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| Statement |
|---|
| With confidence, capability and effective methods, we aim to achieve a gradual decline in risk level on a quarterly basis, refine asset quality, support a steady growth and improve profitability margins |
| In summary, 2023 was a year of rebound with a strong growth in both top and bottom line, surpassing many peers driven by our core strategies |
| This is due to the strong positive revenue uplifting effect from lowered funding costs and the continued improvement in customer early payoff |
| This resulted in a notable improvement of users with credit line increased by 40%, credit drawdown by the good quality users increased by 45%, and risk level of those newly issued loans consistently decreased on a monthly basis |
| Secondly, we will continue to enhance the modularization building up of our risk management system, improving the standardization of risk strategies |
| The ratio of GMV loss volume for our super prime and prime customer segments has increased by 12% compared to Q3, effectively improving our asset structure and reducing the risk of new loans to existing customers by 15% |
| Furthermore, we can gradually improve to the leading level of the industry |
| However, I'm very confident that by implementing a proven quantitative risk management system and enhancing further refined risk management, we can bring down the risk level of our Lexin assets to match industry average level and in the future |
| To be specific, in terms of new customers, we developed the low-end growth [risk growth system] based on new customer segmentation and jointly built the RTA model in collaboration with platforms such as ByteDance, significantly improving our risk identification capabilities for online traffic in Q4, while the number of newly registered users remain the same compared to Q3 |
| So in my perspective, Lexin has a very solid foundation and a strong customer base |
| The early stage risk performance metrics of the newly issued loans stabilized and entered an improving momentum with nearly 15% decrease in December |
| This will effectively bolster the inflow of high quality customers and improve the overall asset quality |
| Compared to the previous customer segmentation, this new approach has significantly improved risk level differentiation and the stability among various customer segments |
| The performance of our risk identification capabilities has seen an improvement of nearly 30% |
| By fully leveraging their massive amounts of scenario data, we have greatly improved accuracy and stability of our risk scoring models |
| This has greatly improved the operational efficiency of risk management system, supporting rapid strategy iteration and the launch of new business products |
| Since we entered 2024, the quality of new issued loans has continued to improve and the risk performance indicators of the overall asset portfolio are gradually improving as well |
| In 2024, we will better meet customer demand and effectively improve customer satisfaction by enhancing consumer protection governance system and the mechanism thereby reducing the impact of malicious compliance around illegal groups |
| We are confident that as our skills expand and risk performance continue to improve, our profitability will further increase |
| First, bringing down risk level of overall assets and enhancing profitability |
| Despite industries wide risk volatility, our commitment to strategic pillars, rigorous risk management, customer segmentation and upgrading operational refinement and cost optimization has fortified our financial framework and yielded positive business results |
| As for the e-commerce business, while maintaining our advantages in 3C products, we will expand to more trendy goods SKU that attracts the youngsters will strengthen differentiated trading and risk management strategies, upgrade risk management system, improve user credit profile identification accuracy and uplift approval and the transaction rates aiming to expand scale and profitability |
| Guarantee income grew steadily by 11% on a quarter-over-quarter basis at a 42% on a year-over-year basis due to continuing releasing from existing loan book |
| Through the effective dynamic growth strategy of low-end growth, we will improve credit profile identification of high quality customer groups, increase the volume of high quality new assets and the drive down to overall risk levels |
| Second, we have demonstrated strong and resilient revenue generating and growth capability |
| For high quality customers, we will strengthen competitive offer, capture a large share of their wallet and simultaneously lower overall portfolio risk |
| With over 200 million registered users, Lexin still has ample room for growth |
| We achieved this through ample funding and partnerships with cost efficient national financial institutions |
| By that, we achieved a differentiated and diverse customer acquisition matrix |
| We will continue to scale up our team, upgrade salesforce management system, enhance the team management and underline the differentiation advantages of customer acquisition and firsthand information-based credit profile identification |
| Statement |
|---|
| Our Q4 GMV reached RMB61.2 billion, a 3.3% sequential decline reflecting our tightened credit standards and focus on quality growth |
| In the fourth quarter, the industry faced increased challenges due to the slow recovery of macroeconomic with credit demand and intensified competition |
| That's the slow recovery of the domestic economic and the intensified competition in domestic market |
| In Q4, our asset quality showed some pressure mainly due to the slow macroeconomic recovery with consumer demand and the turmoil in the loan collection industry, which resulted in fluctuation in the risk performance of our existing loan book |
| As a result, the risk level across the industry went up and we faced some short-term pressure on profitability |
| We cut the weighted average APR by 0.4% to 23.7% from 24.1% in Q4 a year ago, therefore, resulting a 40 basis decline in pricing |
| Tech-empowerment service fell 6% from last quarter and increased 3.4% from last year, primarily due to the reduced volume in tech-empowerment business |
| We only saw a marginal revenue take rate dip of 25 basis points to 2.47% from 2.72% a year ago |
| The funding cost hit a new record low level below 6% in February, and we expected this downward trend to continue going forward |
| The collection rate of the overall assets started to come under pressure in the second half of 2023, but began to stabilize and recover from January 2024 |
| Asset quality metrics have shown signs of stress, including the D1 delinquency rate, M1 collection rate, and the 90-plus days delinquency rate |
| The industry-wide risk fluctuation during the second half of last year have impacted us as they did to our peers |
| We have recorded a historically low funding cost of 6.18% in Q4, down 63 basis point year-over-year |
| In the face of the current macroeconomic environment and [industry] challenges, we adopted a prudent business strategy in the fourth quarter |
| Total provision related cost items, including the provision for financing receivables, provision for contract assets and receivables, provision for contingent guarantee liabilities and the changing fair value of financial guarantee deliberative and loans at a fair value increased by 7.1% on a quarter-over-quarter basis due to the increased pressure on our asset quality in Q4 |
| Funding costs on our income statement, which related to our on-balance sheet loan generation dropped significantly by 42.1% quarter-over-quarter and by 47.9% year-over-year due to the maturity of a portion of trust funding in Q4 |
| We see the asset quality of newly issued loans already showed a turning point since the last year-end with risk level declining on a monthly basis |
| The immediate financial impact is sequentially almost the flat revenue in Q4 and the increased provisioning of credit impairment costs |
| The 40 basis point decline in pricing, the shortened tenor along with the industry-wide risk penetration did not significantly impact the overall Q4 revenue take rate |
| We have taken some proactive measures to reduce the borrower's early repayment |
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