During the Period, the Group's total income was RMB1.2 billion, which was largely supported by the powerful financial technology of the Group in terms of effective risk management and enhanced asset quality, amid the outbreak of COVID-19. Based on an in-depth analysis conducted on proprietary data, the Group enhanced customer acquisition algorithms. A series of targeted risk control measures were implemented, resulting to gradually improved asset quality which returned to levels even lower than before the COVID-19 outbreak. In addition, the Group has introduced new consumer finance companies, banks and trust companies into the ecosystem. By June 30, 2020, the Group has successfully established partnerships or collaborations with 64 Chinese licensed institutions in terms of capital and credit enhancement cooperation. Meanwhile, the Group has strengthened its cooperation with existing funding partners to further control the Group's funding costs through a tiered pricing scheme based on the loan volume amount originated each month.
The Group has successfully transformed into a pure online consumer finance platform. During the period, the Group's Loan Origination Volume of consumption credit products, which represented 79.2% of total Loan Origination Volume, increased by 36.23% against the trend to RMB10.54billion. In the first half of 2020, despite the volatilities and economic uncertainties caused by the COVID-19 pandemic, the Group continued to commit its technology-driven development strategy and to steer the Group's business operation return to normal.
In 2020 Q1, the Group's first payment delinquency ratio(1) reached 2.0%, but with its effective risk management policies, the ratio declined to 0.8% in 2020 Q2. The Group revamped risk models and adopted more prudent and tightened risk credit policies by granting credits to customers with better risk profiles, and reduced credit exposure to customers in geographic areas and industries more seriously impacted by the COVID-19 pandemic. The Group has developed a more intelligent score card system to identify existing customers'credit risks for prompt and appropriate customer maintenance. The Group's first payment delinquency ratio will remain at a level of about 1.0% in 2020 H2. The corresponding M1- M3 ratio(2) and M3+ ratio(3) are also expected to peak out in 2020 Q3 and gradually come down to the pre-pandemic level in 2020 Q4 similar to its experience of the market disruptions caused by the promulgation of Circular 141 at the end of 2017 and M3+ delinquency ratio culmination in 2018 Q2 followed by normalization in subsequent quarters.
Riding on the leading Fintech in the industry, the Group continuously enhanced the customer acquisition algorithms and improved its credit risk assessment and management models. The current highly intelligent and autonomous risk management system has led the Group to adapt to volatile market situations and uncertainties such as the COVID-19 pandemic. The Group primarily offers two credit products through its pure online loan lending processes: (1) credit cards balance transfer products, and (2) consumption credit products, both of which are installment-based.
In spite of the stringent supervision on the online consumer lending sector imposed by the Chinese government, the Group has overcome obstacles and continued to enhance its collaborations with existing institutions, while introducing new consumer finance companies, banks and trust companies to the ecosystems. As the P2P exists come to an end and the crackdown on undesirable debt collection methods permeates the market, asset quality stabilizing in the consumer lending sector in China will benefit the Group in the long run.
The Group's strategic cooperation with China Telecom Corporation Limited ("China Telecom") and China Mobile Communications Corporation Limited ("China Mobile") also presented outstanding performance. During the period, the Group's collaborations with China Telecom covered 265 cities in China, which accounted for a total loan volume of RMB89.9 million. The collaboration with China Mobile resulted in total loans of RMB184.9 million to more than 24,000 China Mobile customers provided by the Group.
The Group also invested RMB20 million to acquire a 0.27% interest in Guoren Property and Casualty Insurance Co. Ltd. ("Guoren P&C") to become one of its shareholders. Relying on the highly advanced Fintech, the Group and Guoren P&C will carry out in-depth cooperation in insurance technology, consumer finance and other related business fields to digitalize risk management models, customer service capabilities and post-loan management processes. With the aim of creating and capturing synergies, the Group has established a joint business division with Guoren P&C to support talent communication and share technology specialties, jointly explore new business fields in Fintech and insurance.
Looking forward, the Group will further strengthen its development in Fintech to improve risk management capabilities, enhance compliance and governance, and to improve operation efficiency. Meanwhile, the Group will leverage on its advantages in technologies to foster relationships with financial institutions, enhancing its cooperation structure with funding partners to optimize cash flow. Technology, risk management and compliance are the core of the Group's fintech business. The Group is committed to expanding more application scenarios, enriching product types, providing customers with extraordinary services, and maintaining its leading position in the industry.
Note:
(1) First payment delinquency ratio is defined as the total balance of outstanding principal amount of the loans the Group originated in the applicable period that were delinquent on their first payment due dates divided by the aggregate loan origination volume in that period..
(2) M1- M3 ratio is calculated by dividing (i) the outstanding balance of loans which have been delinquent up to 3 months, by (ii) the total outstanding balance of loans to customers.
(3) M3+ ratio is calculated by dividing (i) the outstanding balance of loans which have been delinquent for more than 3 months and have not been written off by (ii) the total outstanding balance of loans to customers.
About VCREDIT Holdings Limited (2003.HK)
VCREDIT Holdings Limited ("VCREDIT") is a leading independent online consumer financial service provider in China with over 10 years of track record. The Company caters to prime and near-prime borrowers underserved by traditional financial institutions by offering credit card balance transfer products, and consumption credit products. To match the funding needs for these products, the Company primarily engages institutional funding partners through three types of sustainable and scalable funding structures: trust lending, credit-enhanced loan facilitation and pure loan facilitation. Through such funding structures, VCREDIT provides institutional funding partners with solutions at varying levels of risk discretion and flexible profit-sharing arrangements.
Website: http://www.vcredit.com/
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