 理 之 余 ， 重 点 关 注 销 售 合 伙 人 体 系 的 建 设 ， 通 过 提 供 精 细 化 的 管 理 服 务 为 其 持 续 赋 能 ， 争 取 使 销 售 合 伙 人 早 日 形 成 规 模 。
First, besides servicing the current sales partners, we will put more resources to promote collaboration with channeling partners who have access to broader customers and empower them by providing them with refined services and management. We will use our platform and system to empower those channeling partners and help them to form scale.
第 二 ， 抓 住 目 前 的 机 遇 期 ， 继 续 引 入 低 成 本 的 信 托 资 金 。 除 了 信 托 资 金 外 ， 我 们 也 也 将 继 续 扩 大 与 银 行 的 合 作 规 模 ， 扩 大 其 在 公 司 资 产 中 的 占 比 。 同 时 ， 我 们 将 与 风 险 投 资 机 构 就 利 用 不 良 资 产 进 行 再 融 资 进 行 谈 判 ， 争 取 在 明 年 使 该 项 特 殊 资 产 基 金 初 具 规 模 。
我 们 将 会 从 内 部 着 力 ， 加 强 对 于 资 金 的 统 筹 安 排 ， 做 好 闲 置 资 金 的 管 理 ， 从 而 降 低 各 类 产 品 的 综 合 成 本 ， 让 利 小 微 企 业 主 。
We will continue to raise low-cost capital from trust companies. We will also continue to expand our cooperation with commercial banks and make it a bigger part in our product mix. We will also negotiate with subordinated units investor about refinancing NPLs and make this refinancing to reach a certain scale by the end of next year. We will also refine our own process to better coordinate loan application and fundraising and better manage added cash, and therefore further cut the interest rates on our loan products so that the MSE owners could receive the infusions.
We will continue to empower our business with technology and make our products simpler and more efficient. Within 2023, we will register and maintain an official public account and use this account to send notice to borrowers, answer customer inquiries, and deal with complaints. We hope such official account could enrich our toolkit in terms of developing customer loyalty and further harness the value of our products.
[Foreign language]
Fourth, we will participate more proactively in the capital market other than keep pushing a secondary offering. We are also seeking chances to an acquisition by exchanging shares using the treasury shares we have repurchased. We will pay attention to the life Fintech startups for that purpose.
[Foreign language]
Last, I want to represent the company and the board of directors. Welcome Mr. Yang Ge to join the company's board as an independent Director. Mr. Yang Ge got his Bachelor's degree in International Finance from Nankai University, and then obtained an MBA from Tsinghua University and a master's degree in accounting from Seton Hall University. Director Yang Ge has more than 30 years of experience in corporate finance, non-bank financial institutions, and wealth and asset management.
He has worked with public companies listed in Shanghai, New York, and Hong Kong. Mr. Yang has work experience both in China and overseas, including Europe and the U.S. Currently based in New York, he is expected to, together with other board members, explore further opportunities for the company to continue growth in the capital market and create more values to our shareholders.
[Foreign language]
I would like to hand the call over to Ms. Jing Li, the acting CFO of the company, who will walk you through the third quarter 2022 financials.
Thanks, Mr. Qian. Thanks again to everyone joining us today. I will walk you through our third quarter of 2022 financials. We believe year-over-year comparison is the best way to review our performance. Unless otherwise stated, all percentage change I'm going to give will be on that basis. Unless otherwise stated, all numbers I'm going to give will be in RMB. As of September 13, 2022, total outstanding loan principal was RMB 10.5 billion, as compared to RMB 10.4 billion as of December 31, 2021. The total origination volume was approximately RMB 3.9 billion in the third quarter of 2022, compared to RMB 3.1 billion in the same period of 2021.
Interest and financial service fee on loan decreased to 9% to RMB 413 million for the first quarter of 2022 from RMB 455 million in the same period of last year. Finally, attributable to a decrease in the balance of average daily outstanding loan principal. Such decrease was mainly as a result of the company's transfer of loan under the traditional facilitation model to third party in block during the fourth quarter of last year, which was partially offset by an interest increase in the total outstanding loan principal under the collaboration model.
Interest expense decreased 11% to RMB 195 million for the first quarter of 2022. Compared to RMB 219 million in the same period of last year, primarily due to the decrease in principal of other borrowings and lower interest rates charged by such companies. Interest income charged to sales partner, representing the fees charged to sales partners who choose to repurchase default loans in installments, increased by 213% to RMB 34 million in the third quarter of 2022, from RMB 11 million in the same period of last year. Primarily attributable to the increase in the delinquent loans that were repurchased by sales partners in installments. Collaboration costs for sales partners decreased to RMB 85 million for the first quarter of 2022 from RMB 102 million. Primarily attributable to the lower average w-fee rate.
The company paid to sales partner in the third quarter of 2022 as compared with the same period of last year. The fee rate under collaboration model varies based on different collaboration models signed and the terms of the loan. Provisions for credit losses increased by 30% to RMB 42 million in the first quarter of 2022 from RMB 33 million in the... The increase was due to the heightened economic uncertainty caused by COVID-19 pandemic and the relevant prevention and control measures, as well as the downturn pressures faced by China's real estate market during the third quarter of 2022. The total of operating expenses decreased by 11% to RMB 83 million for the first quarter of 2022 from the RMB 93 million.
Income tax expense increased by 153% to RMB 70 million for the first quarter of 2022 from RMB 7 million, primarily due to an increase in the amount of taxable income. Net income increased by 142% to RMB 46 million for the third quarter of 2022 from RMB 19 million in the same period of last year. As of December 30, 2022 and December 31, 2021, the company has cash and cash equivalents and restricted cash of RMB 1.4 billion and RMB 2.2 billion. The delinquency ratio for loans originated by the company decreased from 34.1% as of December 31, 2021 to 32.9% as of December 13, 2022.
The delinquency ratio excluding loan held for sale for loan origination by the company decreased from 16.2% as of December 31, 2021 to 13% as of December 30, 2022. The NPL ratio for loans originated by company increased from 9.4% as of last December 31, 2021 to 10.8% as of December 13, 2022. The NPL ratio excluding loan held for sale for loan originated by the company decreased from 2.1% as of December 30, 2022 to 1.5% as of December 13, 2022. Thank you. With that [audio distortion].
We would like to open the Q&A section with that. Operator, please.
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. To withdraw a question, please press star then two. At this time, we will pause just momentarily to assemble a roster. Our first question here will come from William Gregozeski with Greenridge Global. Please go ahead, sir.
Hi, guys. Great quarter. Can you provide an update on the number of active sales partners and give some kind of indication on how their liquidity is?
[Foreign language]
[Foreign language]
At the end of this quarter, the number of active sales partners is about 1,267, which is about 100 more than the same period than Q2 2021, and 30 more than at the end of Q2 2022. As of the liquidity, they actually made a turn to the better, which can be observed in two aspects. The first is the increase in the loan origination volume, which means they now have liquidity to expand their business. The second aspect is that their they can now fulfill their obligation associated with defaulted loans, 'cause we are seeing fewer confiscation of Credit Risk Mitigation position. Thank you.
Okay, great. Can you talk about the commercial lending? You know, It was about 10% of total origination. Is that where you guys want to be at this point? How do you see that continue to grow?
您 能 不 能 谈 ， 谈 论 一 下 这 个 银 行 合 作 模 式 ， 你 有 没 有 达 到 之 前 提 到 过 的 10% 余 额 的 占 整 体 余 额 10% 的 目 标 ？ 如 果 没 有 的 话 ， 你 想 这 个 以 后 会 怎 么 发 展 的 。
呃 ， 我 们 希 望 呢 ， 整 个 银 行 注 贷 的 模 式 呢 ， 是 能 够 ， 呃 ， 进 一 步 的 扩 大 份 额 。 目 前 来 讲 的 话 呢 ， 呃 ， 与 这 个 整 个 的 投 放 这 个 余 额 是 在 四 亿 左 右 ， 但 是 我 们 希 望 呢 ， 在 ， 呃 ， 这 个 到 了 明 年 二 零 二 三 年 底 吧 ， 我 们 整 体 的 这 个 投 放 金 额 ， 也 银 行 的 这 个 放 贷 的 余 额 能 够 占 到 百 分 之 二 十 五 到 百 分 之 三 十 五 这 个 份 额 左 右 。
同 时 呢 ， 月 投 放 额 我 们 希 望 能 够 维 持 在 五 到 六 个 亿 左 右 。
The loan facilitated, the loans introduced to commercial banks in this quarter was about RMB 400 million, which is not quite there yet. We are hoping the loans we introduced to commercial banks continue to cut bigger shares in our portfolio. Our goal in 2023 for loans introduced to commercial banks is to make it about 20%, 25% to 35% of the total loans originated, including the loans under the trust lending model, which is about RMB 500 million-RMB 600 million every month.
Okay, great. Great. Then can you just give an update on the demand you're seeing from the SME borrowers, in terms of, you know, having a lot of demand, if there's a lot of demand and if they have good collateral with that?
你 能 不 能 更 新 一 下 ， 给 我 们 更 新 一 下 关 于 小 微 企 业 的 融 资 需 求 的 情 况 ， 他 们 的 融 资 需 求 是 如 何 的 ， 然 后 现 在 这 个 抵 押 物 的 质 量 大 概 是 怎 么 样 子 的 。
这 个 由 于 前 三 季 度 ， 疫 情 这 个 所 带 来 的 不 确 定 性 ， 包 括 经 济 持 续 下 行 ， 带 来 的 这 个 社 会 需 求 的 这 种 不 确 定 性 ， 整 个 小 微 企 业 贷 款 的 融 资 需 求 呢 ， 相 比 去 年 同 期 还 是 减 少 的.
呢 相 比 今 年 第 二 季 度 是 有 所 回 这 个 回 暖. 根 据 第 三 季 度 人 民 银 行 公 布 的 社 会 融 资 需 求 这 个 数 据 显 示 ， 10 月 份 人 民 币 贷 款 新 增 ， 人 民 币 贷 款 增 加 了 RMB 6,152 hundred million yuan ， 较 去 年 同 比 还 是 少 增 了 RMB 2,110 hundred million yuan.
Okay. Because of the uncertainties raised associated with the pandemic prevention and control, as well as the downward pressure of the economy. We're actually seeing less demands as compared to the same period of 2021. However, it's getting better if you compare it to the first half. Also, from a data released by PBC, at the end of October, the new RMB loans is about RMB 615 billion, which is RMB 211 billion lower from the same period of 2021. You can see that. 还 有 那 个 抵 押 物 的 情 况 。
嗯 。
我 们 第 三 季 度 的 不 良 率 是 下 降 的 。
我 们 第 三 季 度 整 体 的 逾 期 率 和 不 良 率 呢?
都 是 下 降 的.
都 是 在 持 续 不 断 的 下 降 的. 从 目 前 资 产 表 现 质 量 来 看 的 话 呢, 预 计 都 是 在 我 们 目 前 可 控 的 范 围 之 内.
As for the collateral, you can see that both of the delinquency ratio and the NPL ratio has decreased at the end of the third quarter. That means the quality of collateral is still within our control.
Okay, perfect. Last question is, you guys mentioned looking to do some acquisitions. Is there anything, you know, in that fintech space specifically you're looking for or just anything that might be, you know, complementary to what you guys offer?
最后 一个 问题 是 您 刚刚 提 到了 一个 可能 的 收购 计划， 我 想 问 一下 是 有 一个 现在 已经 有 特定 的 目标 了 吗， 还是 只是 大体上 一个 比较 complementary 的 事情， 就 比较？
目 前 没 有 ， 目 前 没 有 一 个 特 定 的 目 标 ， 只 是 我 们 在 资 本 市 场 方 面 的 一 个 想 象 和 需 要 去 完 成 的 一 个 事 情 。
There is not a particular target at this moment. It's just something we want to achieve in the capital market.
Okay. All right. Thank you.
Again, if you have a question, please press star then one. With no further questions, we will conclude our question and answer session. I'd like to turn the conference back over to Matt Lou for closing remarks.
Thank you. Thank you again just for joining us tonight on this morning. If you have any further questions, you can always view our official website at ir@cashchina.cn. Also, you can sending us emails. Thank you. Thank you again.
The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect your lines.