FinVolution Group (FINV) Q2 2026 Earnings Call Transcript

Hello ladies and gentlemen, thank you for participating in the second quarter 2026 earnings conference call for Finvolution Group. At this time, all participants are in a listen-only mode. After management prepare remarks, there will be a question and answer session. Today's conference call is being recorded. I'll now turn the call over to your host, Yam Cheng, Head of Capital Markets for the company. Yam, please go ahead.

Hi, all. Thank you for joining our call. Welcome to our second quarter 2026 earnings conference call. The company's results were issued through Newswire services earlier today and are posted online. You can download the earnings release and sign up for the company's email alerts by visiting the IR section of our website. Mr. Tim Lee, our Chief Executive Officer, and Mr. Alexis Xu, our Chief Financial Officers, will start the call with the prepared remarks and conclude with a Q&A section. During this call, we will be referring to several non-GAAP financial measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP measures and reconciliation to GAAP measures, please refer to our earnings press release. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties are included in the company's filings with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Finally, we posted a presentation on our IR website providing details of our results. Before I turn over to our CEO, we are dialing in from multiple locations, so if there is any delay in connection, please bear with us. I will now turn over to our CEO, Tim. Tim, please go ahead.

Thanks, Yan, and thanks, everyone, for joining us. Let me start with the big picture. For years, we have pursued one clear strategy. internationalization. Inward, this volatile, that strategy matters more than ever. It let us take what we have learned and put it to work in markets that are ready for fintech. And it helps us diversify away from any single market. That strategy served us well this quarter, and it is exactly where we are headed overall the second quarter was a solid one in china a stable risk backdrop together with the preemptive actions we took in early quarters give us a constructive environment to operate in overseas momentum in indonesia and australia more than offset a deliberate temporary pullback in the philippines that is our diversification strategy working as designed let me turn to the results given the research in china in the first quarter of last year the sequential trend is the most tiling measure group volume rose 5 percent sequentially to 45 billion RMB and the revenue moved in step up 6% to 3.4 billion RMB. Net profit was 427 million RMB up 1%. But the finger we are most encouraged by is overseas. 54 million RMB in operating profit, up 17% sequentially. Overseas now account for roughly 27% of group revenue, and that share will keep rising for the rest of the year. Now let me dive into the two segments, starting with our Chinese mainland. At a high level, we booked 41 billion RMB in loan volume, up 6.5% quarter over quarter, a healthy continuation of the recovery that began at the beginning of 2026. That said, the industry was rattled by an isolated credit incidence, which adversely impacted the risk and funding dynamics. I will walk you through in a bit. Right now, we are watching three priorities closely, asset quality, fundings, and regulation. First, asset quality. Coming into 2026, we expected a gradual recovery following the regulatory reset in the fourth quarter of last year. Two quarters in, that played out as we expected through the first half. Risk continued to ease through the second quarter. C2M2 came down again from 0.68% to 0.56%. So we grew the book selectively, focusing on the high-quality repeat borrowers as we know well. The strategies generated 6% sequential growth in unique borrowers while keeping credit quality Vintage credit cost was steady at roughly 2.7%. The environment has since turned. In July, an isolated credit event led institutional funding partners to reduce funding for loan facilitation. Many smaller platforms either excited or sharply cut loan origination. Separately, a regulation campaign around the collection industry has tightened the collection capacity across the industry. Together, this creates a risk headwind for us in the coming quarters. While it is in the early stage, we are staying cautious on the risk of our portfolio. On funding, let me be direct. The same tightening sits behind our funding outlook. Our own funding held up well in the second quarter, but beginning in July, we are seeing the industry as a whole titan. As an institution, turn more cautious. For us, that could mean meaningfully lower organization volume and some upward pressure on funding costs. Here is how we are managing it. Our balance sheet and liquidity give us room. And our asset quality and compliance record matter more when funding partners get selected. We've already began allocating liquidity towards our China funding base. And we'll prioritize funding stability over near-term growth until the environment normalizes. On regulation, the new fee disclosure requirements took effect on August 1st, and we are compliant. the online marketing rules take effect at the end of september and we are already working with our partners to be ready now let's move on to the overseas segment our overseas segment is performing well volume rose 19 percent year over year and revenue reached 930 million rnb up 18 percent more important these numbers are backed by real demand our unique borders more than doubled from a year ago to 5.3 million over the past two years we have reached several important milestones we have built a diversified portfolio of markets where temporary weakness in any one country can be off-site by strength in the others. Last year, we absorbed an interest rate camp in Indonesia on the strength of the Philippines. This quarter, we deliberated dialed-back origination as the new rate camp took effect in the Philippines. And that gap was filled by structural growth in Indonesia and the progress we keep making in our newest market, Australia. As the country is balanced, and as we add more profitable markets, our growth trajectory would be increasingly predictable and certain. Our playbook remains the same, products expansion and customer upgrade. We use broad portfolio of easy-to-use financing products to attract customers to try out, and progressively cross-sell other credit solutions to build better unit economics over time. In Indonesia, offline buy-now-pay-lator continues to lead the growth. Our partnership in various offline consumption scenarios continues to proliferate. Offline buy-now-pay-lator is now around 25% of the volume, comparing to single-digit contributions a year ago. In the Philippines, the rate camp took effect this quarter, we slowed down deliberately to protect quality, the same approach we have taken through past transition. And growth has typically returned once the new pricing settles in. In Australia, we further expanded our offerings to large ticket size, lower interest rate products to attract consumers with strong credit profiles for higher credit limit. While this is still preliminary, we plan to continue to pursue customer upgrade as a core strategy. We also made further investment in building the opening banking infrastructure, giving us direct access to bank statement data and a far sharper grid on each borrower. Finally, ESG. In our business, trust is everything. In June, we published our eighth annual ESG report on fraud prevention. We made 60 upgrades to our anti-fraud system, flagged more than 9,000 suspicious activities each day, and blocked over 17,000 fraud attempts. We also launched launched our own consumer protection system, Golden Satin Nail. It systematically integrates early risk warnings, complaint analysts, and data dashboards to drive consumer protection governance from post-incidence handling towards proactive warning, and thus resolves 74.5% of cases on first contact, with customer satisfaction at 98.5%. With that, let me handle it to Alexis for a closer look at the numbers.

Thank you, team, and hello, everyone. Let me walk you through our key results for the second quarter, and please refer to our earnings press release for further details. Now let me discuss each of the segments. First, China. Micro in China remains in a gradual recovery model. China's real GDP growth slowed down from 5% in first quarter to 4.3% in the second quarter on the back of subdued household consumer confidence. For us, in Q2, revenue was IMB 2.4 billion, up 8% sequentially, a direct result of recovery loan volume during the quarter. Tick rate stabilized at about 3.2%, in line with the first quarter. On risk, asset quality, our new loans held steady at 2.7%. Other risk indicators show signs of improvement on outstanding loans. The day one delinquency taken up slightly from 5.2% to 5.3%, while the 30-day collection rate strengthened from 87% to 89%. Overall, C2M2 improved to 0.56% from 0.68% below the Q3 2025 level. While this point to a portfolio of improving credit quality, we are vigilant on the risk uptake following various industry events in July. Separately, funding costs rose a further 30 basis points accruciating to 3.7%. Institutional funding supply began to tighten toward the end of the quarter, and we expect further upward pressure on funding costs in the coming quarters. On customer acquisition, we raise our risk appetite for repeated borrowers. combined with acquisition costs holding at an attractive level that brought our overall customer acquisition costs down quarter over quarter. As a result, China's operating profit grew 4.3% secretionary to IMB 625 million. Turning to the overseas, overseas revenue rose 18% year-over-year to RMB 930 million, partially dragged by our deliberate pullback in loan arbitration in the Philippines. One priority for our overseas segment is to balance profitability with growth. By its nature, this business recognizes customer acquisition costs and credit laws at the front, while revenue is earned over time. That means profit is inherently back-loaded and rapid growth on its own would leave the early years deeply unprofitable. We manage it deliberately against that. dynamic, ensuring we deliver profit even as we scale. The second quarter was a case in point, RMB $54 million in operating profit, up 17% quarter over quarter, and more than double year over year. Earlier this year, we guided to US $13 million of full year EBITDA. Doubling from last year, we remain confident in delivery. During the quarter, we added 2.2 million new borrowers in the quarter, up 29% sequentially. Offline buying operators in Indonesia drove most of the new borrower momentum, a sign that our offline expansion is translating directly into new customers rather than just brand awareness. The Philippines continued to absorb the impact of the industry's new interest rate cap. We pre-actively scaled back originations over the past two quarters, but the momentum should soon restart. In Australia, unique borrowers grow 22% discretionary, driven by effective online marketing, a wider product range, and a cleaner apps experience. Going into the next quarter, we continue to be mindful of the macros such as oil price may impose on currency as well as credit quality in market we operate. On a group basis, net revenue reached RMB $3.4 billion, up 6% sequentially on the back of higher loan volume. Operating profit came in at RMB $529 million, which included a one-off intangible assets in payment of RMB $64 million. Excluding that impact, operating profit was up 8% sequentially. Net income was R&B $427 million, up 1% sequentially. We held R&B $6.4 billion in cash and short-term investments and leverages set at 2.1 times, in historical lows. That balance sheet strength gave us the flexibility to navigate a tighter funding environment in China.

Our shareholder returns.

Our capital allocation is clear. We prioritize BNS growth first and use buybacks as our flexible level. Size to market conditions, trading volume, and the share price. In the second quarter, we repurchased the U.S. 27.4 million of shares, bringing first half of 2026 repurchase to U.S. 66.8 million. Now to our outlook, we are reiterating our full-year revenue guidance of R&B 11.5 billion to R&B 12.9 billion, based on information currently available. We set that range conservatively at the start of the year given industry volatility. Our first half performance tracked ahead of our internal plan that gives us a cushion. The odd performance we delivered in the first half year helps absorb the softer second half we now expect as funding and the credit conditions tighten. Given that near-term pressure, we would expect to land in the lower part of the range unless the operating environment substantially changes to summer. China is moving through a transition that we believe will favor players with strong compliance and operational know-how. Overseas is becoming a second growing source of profit. We're going to the third quarter clear-eyed about the funding and the regulatory pressure ahead and committed to the same execution that has carried us this far. Of course, both capital allocation and operations were focused on one goal, lasting, compounding returns for our shareholders. Thank you. We will now hand the call to the operator for questions.

Thank you. We will now begin the question and answer session. If you would like to ask questions, please dial star 11 and wait for a name to be announced. For the benefit of all participants on today's call, if you wish to ask your questions to management in Chinese, we ask that you can please kindly repeat your questions in English. One moment for our first question. The first question will come from the line of Cindy Wang of China Renaissance. Please go ahead.

Thank you for taking my call. I have two questions here. First, following the GZ, platform incidents what business adjustment did the company make to ensure risk control what is the current funding supply situation and will the recent exit of small size platform would lead to a resurgence of industry risk and what are the recent changes in the company early risk indicators second what is the current interest rate adjustment situation in philippines and will they affect the growth rate of overseas new loan volume this year? Thank you.

Thank you, Cindy. I will take your questions. I think you have two questions and your first question is a very big and a multi-part question. So I will break it into different pieces. Okay, let's start with what we are seeing on the funding side, you know, after the event, the credit and the liquidity issues at the individual platform did trigger some broader volatilities in the funding across the loan position industry so the first impact is the tightening rigged appetite of the financial institutions the event raised concerns among the financial institutions about the on the flow safety and the compliance of the platform 5th july a lot of institutions have launched for internal self-checks and do some reviews for their partners some of them forced the business during that process took up weight and the approach so that that led to a fairly sharp near-term pullback in funding supply across the whole market i think most of the the small and middle-sized platforms have either exited or pulled back sharply on lending and we are relatively less impact but our China volume was down around 50% in July and looking at august we believe institutional confidence has started to stabilize but the funding recovery is still coming back at a slower pace. And what we have done to adjust our business for the challenge, okay, so first is the transparency. We have worked very closely with our financial institution partners, gives them the visibility into our fund flows and the repayment path, kept everything in a very clear, closed-loop complex process. We believe it will help to ease their concerns. And secondly, during this period, we have prioritized the quality over the scale, further refined our customer segmentation, raised the underwriting bar, and prioritized the findings for our high-risk quality customers. And then, turn to the funding outlook. I think over the long term, financial institutions will keep reducing their exposure to those small platforms and focus on the big platforms that there are confined, will capitalise and have a strong risk track record. That's where we see it. I can show some figures here. In the second quarter, we had IMB 6.4 billion in cash and short investment. Cash flows stay solid through July and August. And the latest number is IMB 7.5 billion. And on top that we have got roughly $5 billion in highly liquidity assets. I mean those cash we can recover very quickly in a near term. So the aggregator number is $12.5 billion in total. That gives us a real resilience and forms the foundation for our leading position in this industry and our long-term relationships with the funding partners okay um we think in near term there will still be some volatility as the institutions still need time to rebuild their risk appetite and work through their process reviews so maybe in the next one or two quarters I think it comes down to two things. First, it depends on how fast institutions get through their self-checks and the system fix. The pace varies a lot case by case, so industry-wide recovery hasn't quite caught up yet. Secondly, I think whether the border credit environment stays stable. Payal and SAS keep exiting and assuming there is no new extreme event. So in that case, I would expect risk appetite and the confidence to gradually come back with the self-check wrap up. And last, I will talk about our early risk indicators. This round of founding Titan also overlapped with the regulator action in the collection industry at the end of July. So collection results got tighter and the recovery efficiency took a bit off his too. That added some challenges on top. Actually we have seen some movement in our early risk indicators. As a result, our latest reading is up around 20% versus the second quarter. Given all of that, we are seeing profit-focused resident chasing scale. We are also taking a more constructive posture on risk shopping, how we identify higher risk borrowers speeding up model iteration and tighten the acquisition span all our goal is at protecting our unit economics okay so that's my answer for your first questions and your second question is about philippines okay um the philippines showed out a new interest rate cap effective from iPro first. So heading to that, we took a pretty deliberate cultural approach in the first half. We actually slowed down the originations on purpose to give ourselves room to adjust the thinness. Yes, short-term volume in the Philippines did take a hit, okay, as we have mentioned before, But based on our experience navigating similar pricing adjustment in Indonesia before, we believe this kind of recovery typically takes about two or three quarters. So we expect that the Philippines BNNs will return to growth in the third quarter. And after the adjustment, the new regulator framework setting and as our mix shifts further toward high-quality borrowers, we have still got room to optimize both credit costs and funding costs, and the growth picks back up from there. And to be clear, in the Philippines, I think we are not just cutting prices to comply with the new rules. We are using this as a chance to push a deeper structure upgrade across the B&A. For example, on the risk side, we have raised our underwriting bar and the pullback on the marginal segment, where risk and returns were not linear. Well, growing the share of higher quality borrowers, the ones with more stable repayment behavior and a better repeated borrowing performance. And on the product side, we are continuing to diversify beyond the online cash loan product. We have expanded into more scenario-based products like our binopinator product with the local smart shop company and cover sale that lets us move beyond a single cash loan product into a broader range of consumption and the payment uses so we can match our better quality customers with the right credit line tenure and the product and then build the lifetime value so repeat for it. Now zooming out to the overseas business as a whole, the fee adjustment in the Philippines in the first half doesn't change the overall growth trajectory for our overseas market and there is rally thanks to our the multi-market food point. The Q2 pullback in the the Philippines was largely offset by the strong growth in our Indonesia and the Australia market. So heading to the second half, we expect the momentum in Indonesia and Australia to continue. And also we expect the Philippines to work through this adjustment period to get back to the secretion growth. So for the full year, we are well confident to expect the overseas volume to grow at a double-digit rate year-over-year. Okay, thank you.

Please hold for our next question. The next question now comes from the line of Alex Yeh of UBS. Please go ahead.

Thank you for your time. Thank you. So I'll translate from a question. First question is about the funding cost. So what has been the latest funding cost in recent months compared to Q2? And what's your expectation for the coming one to two quarters? second question is that given funding supply has become a major bottleneck at the moment so is there any adjustment that the company is going to make it with regard to the utilization of your self-capital so and then relate to that how should we think about the pace of buyback in the coming one to two quarters okay okay thank you X yeah yeah what question is about funding Yes.

We are seeing funding costs ticked up in the third quarter, relatively to the second quarter, up about around 30 basis points in July. And we expect the gradually upward trend to continue over the next quarter or two. So just given the border funding environment in China right now. Okay. And we believe short-term funding volatility is largely a matter of competence. So over the long run, we don't see the competitiveness of the quality asset strategy. If anything, it will only get stronger. Your second question is about the capital deployment and the buyback pace. So recently, you know, the funding tightness from the industry event has met a lot of financial institutions, more focused on the compliance and the capital strengths. And on our side, we are leading into our own strong balance sheet and ample cash reserves. Yeah, we have showed the figures before. We are offering a solid safety caution and credit enhancement in our funding partnerships to work with them to build the institutional confidence and speed up the recovery. Now we are also looking at at the next point, the possibilities at the capital injections into our licensed business, for example, the micro-landing company as a way to diversify our funding sources and improve the stability. so that's for our China business. On the other side, even in the short term there is some pressures in the China market. Our long-term overseas build-out is already paying off. We are moving into our profit-release phase, so So, frankly, we have also noticed a lot of our peers accelerating their overseas B&A lately. But for us, that's valid two things, that we were ahead of the curve on this and the strategy itself was the right one. So, with our mature, skilled overseas B&A already in pace, we have got a lot more patients the confidence to navigate the bonds in China. If anything, that's made us even more committed to accelerating investment overseas. For example, the Fondo acquisition in Australia, the first quarter last year, also gave us valuable experience entering the new market through M&A. So going forward, but replicating the playbook through the capital allocation may be the smart move and can really help us to drive a healthy and fast growth overseas business. And the last on the buyback pace, as we have mentioned, we will prioritize the study operations in business first. the steady business in China and the fast-gross business overseas market and from there we will keep the flexibility to execute the buyback plan based on the share price and the market liquidity but it will not change our long-term directions on shareholder returns we will remain committed to return the capital to maximize the long-term shareholder's return. Okay, the shareholder's value. Okay, Operation, please continue.

Thank you. One moment for our next question. Our next question will come from the line of Yoyo Fan from CICC. Please go ahead.

Thank you for the opportunity to give me this question. I'm the research professor, Fan Yoyo. I'm here to ask you about international business. 这一块啊那因为公司之前也提到今年海外业务的一个全年经营的利润目标那我们其实从现在上半年的一个分布数据来看的话整体上的这个进展还是非常啊well on track的啊所以可能想请教一下管理层如果咱们展望下半年来看的话啊咱们这个国际业务的一个主要利润增长的驱动啊进一步去分拆可能会是怎么样啊那我这边快速翻译一下啊Thanks for taking my classroom This is Yoyo Fan from CIC. My question is on overseas business. We can see that the overseas business is well on track based on the first half year data. So looking ahead to the second half of this year, what will be the key drivers of our overseas profit growth? Thank you.

Okay. Thank you, Yoyo. Before I get into the specific drivers for the second half, let me give you a bit of context. Looking back at how our overseas business has developed, I would say it's been marked by real foresight and proactively strategy from the start. Back in 2018, eight years ago, when our China business was still enjoying strong growth, the group, we have already made global expansion a long-term strategic priority so over the past eight years we have steadily built up our overseas foundation securing license establishing the local operations and building out our fundings ecosystem we proved that the model from zero to one in indonesia and then replicate the experience in the Philippines and the other countries and acquired the fondle and entering them Australia upgraded the whole approach into what we are now called the strategy legal class as that is the years of deliberate groundwork and sustained investment that allowed our overseas business to become what it is today, a material second profit engine, delivering steady and meaningful profit for the group. And then, let me get into the details in the second half. Looking ahead, we expect our three major overseas markets to work together in a very very commentary way. Indonesia contribute to the bulk of the incremental growth and the Philippines gradually recover and the Australia continue its rapid expansion. For Indonesia which is our largest one, it already accounts for more than 50% of both our overseas volume and revenue. Even with the seasonal drag from Remington, we still delivered a solid 13% growth versus the second half year 2025 in the first half. So the second half trends to benefit from the traditional peak season. So we would expect some further improvement in growth. We are also continuing to build out offline binopulated products through our multi-finance lessons and the customer segment tends to be high quality, longer tenure and the larger ticket size which will help us to keep improving our overall customer mix and finally drive the healthy ingredients. Okay that's for Indonesia and other Philippines. In the first half, we made a deliberate choice to tighten up response to the new interest rate cap to raise our underwriting standards and clean up our customer mix. So after the new price environment stabilized, we would expect the Philippines' volume to start recover secretioning in the second half and as the share of the high quality customers keep rising that will continue to bring risk down and support the ongoing improvement in the unit economics and for Australia as the new starts in our overseas expansion it's very high compliance high value developed market and the growth has been fast since we consolidated at the end of last year and you know in the second uh in the second quarter united borrowers were up 22 percent quarter over quarter uh it drove the volume to 70 percent sequentially so we would expect australia to keep going put up the double digit secretion goals in the second half So, given the Australian customer tends to have larger ticket size and better performance overall, we think Australia's contribution to overseas profits will keep increasing as the customer base grows and more of our acquisition shifts to our proprietary apps. So, that's for our three major overseas markets. And in summary, our overseas business is no longer dependent on any single market. It's built on three things working together. And maybe in the near future, it will be more countries. Border products, diversification, continued customer makes upgrades, and our legal-plus global platform so together we have built a cross-regional growth structure that is really resilient through the cycle that's what to give us the ability to better regulatory shifts in any single market and stays on track towards a long-term goal yeah you know we have our ambitious target by 2030, we expect the overseas revenue will reach more than 50% of the total group revenue. Okay, that's all for my answer. Thank you.

Questions now? I'd like to turn the call back over to the company for closing.

Thank you. Thank you once again for joining us today. If you have any further questions, please reach out to the Investor Relations team.

Thank you very much. This conference call, thank you for your participation, you may now disconnect your