Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Continued improvements in asset quality across both portfolio and consumer finance businesses.
- Consumer finance business saw a 23.6% year-over-year increase in new loan sales.
- Notable improvements in asset quality with NPL ratio decreasing to 1.4% from 1.6% in the first quarter.
- PAObank delivered solid growth with a 45% year-over-year increase in total loan balance.
- Enhanced synergies with Ping An Group expected to reduce funding costs and improve brand reputation.
Negative Points
- Total new loan sales in the second quarter of 2024 declined by 15.5% year-over-year.
- Total income decreased by 35.5% to RMB6 billion from RMB9.3 billion in Q2 2023.
- Unit operating expenses increased due to a decrease in loan balances, impacting profitability.
- Net loss of RMB730 million recorded for the second quarter.
- Operational expenses remain high due to fixed costs and decreased economies of scale.
Q & A Highlights
Q: How is the overall loan demand currently, and do you think you are still on track to meet your full-year target?
A: Loan demand remains weak overall, largely dependent on macroeconomic improvements. While we maintain a prudent strategy on SVR lending, our consumer finance business shows more stable demand. We focus on consumer finance and larger consumption loans to cope with declining loan demand in the near term, especially in regions with significant loan volume contraction. (Yong Suk Cho, Chairman and CEO)
Q: Can you continue to see improvement in the M3 flow rate, and how will management sustain this trend?
A: Improving C-M3 flow rates is challenging with declining loan balances, but with continuous portfolio mix improvements and better quality accounts from 2023 and 2024, we believe our asset quality will continue to improve. We are also upgrading our risk model, underwriting model, and collection processes to sustain this trend. (Yong Suk Cho, Chairman and CEO)
Q: What areas do you see more collaboration potential with Ping An Group in the future?
A: We expect increased collaboration in customer sourcing using Ping An's online and offline channels, technology development, and brand sharing. With Ping An Group's increased ownership, we anticipate reduced funding costs due to their strong financial standing. (Yong Suk Cho, Chairman and CEO)
Q: Do you have any plans to further increase shareholder returns?
A: Although no semi-annual dividend will be paid due to a net loss in the first half of 2024, management is dedicated to returning value to shareholders. We will seek potential ways to increase shareholder returns, maintaining our annual dividend policy of 20% to 40% of net profit, paid semi-annually. (Yong Suk Cho, Chairman and CEO)
Q: What is the outlook for future funding costs?
A: We expect funding costs to continue decreasing due to favorable monetary policies and support from our funding partners. The acquisition of a nationwide small lending license will also help lower funding costs. (Alston Zhu Peiqing, CFO)
Q: Why did the OpEx to income ratio increase in the second quarter, and is there room for improvement?
A: The increase was mainly due to loan scale contraction, leading to a decline in economies of scale, and some fixed expenses. We will continue to improve operational efficiency through technology, synergy, and digitalization efforts. (Alston Zhu Peiqing, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.