Credit East (referred to as "UN Digital" in the summary by the incoming CFO) held its Q1 2025 earnings conference call, featuring CEO Ning Chang, CFO Yu Ning Feng, and incoming CFO William Hui.
Key Highlights:
- Technology Transformation Strategy: Credit East is focused on sustainable growth, operational efficiency, technology innovation, and international expansion, leveraging domestic economic stimulus policies.
- Impact of New Loan Facilitation Rules in China:
- The new rules require commercial banks to use a formal white-list mechanism for fintech partnerships and standardize financing cost structures.
- This is expected to accelerate consolidation in China's online lending industry, benefiting larger, compliant platforms like Credit East (UN Digital), which is already on the white list of its funding partners.
- Risk management, regulatory compliance, and differentiated product pricing will become critical competitive differentiators.
- Financial Services Business (Q1 2025):
- Loan Volume Facilitated: RMB 15.2 billion, a slight decline quarter-over-quarter but a strong 28% increase year-over-year, demonstrating resilience.
- Q2 2025 Projection: Double-digit growth in loan volume.
- Key Growth Drivers:
- Repeat Borrowing Rate: Increased significantly to 74% in Q1 2025 (from 65% in Q4 2024) due to a focus on higher-quality borrowers.
- Broadened Traffic Channel Mix: Added three new partnerships, including travel and lifestyle platforms.
- AI-Driven Initiatives:
- Proprietary large language model "Zhiyu" received commercial use approval, generating over 550 advertising pieces in China and extensive content in the Philippines.
- AI customer service system handles over 30 million calls per month, boosting acquisition efficiency and cutting labor costs.
- Serves over 20 million existing borrowers, with improved semantic recognition and intent detection.
- Customer interactions averaged 7.1 rounds per session (up from 6.6 rounds).
- Call pick-up rate increased to 96% (from 85%).
- Launched AI-powered marketing prediction system for personalized targeting.
- Internal AI-driven training platform enhances agent communication and compliance.
- Funding: Added four new institutional funding partners, bringing the total to nearly 60. Funding costs declined by 9 basis points in March 2025 (vs. December 2024).
- Asset Quality: Risk indicators remain stable at historical lows. Delinquency rates for 1-30 days, 31-60 days, and 61-90 days were 1.6%, 1.2%, and 1.2%, respectively, showing negligible fluctuation.
- AI in Asset Management: AI collection robots handled 83% of day one delinquent cases, 29% of day two, and 28% of day three cases in the domestic market, saving approximately RMB 1.9 million monthly in labor costs. In the Philippines, AI collection strategies reduced complaints by 14% quarter-over-quarter.
- Overseas Business:
- Philippines: Loan volume reached RMB 123.7 million in Q1 2025, a 74% growth quarter-over-quarter, with new borrowers' loan facilitation up 108%. Double-digit growth anticipated for Q2.
- Indonesia: Preparations for expansion are progressing, with operations expected to launch in H2 2025.
- Leveraging AI to optimize marketing and reduce costs in international markets.
- Company is also exploring other markets like the Middle East and Europe.
- Insurance Business:
- Facing headwinds due to regulatory tightening and market contraction, especially in life insurance.
- Total premiums: RMB 801.8 million (12% year-over-year decline).
- Revenue: RMB 71.5 million (43% year-over-year decline).
- Dual strategy: leveraging new media for life insurance and expanding embedded insurance in emerging sectors (AI robots, low-altitude economy) for property insurance.
- Anticipates a "remarkable recovery" in Q2.
- Growing synergies with lending business, with premiums from cross-selling up 67% quarter-over-quarter.
- Consumption and Lifestyle Business:
- Strategic decision to realign resources and scale back offerings in this segment to focus on financial services and AI-driven innovation, where greater sustainable growth opportunities are identified.
- Total revenue dropped 40% year-over-year to RMB 308 million.
- Overall Financial Performance (Q1 2025):
- Total Revenue: RMB 1.6 billion, up 13% year-over-year.
- Financial Service Segment Revenue: Surged by 59% year-over-year to RMB 1.2 billion.
- Revenue from Guaranteed Service: RMB 318 million (compared to RMB 17 million last year), reflecting growth in the risk-taking model.
- Sales and Marketing Spend: RMB 277 million (down 0.1% year-over-year), reflecting AI-driven cost efficiency.
- R&D Expenses: Increased 112% year-over-year to RMB 86 million due to increased investment in AI and talent.
- Origination, Servicing, and Other Operating Costs: RMB 225 million (down 4% year-over-year).
- G&A Expenses: Increased 15% year-over-year to RMB 96 million due to incentive bonuses and employee benefits.
- Allowance for Contract Assets and Receivables: RMB 153 million, up 49% year-over-year, due to loan volume growth and cautious risk management.
- Provision for Contingent Liability: Increased significantly to RMB 411 million, primarily due to upfront provisioning required for growing loan volume under the risk-taking model, even though corresponding revenue is recognized monthly. This is an accounting treatment and is not directly related to stable delinquency rates. The company expects this provision level to stabilize as the loan balance in this category reaches a steady state (peak around Q2/Q3).
- Net Income: RMB 248 million, decreased 49% year-over-year, attributed to upfront provisions for risk-taking loans, increased R&D, and reduced profitability in insurance and lifestyle segments.
- Cash Flow from Operations: Approximately RMB 479 million net cash generated.
- Cash and Cash Equivalents: Strong at RMB 4 billion.
- Q2 2025 Outlook: Total revenue expected to be between RMB 1.6 billion to RMB 1.7 billion, representing a 7% to 14% year-on-year increase with a healthy net profit margin.
- Management Change: Yu Ning Feng will step down as CFO on July 30, 2025. William Hui, with extensive experience in investment banking, will be the new CFO.
- Dividend Policy: Credit East is committed to its semi-annual dividend policy, with a current payout ratio of around 10% based on a six-month earnings period. The last payout was 20%. The company is balancing shareholder returns with reinvestment in high-potential opportunities.
The company also briefly mentioned a small allocation of cash into crypto assets as part of managing overseas cash, which experienced some market fluctuations in Q1 but is expected to rebound in Q2.
