VCREDIT Holdings Limited Management Presentation August 2019
At the forefront of online inclusive consumer finance Unique product offerings Large addressable market Serving the underserved borrowers 900mn people covered by CCRC credit database (1) Offering readily available inclusive consumer finance 450mn people with credit history in CCRC Establishing traceable credit database (1) records in the universal 95% of our borrowers had CCRC official credit system credit records (2) Structured Funding Real-time data integration 100% institutional funding Read-and-write access to the CCRC consumer credit Wholly-owned licensed financing guarantee database and online small l oan companies Hummingbird system with proprietary Pioneer in facilitation with 27 licensed institutional alternative data aggregation algorithms funding partners under facilitation structures Notes: (1) According to the Frost & Sullivan Report, updated as of December 31, 2017 1 (2) For the year ended Dec 31, 2018, and by loan origination volume
Recent developments Circular 141 and 175 , and ancillary regulatory pieces Latest Ongoing serial P2P platform collapses development Stricter oversight on collection practices as a result of the anti-gangsterous campaign Loan origination volume (1) Funding partners (2) RMB14.4bn 38 Operating results Registered users (2) Outstanding loan balance (2) 69.7mn RMB15.8bn Notes: (1) For 6 months ended June 30, 2019 (2) As of June 30, 2019 6.2% 7.0% 6.0% 4.5% 5.0% 3.9% 3.7% 3.6% 3.5% Asset 4.0% 2.4% 3.0% 1.7% quality 2.0% 3.1% 2.1% 1.0% 1.8% 1.6% 1.7% 1.6% 1.7% 1.5% 0.0% 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 First Payment Delinquency Ratio M1-M3 Ratio 2
Effective credit rating and risk management M3+ Delinquency Ratio distribution Cohort-based M3+ delinquency ratio for online credit products (2) across risk rating categories (1) 12% Lower pricing and delinquency 10% ratio for better risk profiles M3+ Delinquency Ratio 8% 6% 4% 2% 0% 0 5 10 15 20 25 30 35 # of months I II III IV V VI 2015 2016 17Q1 17Q2 17Q3 17Q4 18Q1 18Q2 % APR 18Q3 18Q4 19Q1 ✓ Effective internal credit rating ✓ Enhanced risk ✓ Better ✓ Shift to pure online ✓ Effective pricing methodology decision and consequence business model according to the respective pricing engines enforcements credit rating Notes: (1) The loan applicants are sorted into six credit rating categories, including Class I to VI (with VI representing the highest rating) and an extra category where all applicants are automatically rejected (2) As of a specified date, defined as the aggregate balance of outstanding principal of all loans within the applicable cohort under which any payment of 3 principal or interest is delinquent for 3-12 months divided by the aggregate loan origination volume within the applicable cohort
Foster credit profiles for young adults with promising income growth prospects Inclusive Finance Private Lending Universal Up to credit profiles Excessive RMB80k rates ticket size Full-fledged Token consumer finance services amount 24.4% (1) APR Ultra-short Fairly tenors priced products 9.0 months (1) Growing Indebtedness Meaningful average tenor amount Note: (1) For the loans originated in the 6 months ended June 30, 2019 4
Promote inclusive finance by partnering with licensed financial institutions On-Balance Sheet Model Facilitation Model Platform Model Credit-Enhanced Pure Loan 54% 1% 10% Direct Lending Loan Facilitation Facilitation • 2 online small loan Credit-enhancement Taking zero licenses through own financing • Clear regulatory guarantee license credit risk requirements 3 partnerships with Regulatory licensed consumer endorsement finance companies 35% Trust Lending Empowering funding Perfect duration • Efficient leverage partners’ direct match • Long-term partnership dealing with borrowers with FOTIC Well positioned in the inclusive finance value chain through technology solutions Note: The percentage in the bubble represents the percentage of loan origination volume contributed by the respective funding structure for the 6 months ended June 2019 5
Experienced management team with structured talent acquisition Thomas Liu Lawrence Ma Stephen Liu Lan Xue COO Founder, Chairman Founder, CEO General Manager Daniel Zhou Ray Yu Jiafang Jin Ethan Gong CFO CMO CTO CRO Adaptive to Credit-risk Technology- Institutional regulatory centric driven efficiency mindset environment 6
Financial highlights
Stable growth in business scale Outstanding balance of loans to customers (1) Loan origination volume (RMB mn) (RMB mn) 15,892 15,773 24,544 14,040 10% 13,796 18% 20,756 29% 13% 49.6% 31% 35% 32% 22% 14,403 41% 23% 7,903 19% 16% 9,627 54% 7,870 19% 63% 58% 17% 65% 38% 48% 50% 49% 41% 19% 10% 46% 64% 43% 27% 2016 2017 2018 2018H1 2019H1 2016 2017 2018 2018H1 2019H1 Credit card balance transfer products Consumption credit products Online-to-offline credit products Note: 8 (1)The outstanding loan principal calculated using amortization schedule is defined as outstanding balance of loans to customers
Increasingly diversified income growth Funding structure Income breakdown (RMB mn) (RMB mn) Strategic trending Strategic trending Direct lending Interest income/interest type income (1) Trust lending Loan facilitation service fees Credit-enhanced loan facilitation Other income Interest expenses Pure loan facilitation 2,737 2,706 11% 19% 3% 10% 24,544 4% 1,860 12% 20,756 1,433 10% 29% 1,271 7% 4% 12% 120% 4% 24% 107% 31% 14,403 10% 120% 124% 79% 9,627 62% 1% 7,870 54% 1% 24% 60% 4% (21%) (31%) (40%) 84% 66% (34%) (36%) 35% 6% 9% 11% 5% 1% 2016 2017 2018 2018H1 2019H1 2016 2017 2018 2018H1 2019H1 Note: (1) Interest income was reclassified as interest type income under IFRS 9 since January 1, 2018 9
Unique capital structure and stable funding cost Stable funding expense (1) Unique and flexible capital structure Historical funding cost (%) ▪ Our company is set up as a As of As of 10.4% December 31, June 30 WFOE, instead of a VIE which is 10.2% 2016 2017 2018 2019 commonly adopted by industry peers Trust 10.9 10.0 11.0 11.2 ▪ Under the WFOE structure, there funding are relatively less cross-border Corporate capital flow restrictions & Individual 10.1 10.0 10.0 10.0 borrowings ▪ The capital raised offshore can be channeled back onshore smoothly Bank 6.9 7.4 6.2 6.2 for lending – lending/trust investment; – deposits with funding partners; Bond n/a n/a n/a 11.0 2018 2019H1 – capital requirements for our onshore licensed entities Notes: (1) Funding expense % = Interest expense divided by average of beginning and end of period borrowing on balance sheet 10 (2) Funding expense for 2019H1 is annualized
Gradually improved operating efficiency Adjusted operating expenses breakdown (1) Adjusted operating profit (2) (RMB mn) (RMB mn) (%: as percentage of total loan origination volume) 1,193 427 0.4% 364 1.1% 923 0.3% 244 1.0% 0.7% 185 647 0.3% 0.4% 556 1.8% 0.3% 450 1.3% 0.8% 0.3% 0.6% 3.3% 1.1% 2.5% 0.3% 5.2% 3.0% 1.9% (330) 2016 2017 2018 2018H1 2019H1 2016 2017 2018 2018H1 2019H1 Origination and servicing Sales and marketing General and administrative Research and development Notes: (1) Adjusted operating expenses is calculated by deducting Share-based compensation expenses (ESOP&RSU) from operating expenses 11 (2) Adjusted operating profit is calculated by deducting Share-based compensation expenses (ESOP&RSU) and listing expenses
Our strategic focuses Mutually Beneficial Vertical Specific Operating Efficiency Funding Partnerships Collaborations Optimization Initiated partnerships Provide advanced Streamline in wellness and organization structure technology solutions education verticals Formed collaborations Enhance Enable precision with all 3 mobile product profitability marketing carriers Continue to identify Provide necessary Improve cross-industry and credit-enhancement funding efficiency overseas opportunities 12
Leading market position with proven track record and unique market focus Regulatory Diversified Serving the encouraged underserved institutional business model funding Extensive industry know-how and Promotion of technology driven Structured and securitized funding insights in China inclusive finance Proven funding scalability, stability Unique access to CCRC and sustainability Established well-recognized consumer credit database brands Vanguard of innovative structures Cultivation of universal tracible within the regulatory framework Tested in economic cycles credit profiles 13
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