Qifu Technology

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奇富科技2026年第二季度业绩电话会

Key Takeaways (AI-Generated)

Financial Performance

- Q2总净收入为人民币35.7亿元，环比下降9%，同比下降32%

- 信贷驱动服务收入为人民币26亿元，环比下降12%，同比下降27%

- 平台服务收入为人民币9.7亿元，环比增长2%，同比下降41%

- 非GAAP净利润为人民币4.55亿元，环比下降52%，同比下降75%

Business Highlights

- 通过AI驱动的信贷决策引擎为168家金融机构提供服务，累计信贷额度用户超6500万

- C2M2比率改善至0.66%，环比下降17%，接近2025年Q2水平

- 30天催收率提升至88.1%，环比上升2.3个百分点

- 税务解决方案业务贷款量达人民币105亿元，同比增长515%

Financial Guidance

- 预计2026年Q3非GAAP净收入在人民币4-5亿元之间，同比下降67-73%

- 预计8月份C2M2环比增长约25%

- 预计下半年整体融资成本将上升

- 风险优化预计需要2-3个季度，贷款量短期内不会回到Q2水平

Opportunities

- 市场整合为领先平台创造机会，弱势竞争对手退出市场

- AI+金融监管框架为合规AI解决方案创造更大市场机会

- 欧洲、拉美和东南亚海外扩张显示早期进展

- 税务解决方案业务展现强劲增长，同比增长515%

Risks

- 6月底意外行业事件引发全行业流动性紧缩

- 监管收紧，Q3生效的融资成本、贷款披露和营销新要求

- 全国性催收行业监管行动导致严重产能短缺

- 风险指标急剧上升，预计8月C2M2因市场波动上升25%

Full Transcript (AI-Generated)

Operator

Available on our IR website, joining me today are Mr. Wu Haishen, our CEO, Mr. Alex Shu, our CFO and Mr. Jin Yan, our CRO. Now I will quickly cover the Safe Harbor statement. Today's discussions may contain forward-looking statements, particularly statements about our business and the financial results that are subject to risks and uncertainties, which could cause actual results to differ materially from those in the forward-looking statements.

Please refer to the Safe Harbor statements in our earnings release, which also contains a reconciliation of the non GAAP financial measures to GAAP financial measures. Now I will turn the call over to Mr. Wu Haisheng. Please go ahead.

Wu Haishen

Hello everyone. Thank you for joining us today. Since the start of 2026, China's consumer finance industry has remained under pressure. According to the People's Bank of China, the outstanding balance of short term household consumer loans fell by more than RMB 660 billion from the beginning of the year through the end of Q2, reflecting continued voluntary and involuntary deleveraging among households.

Meanwhile, regulatory oversight continued to tighten. A series of measures were introduced to close regulatory gaps and promote a healthier, more compliant industry environment. These measures bring the entire credit industry under stricter framework covering pricing, marketing, funding, collections and payments. In late June, an unexpected industry event then triggered a crisis of confidence in the loan facilitation sector. This caused liquidity to tighten sharply across the market.

Against this backdrop of profound industry adjustment and structural shakeout, we remained committed to prudent operations, prioritizing compliance, risk management and efficiency over scale. By continuously optimizing our user mix and business structure, we further enhanced operational efficiency and strengthen the resilience of our business model.

As of the end of Q2, our AI powered credit decision engine and asset distribution platform served 168 financial institutions delivering intelligent digital credit services to over 65,000,000 credit line users on a cumulative basis. We maintained rigorous risk management standards while driving cost and efficiency improvements.

In Q2, total loan facilitation and origination volume on our platform reached approximately RMB 63.4 billion, down 2.5% sequentially. Risk metrics continued to improve, accompanied by lower funding costs and greater operating efficiency. Amid the rapidly evolving industry landscape and the broad based contraction in consumer credit supply, we maintain the prudent balance across risk scale and profitability, demonstrating strong operational resilience.

Risk management underpins every business decision we make and is critical to our ability to navigate industry cycles and achieve sustainable growth. Since the second-half of 2025, risk optimization has remained our top priority. By expanding our base of high quality users and optimizing our business mix, we have kept the risk level of new loans at historical lows in Q2.

Our risk indicators continue to improve. The C2M2 ratio declined by 17% sequentially to 0.66% approaching the level in Q2 last year. This improvement reflected the benefits of our earlier asset mix adjustments and risk strategy optimization as well as enhanced post loan management capabilities.

During the quarter, we further refined our pre loan and the Yin loan risk strategies with closer monitoring of multiple borrowing and the changes in customer liquidity. By analyzing multiple signals, including recent customer behaviour, external borrowing exposure and changes in debt levels, we can quickly identify users with high debt burdens or declining income stability. This allows us to tighten risk strategies promptly and reduce our exposure to high risk segments.

For post loan management. We continued to refine our collection scorecard or C scorecard, improving our ability to segment users by risk level, willingness to repay and repayment capacity. We then tailored our outreach strategies and offered targeted relief or repayment plans based on each customer's risk profile and actual ability to repay. This measures have improved the customer experience and made our collection efforts more efficient.

As a result, our 30 day collection rate improved each month throughout Q2 and averaged 88.1%, up 2.3 percentage points sequentially. We also embedded risk discipline earlier in the customer acquisition process. Given the uncertain regulatory environment, we moderated the pace of acquisition spending and continue to optimize our customer and loan mix.

In Q2, customer acquisition expenses decreased by approximately 13% sequentially, while high quality users accounted for a larger share of loans issued to new users. We also maintain strict discipline on payback periods. By improving the user experience, we increase retention and repeat borrowing, which in turn raise user lifetime value.

In addition, we continue to scale back long tail API channels with weaker customer quality and less stable returns. As a result, API channel's share of new credit line users declined by 11 percentage points sequentially, while the API contribution to new loan originations fell by three percentage points. Following these adjustments, ROA for API channels improved by around 1.87 percentage points.

As our user and channel mix improved, the average pricing of new loans decreased further to 18.2% in Q2. A higher quality user mix allows us to align our assets more effectively with funding demand while further strengthening our asset quality.

On the funding front, we further optimized our funding mix by increasing the contribution of ABS to external funding and proactively scaling back marginal assets with higher funding costs. As a result, our overall funding costs declined by approximately 10 basis points sequentially in Q2, supported by our long track record of stable asset performance.

Our ABS issuance increased 90% sequentially to RMB 5.5 billion in the quarter, while issuance cost decreased by around 20 basis points. Following an unexpected industry event in late June, financial institutions have become increasingly risk averse. Funding supply has fallen sharply, placing the industry under significant liquidity pressure.

As a leading platform, we benefit from more diversified funding sources, stronger risk performance and asset pricing that aligns well with regulatory guidance. As a result, our funding supply has held up better than most of our peers. We expect funding conditions to remain tight in the second-half of the year with funding costs to potentially increase.

We will continue to build on our asset strength and work to maintain stable funding supply. At the same time, we will better match funding with assets to improve capital efficiency and overall portfolio yields. Tighter funding conditions will also materially affect industry risk levels. To prepare for potential volatility ahead, we will continue refining our risk management and asset distribution strategies while proactively optimizing the allocation of our collection resources. These steps will help us maintain an adequate margin of safety in a volatile market environment.

On the regulatory front, new requirements covering comprehensive financing, cost of personal loans disclosures and the online marketing of financial products are taking effect in Q3. Together, these measures establish higher standards for transparency and the consumer protection across the industry. They also raise the bar for our operational execution.

Meanwhile, an ongoing nationwide regulatory campaign targeting the collection industry has led to a severe shortage of collection capacity across the board and put significant near term pressure on collection costs and efficiency. Over the longer term, however, these measures will help foster a healthier and more sustainable industry ecosystem.

We expect industry resources to increasingly concentrate among leading players with reasonable pricing, strong risk management and disciplined operations as we strengthen the foundation of our credit business and refined our unit. Economics, we continued to advance our one Core 2 wing strategy, extending our proven technology and the credit capabilities to tax solutions for financial institutions and our overseas business.

In Q2, loan volume enabled by our tax solutions business reached RMB 10.5 billion, up approximately 515% year over year, while outstanding loan balance reached around RMB 16.1 billion at quarter end, up 313%. Through Fox Pro and other solutions, we embed our capabilities spending, customer acquisition, product risk management, operations and post loan management into the workflows of financial institutions, enabling banks to serve customer segments typically priced between 3% and 12%.

Our AI plus credit strategy also made meaningful progress recently. We secured 2 AI agent development projects with banks covering marketing growth and credit risk management. Our AI Loan Officer will be deployed across the banks, retail, SME and corporate banking businesses, supporting relationship managers from lead identification and customer engagement to conversion.

Our AI Credit Officer will support SME lending in areas such as transaction analysis, audio and video due diligence, and credit review and approval, which will help banks improve credit assessment and approval efficiency. These wings demonstrate growing recognition of our AI agent capabilities in real world environments at financial institutions.

With both projects entering implementation, we are now positioned to provide deeper support for the digital and intelligent transformation of financial institutions. This progress comes as the regulatory framework for AI in financial services enters a new phase. Since July, regulators have issued a series of major policy documents, including guidance on the secure development and the use of AI in banking and insurance sectors.

These policies mark that AI plus finance is shifting from encouraging innovation to prioritizing security and compliance. We believe this shift will create greater market opportunities for our AI solutions which are secure, compliant and deeply integrated into real world financial workflows.

Overseas markets represent a long term growth opportunity for us. By combining the technology and know how we have developed in China's credit market with strong local operations, we are trying to build an efficient and replicable model for overseas expansion. During the quarter, we continued to refine our risk models and deepen our understanding of the European and Latin American markets.

Based on small scale sample data, our models have already shown competitive performance in select markets. With continued iteration and refinement. We believe our strength in risk management and technology will set us apart in overseas markets. In Southeast Asia, we are steadily advancing licensing efforts, exploring partnership opportunities and building local teams. We expect more progress in the second-half of the year.

At this stage, we are taking a disciplined approach to overseas expansion, carefully balancing risk and capital deployment to ensure efficient capital allocation. At the organizational level, we continued our transformation into an AI native company. We are gradually turning the knowledge and capabilities accumulated across our teams, documents and systems into organizational assets that AI can understand and use. We have also begun building our proprietary agent platform.

The value of AI native transformation extends beyond efficiency gains. It is about turning individual and team experience into shared, reusable organizational capabilities and creating a new form of organizational leverage. Over time, this will accelerate learning and iteration across the organization while steadily raising both execution efficiency and the ceiling of what we can achieve.

Looking to the second-half, industry adjustments are still under way and the market volatility is accelerating the exit of weaker platforms. In the process, we have already seen many. Editors leaving the market. As a result, customer acquisition costs have fallen sharply and the non compliant practices are decreasing.

Once the dust settles, we expect a more stable and predictable regulatory environment where we will remain disciplined and vigilant in our approach to both regulation and risk. Under the new regulatory framework, we will continue to strengthen our capabilities, refine our business model and improve operating efficiency.

Precedence from overseas markets suggest that as the market transitions from disorder to order, even industry leaders often experience short term pain. This is an inevitable part of the process. However, those that successfully navigate the transition will emerge better positioned for sustainable growth and long term success.

Going forward, we will remain firmly committed to our one quart 2 wing strategy anchored by our domestic credit business and supported by tax solutions, commercialization and overseas expansion. As we advance this strategy, we will continue to pursue sustainable high quality growth. We are confident that we will thrive over the long term. Thank you. With that I will now turn the call to Alex.

Alex Shu

Thank you, Haisheng. Good morning and good evening everyone. Welcome to our second quarter earnings call. It was a very eventful quarter where where unexpected crisis at some peers in late June triggered an industry wide liquidity squeeze compounded by increasingly stringent regulatory scrutiny, which caused significant changes in industry behavior and reshape the landscape.

For the time being, our managerial priority is to maintain financial discipline and focus on cost reduction and risk mitigation. Total net revenue for Q2 was 3.57 billion versus 3.91 billion in Q1 and 5.22 billion a year ago. Revenue from credit driven service capital heavy was 2.6 billion in Q2 compared to 2.96 billion in Q1 and 3.57 billion a year ago.

The year on year and sequential decline was mainly due to decrease in risk bearing loans as well as a decline in average pricing of loans. Overall funding cost declined roughly 10 basis points Q&Q as contribution from ABS increased in funding mix and off balance sheet loans further declined in Q2.

Revenue from platform service capital light was 969.8 million in Q2 compared to 951.9 million in Q1 and 1.65 billion a year ago. The year on year decline was mainly due to significantly lower ICE contribution due to drastic changes in market conditions during the quarter.

Average IIR of the loans we originated and all facilitated was 18.2% compared to 18.7% in the prior quarter as we continued to focus on attracting and retaining high quality users. Looking forward, we may see modest fluctuation in average pricing under current regulatory framework.

Certain marketing expenses declined 13% Q on Q and 40% year on year. We added approximately 830,000 new credit line users in Q2 VS 1.19 million in Q1. We took more cautious view in customer acquisition and will continue to maintain controlled pays to acquire new users in the near term in response to the volatile market environment and restrictive regulatory changes.

90 day delinquency rate was 2.83% in Q2 compared to 3.5% in Q1, which reflects improved risk performance early in 2026. As a reminder, 90 day delinquency rate is a lagging indicator and has little predictive power of future risk metrics. Day one delinquency rate was 5.6% in Q2 VS 5.7% in Q130.

Day collection rate was 88.1% in Q2 VS 85.8. In Q1C-M2, which represent the outstanding delinquency rate after facility collection was 0.66% in Q2 versus 0.8% in Q1. The noticeable risk bringing improvement in Q2 was mainly related to our risk tightening measures and loan mix shift toward new loans.

While overall risk performance in July remained largely unchanged from June, the positive trend took a sudden reversal in August. The aftermath of the liquidity crisis at some tiers and the nationwide regulatory action against the credit collection operations recently caused significant headwinds in the risk management across the entire financial service industry.

In response to the drastically changing industry dynamic, most participants start to lift their risk bar in August, which in turn caused further tightening of liquidity supply in the market. We observed sharp upward swing of C-M2 in recent weeks, which may significantly impact our operation for the rest of the year.

While we already took proactive measures since late June and even more decisive actions in August, it will probably still take at least two to 3/4 to bring the C-M2 ratio back to a reasonable level given current macro environment and regulatory changes.

We continued to take prudent approach to book provisions against potential credit losses. Total new provision for risk bearing loans in Q2 were approximately 1.72 billion versus 1.68 billion in Q1. New provision booking ratio, which is defined as total new provision divided by total quarterly risk bearing loan volume reached a historical high at 5.36% in Q2.

Write backs of previous provisions were approximately 649 million in Q2 versus 308 million in Q1. Provision coverage ratio which is defined as total outstanding provisions divided by total outstanding delinquent risk bearing loan between loan balance between 90 and 100. 80 days or 472% in Q2 compared to 391% in Q1.

Non GAAP net profit was 455,000,000 in Q2 compared to 946 million in Q1 and 1.85 billion a year ago. The significant year on year decline in profitability was mainly due to loan lower loan volume and pricing and the deleveraging in operation.

In Q2, we incurred A1 off tax related expense of approximately 500 million RMB, which was caused by a change in tax treatment of certain entity based on the updated interpretation of related tax regulation by the tax authorities. As a result, effective tax rate for Q2 was 60.3%, significantly higher than the. Based on the Tax authority's guidance, we now expect the effective tax rate for the operations to be around 20% going forward.

Leverage ratio, which is defined as risk bearing loan balance divided by shareholders equity was 2.1 times in Q2 versus 2.4 times in Q1. Due to the lower risk spending loan balance, we expect to see leverage ratio fluctuated around this level in the near future.

We generate approximately 1.09 billion cash from operation in Q2 compared to 2.1 billion in Q1. Total cash and cash equivalent and short term investment were 10.63 billion in Q2 compared to 10.79 billion in Q1.

In Q2, we aggregate repurchase approximately 463,000 of our ADS in open market for a total amount of approximately 7,7,000,000 US inclusive of commissions at the average price of 15.19 per ADS. We suspended the repurchase in late June due to the sudden outbreak of the liquidity crisis at some peers that triggered industry wide liquidity squeeze and panic in the car.

With our current dividend policy, our Board has approved a dividend of U.S. dollar $0.23 per Class A ordinary share or U.S. dollar $0.46 per ADS for the first half of the 2026 to holder of record of Class A ordinary share and ads as of the close of a business day on September the 9th, 2026 Hong Kong time and the New York time respectively. The dividend payout ratio is 30%.

As we have discussed, given the volatile market environment and serious mishaps among some peers and intensifying regulatory scrutiny, we continue to face heavy headwinds in the coming quarters. We believe the top priority for the company and the management at this point in time are to mitigate risks, streamline operation, cut cost, support strategic initiatives.

Meanwhile, we may need to build additional financial buffer in the intermediate term to counter any unexpected industry volatility. In the long run though, we still believe that optimized capital allocation is a key to drive long term value for the company and stakeholders.

Finally, regarding our business outlook, given the micro and regulatory headwinds, we will take extra cautious approach in business planning for the rest of 2026. For the third quarter of 2026, the company expects to generate non GAAP net income between RMB 400 million and RMB 500 million, representing year on year decline between 67% and 73%. This outlook reflects the company's current and the preliminary view, which is subject to material changes.

With that, I would like to conclude our prepared remarks. Operator, we can now take some questions.

Operator

Thank you. If you wish to ask a question, please press *1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press *2. If you're on a speaker phone, please pick up the handset to ask your question.

For those who can speak Chinese, please start your question in Chinese followed by an English translation to allow enough time to address everyone on the. Call. Please keep it to one question and one follow up and then return to the queue. If you have more questions, thank you. The first question comes from Richard Zhu with Morgan Stanley. Please go ahead.

Richard Zhu

呃，这个第一个提问机会啊，就想问两个问题一个呢，就是，呃，刚才那个海生总还有那个呃徐总都说到了这个流动性的一个收紧的状况那想问一下那公司在三季度又采取了哪些措施来控控制这个资产质量那我们预期这个vintage boss 会上升多少我们现在这个拨备计提的这个缓冲空间还够不够第二呢，就是，呃，你也说到最近有一些针对催收政策的专项行动那我们对这个回收效率会有什么影响啊那这个现在看公司

I guess what should I do? It essentially have two questions. 1 is on the liquidity tightening in third quarter. Essentially the company has taken what measures to control the credit quality and what is the expected vintage loss increases and also are there room in the provisions to cushion the impact? Second is given the tightening of the collection policies, what's the expectation of the recovery ratio and what are the measures the company has taken to mitigate the problems? Thank you.

Jin Yan

OK, thank you. Thank you, Richard. I think both of the questions, it's regarding to risk management and collection issues. So I'll pass it over to Mr. Zhengyang, our Cao.

呃，好的，呃，这一轮风险上升确实是因为行业极端事件引发的一系列连锁反应呃，叠加七月底呢开始全国的催收行业整治所带来的一个双重影响嗯，七月初开始金融机构的风险偏好明显，嗯我们看到明显的收紧，全行业普遍资金短缺资质不足的小平台更是面临了资金枯竭的局面那八月资金会进一步的收紧到目前为止，呃我们依然没有看到好转的趋势，呃，同时呢目前正在全国范围内开展的针对催收行业的相关整治工作也导致了催收资源的极度紧张，对于回收效率也有比较明显的影响啊这个是全行业的

OK, I will briefly translate for Mr. Zheng. The current uptake in risk was indeed triggered by a chain reaction set off by a well known industry incident, compounded by the nationwide crackdown on the collection industry that began in late July. Since early July, financial institutions have visibly tightened their risk appetite, leading to a widespread funding shortage across the industry.

Smaller platforms with weaker qualifications have faced even more severe funding constraints. Funding conditions tightened further in August and have shown no sign of improvement to date. At the same time, the ongoing nationwide regulatory campaign targeting the collection industry has created severe shortages in collection capacity, with a notable impact on recovery efficiency. This is a challenge of. Faced universally crossed the. Industry

呃，从风险指标角度来看呢七月份整体风险表现相对稳定，呃C-M2跟六月份相比相差不大那进入八月后呢，风险水平开始出现上升，从八月份已有的表现的早期风险指标fpd 三和fpd 七来看啊环比七月份上升了20%左右，我们预计八月份的C-M2环比会上升大约25% 我们基于和同业的一些交流，大部分平台的风险在八月份都出现了跳升的现象呃，近期都在积极调整风险策略，不过目前风险表现的时间还是有些短呃，未来一段时间还需要结合市场环境变化和实际回收情况进一步判断最终的风险水平

On the risk front, overall performance remained relatively stable in July, with C2M2 remaining largely flat compared to June. However, risk levels began to rise in August based on early stage risk indicators of FPD 3. And FPD 7 for August, we have seen an increase of approximately 20% month over month. We expect CTM to. For August to increase by roughly 25% sequentially

based on our discussions with peers, most platforms experienced a sharp spy. Risk in August and have seen actively adjusting their risk strategies. That said, the observed risk trends are still relatively short term in nature and we will need more time to assess the ultimate risk level, taking into account evolving market conditions and actual collection performance.

啊因此对风险进行控制是我们近期工作的重中之重基于对市场环境的动态观察，我们逐步从呃六月底七月初的预防性收缩呃，升级到八月份的加速收紧我们从风控策略和贷后管理方面迅速做了一些部署

As such, risk management has become our top priority in recent months. Based on our ongoing monitoring of evolving market conditions, we have progressively escalated our response from a precautionary tightening stance in late June to early July to an accelerated tightening approach in August. We moved swiftly to deploy measures across two key areas, risk strategy and post loan management from Solar Famia.

加强高风险客群的识别，重点关注多平台共债呃腰尾部平台暴露流动性断裂以及频繁短于收入不稳定等风险客群，呃，加快了短期风险模型的一些迭代速度将重点模型更新的频率由原来的月度提升至周度的一个频率提高对风险拐点客户的识别能力啊同时我们会全面搜寻新增资产优化客户结构，分别会从经营交易和资产分发环节压降风险敞口降低额度收紧交易批核率并提高上表和助贷资产的一些准入门槛后续将持续观察新增资产的fpd 三fpd 七以及存量的dpd 七及不同客群和渠道的一些风险分化情况如果指标未见企稳，我们计划于八月底至九月初进一步加码专项客群的准入和资产分发的

In terms of risk strategies, we will further strengthen the identification of high risk customer segments with a particular focus on those excavating multi platform borrowing, exposure to mid and lower tier platform distress, liquidity strain, frequent short term delinquencies and unstable income profiles. We will accelerate the iteration of our short term risk models, increasing the update frequency of key models.

From monthly to weekly to enhance our ability of identifying. Inflection point in customer risk behavior. At the same time, we are tightening underwriting standards across new originations and optimizing our customer mix. We are reducing risk exposure across 3 dimensions, customer engagement, transaction approval and asset distribution by lowering credit limits, tightening approval risk and raising the bar for both on balance sheet.

Capital heavy loan facilitation assets Going forward, we will continue to monitor early stage risk metrics such as FPD 3 and. DPD 7 for new loans as well as DPD 7 for existing portfolios while tracking risk divergent across different customer segments and channels. So this indicators do not stabilize. We plan to further tighten segment specific screening criteria and asset distribution controls by late August to early September.

期将优先稳定在岗能力和回收产能，优化案件分配控制入吹率回收率呃，防止进一步恶化针对高共债重复入吹呃高风险等客户，我们会提前人工介入并且配置呃纾困方案中期呢，我们会通过智能协商差异化纾困和带前带中带后的联动逐步形成兼顾回收和合规的常态化的带后能力然后拨备这一块，请CFO 可以补充回答一下

On the postal management front, our near term priority is to stabilize staffing and collection capacity, optimizing case allocation and prevent further deterioration in both delinquency inflow and collection rates. For high risk segments such as those with significant multi platform borrowing, repeat delinquencies or high risk scores from our collection scorecard, we are intervening early with dedicated personnel and offering relief plans.

Over the medium term, we aim to build a sustainable postal management. Capability that balances recovery performance with regulatory compliance. Through intelligent negotiation tools, differentiated relief solutions and closer integration between pre loan and post loan processes. And now I will pass over to CFO for the questions regarding provision.

Alex Shu

OK. On provision, given the current market condition, the volatility and the significant challenge to asset quality, we have maintained a very prudent provision approach, right in Q2, as I mentioned, new provision as a percentage of risk and loan reached historical high at approximately 5.4%.

As you may know, our normalized risk control target is to keep the vintage loss largely within the range of 3 to 3.5% and historically we only have two quarters to breach that level to be around 4%. So basically even under the most extreme assumptions, we believe our current provision level are more than sufficient to cover potential losses in any dramatic industry or market events. OK.

Operator

Operator, next one. The next question comes from Alex Yih with UBS. Please go ahead.

Alex Yih

嗯，感谢给我这个提问的机会啊，我这个问题想请教我们现在呃，七到八月份所看到的一个呃新增贷款volume 的一个Run rate 大概呃，环环比是一个什么水平，然后这个环比估计是下降的那这个主要的原因是应该，呃，归因于资金瓶颈的一个呃，供应的一个瓶颈，呃，还是说自身风险偏好的一个收缩那我们是就是鉴于这近期行业的一个风险事件吧我们是应该把Q3当前的一个认为当做一个暂时性的冲击吗那如果后续我们确实看到一些呃资金的恢复呃，后续我们是否应该期望有有一定的一个回暖 so

So I'll translate for my question. So what's the current loan volume run rate for your July and August? So how much does it decline from the Q2 level? And was this decline largely due to the shortage of supply or is it more due to your proactive refractile control? And so should we take this as a temporary shock given the ongoing industry difficulties? And let's say, if we do see the funding supply getting normalized afterwards, should we expect this loan volume to somehow recover to your Q2 level? Thank you.

Alex Shu

OK. Let me take this one. In terms of loan volume, starting in July, we saw a significant tightening of industry wide funding supply. Our IC business was the most effective segment. Capital light model experienced a minor impact, while funding for on balance sheet and capital heavy loans remained relatively unaffected.

The liquidity issue caused about 10% direct impact on our loan volume in July. At the same time, given early signs of customer core volume and liquidity stress, we also proactively tightening some risk exposure. Combined these factors led to a 15% decline in July loan volume.

In August, ICE funding tightened further while while funding for on balance sheet loans and Capital Highway and Capital Light loan remained sufficient. However, given our own risk performance and our assessment of current market environment, including liquidity pressures and constraints to collection resources, we decided to adopt A more conservative risk strategy and tighten it further from July.

As risk optimization takes time, we expect to remain cautious on origination throughout Q3. So the volume decline in July was partly due to funding availability, while the pullback in August and September is more about our own risk appetite tightening.

As a leading platform, we have more diversified funding, stronger risk performance and regulatory aligned pricing given us far greater funding resilience than most peers. And based on past experience, risk optimization typically takes 2 to 3/4, so we don't expect the loan volume to return to Q2 levels and anytime soon.

On the funding site. With regulatory uncertainty still there and the shake up of smaller players still ongoing, we will stay cautious and prioritize the asset quality in the near term. We will revisit growth after the industry environment stabilize. Thank you, operator.

Operator

The next question comes. The next question comes from Emma Shu with BFA Securities. Please go ahead.

Emma Shu

啊，谢谢给我这个提问的机会啊，我这边就有一个问题嗯，就是在目前这个行业盈利环境下行还有叠加呃，监管约束增强的这个情况下，公司的股东回报政策是否会有调整啊 so，given the deteriorating in the street Environment coupled with tightening regulatory constraints, will the company adjust the shareholder return policy?

Alex Shu

OK, Emma, I will take on this one. Well, we are still generating decent earnings and the solid operating cash flow. The outgoing industry adjustment has clearly put pressure on our profitability and the cash flow for the for the next few quarters.

In the near term, as regulatory uncertainty lingers and the market volatility intensifies, we have established a clear set of priority in terms of capital allocation. Our first and foremost priority is to weather the storm and safeguard the safety of the company as well as the company's long term operational stability. And in addition, we will continue to put resources to our long term strategic initiatives.

And of course in the long run we still intend to maintain the reasonable shareholder return policy. And going forward, as an industry and the regulatory environment involved, we will continuously assess and optimize our capital allocation strategy based on our sustainable normalized earnings and cash flows. Thank you.

Operator

The next question comes from Cindy Wang with China Renaissance. Please go ahead.

Cindy Wang

啊，谢谢管理层给我这个提问的机会，那我这边有个问题想请教就是能否请管理层帮我们理解一下 Q，对 The guidance pay holder to your. 假设那这些关键指标的，呃，变化背后的一个呃驱动因素为何那以及管理层如何看待这些指标的一个长期趋势那我这边很快翻译一下啊

Thanks for taking my questions. So I have one question. Could management tell us the main assumption behind the Q3 guidance and what are the key factors behind the changes and how does management view the long term trends of these metrics? Thank you.

Alex Shu

OK, Cindy, I will take this one as well. In Q3, we are obviously operating in a very highly volatile market environment. Funding supply across the industry has become extremely tied with the severe liquidity pressure on market players. The implementation of the multiple new regulatory policies also adding operational uncertainty.

At the same time, a wave of small platforms facing accelerated exiting due to the funding depletion and the deteriorating asset quality, further amplifying the market volatility. In such an environment, I think we must main remain highly disciplined. Risk control and efficiency comes first and grows. Take a back seat, OK, for Q3

in terms of loan volume, we are assuming a meaningful decline from Q2 as we have tightening our risk control measures significantly in this challenging A challenging market condition, OK. However, given the liquidity pressure and the impacts on ongoing regulatory campaign campaign on collections and the fact that the major platforms all pulling back at the same time, we still expect the C-M2 for Q3 to rise noticeably from Q2 level

on provision, as I mentioned earlier, we will continue to take a prudent approach to reflect actual risk performance and the changes in the market dynamic. And in terms of funding cost, you know we already seen funding costs, external funding costs increased by around 25 basis points in July and August.

We expect the recent risk volatility in the to heighten the funding partners concern and further tightening the funding supply. At the same time, some institution investors have become more risk averse in their ABS subscription. As a result, we anticipate overall funding costs will trend up in the second-half of the year

and we take a more conservative approach to customer acquisition. As Hashim mentioned earlier, rather than pursuing volume, we will focus on sharpening the acquisition efficiency, improving customer quality and enhance user life cycle value.

Over the past two months, nearly every key element of our business has changed dramatically and all in the ways that interconnect each other and hard to entangle. This is not a company specific issue, it's an industry wide phenomenon making our operational environment far more complex.

That said, as industry consolidate plays out, we expect consolidation condition to normalize and most of these factors to come back to their normal trajectory over the course of the next few quarters. Thank you.

Operator

The next question comes from Yoyo Fan with CICC. Please go ahead.

Yoyo Fan

感谢管理层给我这个提问的机会我是中宁公司分析师樊优yoyo，那我这边的话两个问题想要请教一下呃一个呢是，呃，我们看到橘子事件之后，行业内很多的中小平台出现资金短缺啊也想请教一下公司可能怎么去理解和看待现阶段的一个市场竞争环境那在这么一个背景下啊，公司是如何去考虑下半年的一个获客和增长的策略啊，第二个问题的话是因为近半年来的话，其实我们看到国内的运营环境也发生了比较大的一个变化啊也是想要请教一下管理层是否考虑去进一步的加速海外战略的一个推进啊能分享一下当前海外市场的一个最新进展啊那我这边快速翻译一下啊

Thanks for taking my questions. This is Yolo fan from CICC. 2 questions Hail, Firstly, let's us more to medium platforms are now failing liquidity pressure. So how do you deal with the current market environment and the competitive landscape? And what's your customer acquisition and growth strategy for the second-half of the year?

Secondly, we have seen quite big shifts in the domestic operating environment over the past six months. How do you consider about speeding up the overseas strategy? Could you walk us through the latest update on the overseas markets, these two questions? Thank you.

Wu Haishen

OK, thank you. Let me take both this one. In terms of competition, the well known incident has tightened industry funding and driven acquisition spending down across the board. Industry wide spending fell nearly 50% over month in July with another 20% in August.

Today, only a handful of platforms including us are still spending meaningfully. Most peers have put backs sharply and long tail players are even leaving market. So purely on acquisition cost and spending intensity, market competition has clearly moderated compared to the past.

From our perspective, however, liquidity remains tight, regulations are still evolving and the quality of new customers also require ongoing monitoring. We are therefore focusing on the actual return from acquisition spending. At this stage, we place greater emphasis on the returns from our acquisition spending rather than simply pursuing new customer volume.

We aim to enhance the long term value generated by $8 spent on organization while maintaining A disciplined approach to risk on execution. We are bidding differently by user risk and value, prioritizing higher LTV users while keeping acquisition cost in check. We are also improving user experience and engagement to lift retention and repair rate

on API channels. We are reallocating resources dynamically based on profitability, cutting back on long tail channels with weaker quality and stability to build a safety margin. Following our adjustment in the first half of the year, our API channel improved by more than one percentage point, further strengthening the resilience of our overall business against the market volatility.

Looking into the second-half, we expect industry adjustment and the exit of weaker platforms to continue for some time. Our near term focus is therefore to strengthen the fundamentals of our business, improve our customer and channel mix as well as enhancing the efficiency of funding matching

over the longer term. We believe the industry will become healthier after this round of adjustment and market share is likely to become increasingly concentrated among leading platforms. For us, this is not only a process of refining our business structure, but also an opportunity to further strengthen our competitive position.

Once the market becomes more sensible and the competition returns to a normal level, we will be well positioned to adjust our market spending timely and capture new growth opportunities. And for your second question, in terms of overseas expansion, we have made steady progress in Europe and Latin America keep.

Market knowledge, localizing risk models and balancing growth and risk through diversified business model. In Latin America, our self built model are already showing encouraging early results and we are iterating our models and user selection strategy.

In Europe, we have deployed our own models and are leveraging local credit Bureau and open banking data to sharpen risk detection. In Southeast Asia and other high potential markets, we are advancing license building teams and exploring partnerships.

In every university's market, we treat regulations and risk with deep respect. We also know that risk model validation and unit economics refinements take time. We are still early in all of this market with small team, small capital, modest team test and learning on business model, customer acquisition and risk control, washing risk, risk rewarded closely

As we prove our capabilities, we will bring in external funding to reduce the burden on our own balance sheet. For us overseas expansion is a long game and I think we have enough patience. That's all. Thank you.

Operator

There are no further phone questions at this time. I'll now hand it back to management for closing remarks. Please go ahead.

Wu Haishen

OK. Thank you again for joining us. If you have additional questions, please reach us offline. Thank you.

Operator

Thank you. That does conclude our conference call for today. Thank you for participating and have you may now disconnect.

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