CNFinance Announces Second Quarter and First Half of 2020 Unaudited Financial Results
CNFinance Holdings Limited (NYSE: CNF) reported its second quarter and first half 2020 results, showing a total loan origination volume of RMB1,883.2 million (US$266.0 million), up from RMB1,661.8 million in Q2 2019. However, total interest and fees income plummeted by 43.4%, from RMB802.1 million to RMB454.1 million. Net income fell 84.3% to RMB25.2 million (US$3.5 million), while the first half revealed a net loss of RMB40.6 million (US$5.7 million). The company faced challenges due to COVID-19, but anticipates a break-even outlook for Q3 2020.
- Total loan origination volume increased by 13.3% to RMB1,883.2 million in Q2 2020.
- Achieved a 95.5% increase in other gains, net, attributed to disposal of non-performing loans.
- Total interest and fees income decreased by 43.4% to RMB454.1 million in Q2 2020.
- Net income down 84.3% to RMB25.2 million in Q2 2020; net loss of RMB40.6 million in 1H 2020.
- Aggressive increase of 229.1% in collaboration costs for sales partners in Q2 2020.
GUANGZHOU, China, Aug. 24, 2020 /PRNewswire/ -- CNFinance Holdings Limited (NYSE: CNF) ("CNFinance" or the "Company"), a leading home equity loan service provider in China, today announced its unaudited financial results for the second quarter ended June 30, 2020 and the first half of 2020.
Second Quarter 2020 Operational and Financial Highlights
- Total loan origination volume[1] was RMB1,883.2 million (US
$266.0 million ) during the second quarter of 2020, compared to RMB1,661.8 million in the same period of 2019. - Total outstanding loan principal[2] was RMB9.8 billion (US
$1.4 billion ) as of June 30, 2020, compared to RMB11.3 billion as of December 31, 2019. - Total interest and fees income were RMB454.1million (US
$64.1 million ) in the second quarter of 2020, compared to RMB802.1 million in the same period of 2019. - Net income was RMB25.2 million (US
$3.5 million ) in the second quarter of 2020, compared to RMB160.8 million in the same period of 2019. - Basic earnings per ADS and diluted earnings per ADS were RMB0.37 (US
$0.05) and RMB0.34 (US$0.05) , respectively, in the second quarter of 2020, compared to RMB2.34 and RMB2.13, respectively, in the same period of 2019.
First Half of 2020 Operational and Financial Highlights
- Total loan origination volume[1] was RMB3,050.1 million (US
$430.8 million ) during the first half of 2020, compared to RMB2,664.7 million in the same period of 2019. - Total interest and fees income were RMB947.7 million (US
$133.9 million ) in the first half of 2020, compared to RMB1,694.4 million in the same period of 2019. - Net loss was RMB40.6 million (US
$5.7 million ) in the first half of 2020, compared to net income of RMB296.3 million in the same period of 2019. - Basic earnings/(losses) per ADS and diluted earnings/(losses) per ADS were RMB(0.59) (US
$(0.08) ) and RMB(0.59) (US$(0.08) ), respectively, in the first half of 2020, compared to RMB4.32 and RMB3.93, respectively, in the same period of 2019.
"In the first half of 2020, the global economy slowed down significantly due to the COVID-19 pandemic, which adversely affected our operational and financial performance, especially in the first quarter," commented Mr. Bin Zhai, Chairman and Chief Executive Officer of CNFinance. "To mitigate such unexpected challenges, we took advantage of our IT infrastructure and moved the majority of our business online. We also adjusted the qualifying criteria of the prospective borrowers, the LTV ratio, as well as the risk assessment procedures. Further, we have accelerated the disposal of non-performing assets and maintained a healthy liquidity while keeping a positive recovery rate for NPL disposal."
[1] Refers to the total amount of loans CNFinance originated during the relevant period. | |
[2] Refers to the total amount of loans outstanding for CNFinance at the end of the relevant period. |
"Thanks to the above-mentioned adjustments we have made, we were able to resume our business operations quickly when the Chinese economy started to recover. As a result, we recorded a year-over-year growth in loan origination volume and number of effective sales partners during the first half of 2020. Further, the loans we facilitated are secured not only by the collateral, but also by the credit risk mitigation position contributed by sales partners under the new collaboration model, which helped lower our credit risks exposure. We will continue to work with our trust company partners, customers and sales partners to meet future challenges, including the evolving regulatory environment such as the recent amendment to the judicial interpretation decreasing the maximum annual interest rate allowed on private lending. Looking ahead, we will endeavor to manage our loan origination volume while keeping risks under control, and we will seek to lower our overall financing cost with our trust company partners and sales partners, while being legally compliant. Our goal is to capture the present opportunities and continuously improve our ROE to maximize shareholder value," concluded Mr. Zhai.
Second Quarter 2020 Financial Results
Total interest and fees income decreased by
Interest and financing service fee on loans decreased by
Interest on deposits with banks increased by
Interest and fees expenses decreased by
Net interest and fees income were RMB267.3 million (US
Collaboration cost for sales partners increased by
Net interest and fees income after collaboration cost was RMB163.3 million (US
Provision for credit losses decreased by
Other gains, net increased by
Total operating expenses decreased by
Employee compensation and benefits decreased by
Share-based compensation expenses increased by
Taxes and surcharges decreased by
Operating lease cost decreased by
Other expenses decreased by
Income tax expense decreased by
Effective tax rate increased to
Net income decreased by
Basic earnings per ADS and diluted earnings per ADS were RMB0.37 (US
First Half of 2020 Financial Results
Total interest and fees income decreased by
Interest and financing service fee on loans decreased by
Interest on deposits with banks increased by
Interest and fees expenses decreased by
Net interest and fees income were RMB560.0 million (US
Collaboration cost for sales partners increased by
Net interest and fees income after collaboration cost decreased by
Provision for credit losses increased by
Other gains, net increased by
Total operating expenses decreased by
Employee compensation and benefits decreased by
Share-based compensation expenses increased by
Taxes and surcharges decreased by
Operating lease cost decreased by
Other expenses decreased by
Income tax expense/(benefit) decreased by
Effective tax rate decreased to
Net income/(losses) decreased by
Basic earnings/(losses) per ADS and diluted earnings/(losses) per ADS were RMB(0.59) (US
As of June 30, 2020, the Company had cash and cash equivalents of RMB1.9 billion (US
The aggregate delinquency rate for loans originated by the Company, which is calculated by dividing (i) total balance of outstanding loan principal for which any installment payment is past-due (for one or more days) as of a particular date; by (ii) the aggregate total amount of loans we originated since 2014, increased from
Business Outlook
In the second quarter of 2020, China has been recovering from COVID-19 pandemic and various business sectors started to reopen. As a result, our major operational and financial indicators have improved as compared to the first quarter. However, temporary travel restrictions and mandatory quarantines are still imposed in certain places and the results of operations for MSEs may continue to suffer. In addition, the future impact of COVID-19 pandemic remains unclear, and its impact on China's real estate market remains uncertain. As a result, our normal work schedule and results of operations may continue to be adversely impacted, and our future revenues under the impact of the COVID-19 pandemic may be difficult to predict.
Apart from the COVID-19 pandemic, the recent regulatory development has also imposed challenges to our future business and operations. On August 20, 2020, the Supreme People's Court announced an amendment to the judicial interpretation of China's private lending, which reduces the maximum annual interest rate allowed on private lending to four times of the one-year loan prime rate (LPR), namely
For the third quarter of 2020, based on the information available as of the date of this press release and after taking into consideration of the COVID-19 pandemic and the Amendment, we expect net income to break even for the third quarter of 2020.
The above outlook is based on the current market conditions and reflects our current and preliminary estimates of market and operating conditions, which are all subject to substantial uncertainty.
Conference Call
CNFinance's management will host an earnings conference call at 8:00 AM U.S. Eastern Time on Monday, August 24, 2020 (8:00 PM Beijing/ Hong Kong Time on Monday, August 24, 2020).
Dial-in numbers for the live conference call are as follows:
International: | +1-412-902-4272 |
Mainland China | +86-4001-201203 |
United States: | +1-888-346-8982 |
Hong Kong: | +852-3018-4992 |
Passcode: | CNFinance |
A telephone replay of the call will be available after the conclusion of the conference call until 11:59 PM ET on August 31, 2020.
Dial-in numbers for the replay are as follows:
International: | +1-412-317-0088 |
United States: | +1-877-344-7529 |
Passcode: | 10147085 |
A live and archived webcast of the conference call will be available on the Investor Relations section of CNFinance's website at http://ir.cashchina.cn/.
Statement Regarding Preliminary Unaudited Financial Information
The unaudited financial information set out in this earnings release is preliminary and subject to potential adjustments. Adjustments to the consolidated financial statements may be identified when audit work has been performed for the Company's year-end audit, which could result in significant differences from this preliminary unaudited financial information.
Exchange Rate
The Company's business is primarily conducted in China and all of the revenues are denominated in Renminbi ("RMB"). This announcement contains translations of certain RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB7.0795 to US
Safe Harbor Statement
This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will", "expects", "anticipates", "future", "intends", "plans", "believes", "estimates", "confident" and similar statements. The Company may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements that involve factors, risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include, but not limited to the following: its goals and strategies, its ability to achieve and maintain profitability, its ability to retain existing borrowers and attract new borrowers, its ability to maintain and enhance the relationship and business collaboration with its trust company partners and to secure sufficient funding from them, the effectiveness of its risk assessment process and risk management system, its ability to maintain low delinquency ratios for loans it originated, the effects of the COVID-19 virus on the economy in China generally and on our business in particular, and relevant government policies and regulations relating to the Company's corporate structure, business and industry. Further information regarding these and other risks is included in the Company's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is current as of the date of the press release, and the Company does not undertake any obligation to update such information, except as required under applicable law.
About CNFinance Holdings Limited
CNFinance Holdings Limited (NYSE: CNF) ("CNFinance" or the "Company) is a leading home equity loan service provider in China. CNFinance facilitates loans by connecting micro- and small-enterprise ("MSE") owners with its funding partners. The Company's primary target borrower segment is MSE owners who own real properties in Tier 1 and Tier 2 cities in China. The loans CNFinance facilitated are primarily funded through a trust lending model with its trust company partners who are well-established with sufficient funding sources and have licenses to engage in lending business nationwide. The Company's risk mitigation mechanism is embedded in the design of its loan products, supported by an integrated online and offline process focusing on risks of both borrowers and collateral and further enhanced by effective post-loan management procedures.
CNFINANCE HOLDINGS LIMITED | |||||||||||
Unaudited condensed consolidated balance sheets | |||||||||||
(In thousands) | |||||||||||
December 31, 2019 | June 30, | ||||||||||
RMB | RMB | US$ | |||||||||
Assets | |||||||||||
Cash and cash equivalents | 1,705,356 | 1,933,724 | 273,144 | ||||||||
Loans principal, interest and financing service fee receivables (net of | 10,258,019 | 8,317,029 | 1,174,805 | ||||||||
Investment securities | 654,328 | 1,171,045 | 165,414 | ||||||||
Property and equipment | 9,196 | 5,948 | 840 | ||||||||
Intangible assets and goodwill | 3,738 | 3,497 | 494 | ||||||||
Deferred tax assets | 16,441 | 20,478 | 2,893 | ||||||||
Deposits | 133,513 | 125,287 | 17,697 | ||||||||
Right-of-use assets | 38,134 | 25,646 | 3,623 | ||||||||
Other assets | 207,524 | 454,958 | 64,264 | ||||||||
Total assets | 13,026,249 | 12,057,612 | 1,703,174 | ||||||||
Liabilities and shareholders' equity | |||||||||||
Interest-bearing borrowings | |||||||||||
Borrowings under agreements to repurchase | 870,778 | 971,683 | 137,253 | ||||||||
Other borrowings | 6,652,138 | 5,459,066 | 771,109 | ||||||||
Accrued employee benefits | 37,276 | 23,089 | 3,261 | ||||||||
Income tax payable | 136,932 | 258,321 | 36,489 | ||||||||
Deferred tax liabilities | 359,286 | 209,614 | 29,609 | ||||||||
Lease liabilities | 38,134 | 25,816 | 3,647 | ||||||||
Credit risk mitigation position | 928,702 | 1,040,233 | 146,936 | ||||||||
Other liabilities | 404,469 | 494,025 | 69,782 | ||||||||
Total liabilities | 9,427,715 | 8,481,847 | 1,198,086 | ||||||||
Ordinary shares (3,800,000,000 shares authorized; 1,371,643,240 shares | 917 | 917 | 130 | ||||||||
Additional paid-in capital | 937,590 | 968,626 | 136,821 | ||||||||
Retained earnings | 2,662,146 | 2,603,698 | 367,780 | ||||||||
Accumulated other comprehensive (losses)/income | (2,119) | 2,524 | 357 | ||||||||
Total shareholders' equity | 3,598,534 | 3,575,765 | 505,088 | ||||||||
Total liabilities and shareholders' equity | 13,026,249 | 12,057,612 | 1,703,174 | ||||||||
CNFINANCE HOLDINGS LIMITED | |||||||||||
Unaudited condensed consolidated statements of comprehensive income | |||||||||||
(In thousands, except for earnings per share and earnings per ADS) | |||||||||||
Three months ended June 30, | |||||||||||
2019 | 2020 | 2020 | |||||||||
RMB | RMB | US$ | |||||||||
Interest and fees income | |||||||||||
Interest and financing service fee on loans | 797,953 | 449,918 | 63,552 | ||||||||
Interest on deposits with banks | 4,088 | 4,149 | 586 | ||||||||
Total interest and fees income | 802,041 | 454,067 | 64,138 | ||||||||
Interest and fees expenses | (368,916) | (186,760) | (26,380) | ||||||||
Net interest and fees income | 433,125 | 267,307 | 37,758 | ||||||||
Collaboration cost for sales partners | (31,582) | (103,972) | (14,686) | ||||||||
Net interest and fees income after collaboration cost | 401,543 | 163,335 | 23,072 | ||||||||
Provision for credit losses | (94,788) | (56,532) | (7,985) | ||||||||
Net interest and fees income after collaboration cost and provision for | 306,755 | 106,803 | 15,087 | ||||||||
Realized gains on sales of investments, net | 5,806 | 5,258 | 743 | ||||||||
Other gains, net | 21,997 | 43,019 | 6,077 | ||||||||
Total non-interest revenue | 27,803 | 48,277 | 6,820 | ||||||||
Operating expenses | |||||||||||
Employee compensation and benefits | (51,232) | (46,119) | (6,514) | ||||||||
Share-based compensation expenses | (3,972) | (15,518) | (2,192) | ||||||||
Taxes and surcharges | (15,224) | (11,890) | (1,679) | ||||||||
Operating lease cost | (9,510) | (5,976) | (844) | ||||||||
Other expenses | (38,155) | (34,818) | (4,918) | ||||||||
Total operating expenses | (118,093) | (114,321) | (16,147) | ||||||||
Income before income tax | 216,465 | 40,759 | 5,760 | ||||||||
Income tax expense | (55,661) | (15,573) | (2,200) | ||||||||
Net income | 160,804 | 25,186 | 3,560 | ||||||||
Earnings per share | |||||||||||
Basic | 0.12 | 0.02 | 0.003 | ||||||||
Diluted | 0.11 | 0.02 | 0.003 | ||||||||
Earnings per ADS (1 ADS equals 20 ordinary shares) | |||||||||||
Basic | 2.34 | 0.37 | 0.05 | ||||||||
Diluted | 2.13 | 0.34 | 0.05 | ||||||||
Other comprehensive income | |||||||||||
Net unrealized gains on investment securities | 1,657 | 273 | 39 | ||||||||
Foreign currency translation adjustment | 5,934 | (232) | (33) | ||||||||
Comprehensive income | 168,395 | 25,227 | 3,566 | ||||||||
CNFINANCE HOLDINGS LIMITED | |||||||||||
Unaudited condensed consolidated statements of comprehensive income | |||||||||||
(In thousands, except for earnings per share and earnings per ADS) | |||||||||||
Six months ended June 30, | |||||||||||
2019 | 2020 | 2020 | |||||||||
RMB | RMB | US$ | |||||||||
Interest and fees income | |||||||||||
Interest and financing service fee on loans | 1,686,175 | 939,106 | 132,651 | ||||||||
Interest on deposits with banks | 8,156 | 8,647 | 1,221 | ||||||||
Total interest and fees income | 1,694,331 | 947,753 | 133,872 | ||||||||
Interest and fees expenses | (778,251) | (387,654) | (54,757) | ||||||||
Net interest and fees income | 916,080 | 560,099 | 79,115 | ||||||||
Collaboration cost for sales partners | (40,849) | (198,243) | (28,002) | ||||||||
Net interest and fees income after collaboration cost | 875,231 | 361,856 | 51,113 | ||||||||
Provision for credit losses | (268,062) | (277,372) | (39,180) | ||||||||
Net interest and fees income after collaboration cost and provision for | 607,169 | 84,484 | 11,933 | ||||||||
Realized gains on sales of investments, net | 12,116 | 8,312 | 1,174 | ||||||||
Other gains, net | 33,545 | 80,464 | 11,366 | ||||||||
Total non-interest revenue | 45,661 | 88,776 | 12,540 | ||||||||
Operating expenses | |||||||||||
Employee compensation and benefits | (107,702) | (91,474) | (12,921) | ||||||||
Share-based compensation expenses | (7,943) | (31,036) | (4,384) | ||||||||
Taxes and surcharges | (35,928) | (24,884) | (3,515) | ||||||||
Operating lease cost | (19,871) | (12,802) | (1,808) | ||||||||
Other expenses | (83,761) | (54,611) | (7,714) | ||||||||
Total operating expenses | (255,205) | (214,807) | (30,342) | ||||||||
Income/(losses) before income tax | 397,625 | (41,547) | (5,869) | ||||||||
Income tax (expense)/benefit | (101,299) | 970 | 137 | ||||||||
Net income/(losses) | 296,326 | (40,577) | (5,732) | ||||||||
Earnings/(losses) per share | |||||||||||
Basic | 0.22 | (0.03) | (0.004) | ||||||||
Diluted | 0.20 | (0.03) | (0.004) | ||||||||
Earnings/(losses) per ADS (1 ADS equals 20 ordinary shares) | |||||||||||
Basic | 4.32 | (0.59) | (0.08) | ||||||||
Diluted | 3.93 | (0.59) | (0.08) | ||||||||
Other comprehensive income | |||||||||||
Net unrealized gains on investment securities | 867 | 347 | 49 | ||||||||
Foreign currency translation adjustment | (199) | 4,298 | 607 | ||||||||
Comprehensive income/(losses) | 296,994 | (35,932) | (5,076) | ||||||||
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SOURCE CNFinance Holdings Limited
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