VCREDIT Holdings Limited Management Presentation April 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 19 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 Latest Circular 175 and Serial P2P Platform Collapses development Asset Management and Trust Investment Rules Loan origination volume (1) Funding partners (2) RMB20.8bn 30 Operating results Registered users (2) Outstanding loan balance (2) 59.7mn RMB13.8bn Notes: (1) For the year ended Dec 31, 2018 (2) As of Dec 31, 2018 6.2% 7.0% 6.0% 4.5% 5.0% 3.7% 3.5% Asset 4.0% 2.4% 3.0% 1.7% 1.7% 1.5% quality 2.0% 3.1% 1.8% 1.7% 1.0% 1.6% 1.6% 1.6% 1.2% 1.5% 0.0% 2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 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 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 % APR 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 ✓ 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 RMB50k rates ticket size Full-fledged Token consumer finance services amount 21.1% (1) APR Ultra-short Fairly tenors priced products 13 months (1) Growing Indebtedness Meaningful average tenor amount Note: (1) For the loans originated in the year ended Dec 31, 2018 4
Promote inclusive finance by partnering with licensed financial institutions On-Balance Sheet Model Facilitation Model Platform Model Credit-Enhanced Pure Loan 6% 24% 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 60% 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 year ended 2018 5
Experienced management team with structured talent acquisition Lawrence Ma Stephen Liu Thomas Liu Founder, Chairman Founder, CEO COO Jiafang Jin Sheng Luo Daniel Zhou CTO CRO CFO Adaptive to Technology- Credit-risk Institutional regulatory driven centric mindset environment efficiency 6
Financial highlights
Stable growth in business scale Outstanding balance of loans to customers (1) Loan origination volume (RMB mn) (RMB mn) 15,892 24,544 14,040 13,796 13,796 10% 29% 20,756 31% 13% 35% 31% 32% 23% 22% 15.6% 7,903 19% 19% 16% 11,130 9,627 7% 63% 7,870 27% 19% 58% 17% 65% 38% 48% 50% 49% 50% 10% 19% 66% 64% 27% 43% 2016 2017 2018 1H2018 2H2018 2016 2017 2018 1H2018 2H2018 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 evolution Income drivers (RMB mn) (RMB mn) Strategic trending Strategic trending Direct lending Net interest income/interest type income (1) Trust lending Loan facilitation service fees Credit-enhanced loan facilitation Other income Pure loan facilitation 2,737 2,706 7% 24,544 11% 4% 4% 12% 20,756 3% 10% 24% 1,466 1,433 3% 1,271 24% 3% 12% 11,130 89% 79% 9,627 17% 5% 15% 86% 1% 7,870 24% 1% 25% 60% 4% 93% 83% 61% 84% 66% 55% 9% 3% 5% 6% 11% 2016 2017 2018 1H2018 2H2018 2016 2017 2018 1H2018 2H2018 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 Unique and flexible capital structure Stable funding expense Historical funding cost ▪ Our company is set up as a As of December 31, WFOE, instead of a VIE which is 2016 2017 2018 commonly adopted by industry 10.8% peers Trust 10.2% ▪ Under the WFOE structure, there 10.9% 10.0% 11.0% funding are relatively less cross-border capital flow restrictions Corporate ▪ The capital raised offshore can be 10.3% 10.0% 10.0% borrowings channeled back onshore smoothly for Individual 10.0% 10.0% 10.0% – lending/trust investment; borrowings 2017 2018 – deposits with funding partners; – capital requirements for our Bank 6.9% 7.4% 6.2% funding onshore licensed entities Note: (1) Funding expense % = Interest expense divided by average of beginning and end of period borrowing on balance sheet 10
Gradually improved operating efficiency Adjusted operating expenses breakdown (1) Adjusted operating profit (2) (RMB mn) (RMB mn) (%: as percentage of total loan origination volume) (%: adjusted operating profit margin) 13.5% 15.6% 1,193 0.3% Y-o-Y Growth: 17.2% 0.7% 427 923 364 0.4% 0.3% 2.1% 647 0.4% 0.8% 2.9% 0.5% 2.5% 5.2% 8.8% 2016 2017 2018 (330) Origination and servicing Sales and marketing 2016 2017 2018 General and administrative Research and development Notes: (1) Adjusted operating expenses is calculated by deducting ESOP expenses from operating expenses 11 (2) Adjusted operating profit is calculated by deducting ESOP expenses 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 credit-enhancement funding efficiency 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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