Qfin Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 17, 2025

Key Takeaways

  • Q4 platform loan volume rose 9% sequentially to RMB 89.9 billion, driving non-GAAP net income up 71.5% year-over-year to RMB 1.97 billion and net income per ADS up 91.3% to RMB 13.7.
  • For full-year 2024, non-GAAP net income climbed 44% to an all-time high of RMB 6.42 billion, ROE hit 27.9%, and a USD 410 million share repurchase reduced share count by about 12%.
  • Asset quality strengthened in Q4 with the C2M2 delinquency rate falling to 0.57% (near historical best), while ABS issuance grew 21.6% to RMB 15.2 billion, including the first AAA-rated domestic exchange-traded ABS.
  • Embedded finance expansion added 18 new channels in 2024, lifting new credit line users 26% and embedded-finance loan volume 98%, and AI-generated marketing assets boosted outreach efficiency by 25%.
  • The FocusPRO technology solutions business saw loan volume grow at a 17% monthly rate in 2024, and the company plans an AI agent platform to power one-third of core processes within one to two years.
AI Generated. May Contain Errors.
Earnings Conference Call
Qfin Q4 2024
00:00 / 00:00

Transcript Sections

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Qifu Technology fourth quarter and full year 2024 earnings conference call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad. Please also note that today's event is being recorded. At this time, I'd like to turn the conference call over to Ms. Karen Ji, Senior Director of Capital Markets. Please go ahead, Karen.

Karen Ji
Senior Director of Capital Markets at Qifu Technology

Thank you, Operator. Hello everyone, and welcome to Qifu Technology's fourth quarter 2024 earnings conference call. Our earnings release was distributed earlier today and is available on our IR website. Joining me today are Mr. Wu Haisheng, our CEO; Mr. Alex Xu, our CFO; and Mr. Zheng Yan, our CRO. Before we start, I would like to refer you to our Safe Harbor statements in the earnings press release, which applies to this call, as we will make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of the non-GAAP financial measures to GAAP financial measures. Also, please note that unless otherwise stated, all figures mentioned in this call are in RMB terms.

Karen Ji
Senior Director of Capital Markets at Qifu Technology

Before we start, we would like to let you know that today's prepared remarks from our CEO will be delivered in English using an AI-generated voice. Now, I will turn the call over to Mr. Wu Haisheng. Please go ahead.

Haisheng Wu
CEO at Qifu Technology

Hello everyone, thank you for joining us today. 2024 was an exceptional year for our company. Despite the macroeconomic headwinds, we focused on driving high-quality development and evolving our business, consistently hitting new quarterly milestones to close out the year on a strong note. As our business model gradually shifts to a platform model, our organizational capabilities have been upgraded alongside it. As we look to the future, we will adopt a more open and collaborative approach to engaging and empowering our users and partners, further enhancing the health and resilience of our business. By the end of 2024, our platform empowered a total of 162 financial institutions to serve more than 56 million users with approved credit lines on a cumulative basis. Throughout 2024, we maintained a disciplined approach, optimizing risk management and enhancing operational efficiency.

Haisheng Wu
CEO at Qifu Technology

In Q4, our C-M2 metric, representing the delinquency rate after 30-day collection, for our overall loan portfolio declined further sequentially, reaching its lowest level of the year and approaching a historical best. With our risk metric stabilizing, we strengthened our ability to address user needs through differentiated risk and pricing strategies. Total loan facilitation and origination volume on our platform have grown for two consecutive quarters, with Q4 loan volume increasing by 9% sequentially to RMB 89.9 billion. Loan volume in the second half of the year regained positive growth, increasing by approximately 15% compared to the first half. With operational efficiency continuing to improve, our Q4 profitability hit a new record high with non-GAAP net income increasing 71.5% year-over-year to RMB 1.97 billion, and non-GAAP net income per diluted ADS surging 91.3% year-over-year to RMB 13.7.

Haisheng Wu
CEO at Qifu Technology

Despite macroeconomic headwinds, we have consistently improved upon our results over the year and outperformed our market commitments through the ongoing evolution and enhancements to our business. In 2024, with our take rate continuing to improve, full-year non-GAAP net income rose 44% year-over-year to reach an all-time high of RMB 6.42 billion. Additionally, we successfully executed $410 million share repurchase, buying back approximately 12% of our share count at the beginning of the year. This also contributed to improved non-GAAP net income per diluted ADS for 2024, which increased 55.7% year-over-year to RMB 42.4. Coupled with ongoing improvements in profitability and capital allocation efficiency, our ROE for 2024 increased further to 27.9%, significantly outperforming most financial services and internet companies in China. Now, I'll walk you through the progress we made in 2024. First, we remained committed to driving quality growth.

Haisheng Wu
CEO at Qifu Technology

We enhanced user acquisition efficiency by proactively diversifying acquisition channels. The number of new borrowers in 2024 increased by 16.2% year-over-year, while average acquisition cost per credit line user declined by 5.3%, reflecting a significant improvement in user acquisition efficiency. Notably, the addition of 18 new channels to our embedded finance business drove a 26% increase in new credit line users and a remarkable 98% increase in loan volume from the embedded finance channels, with users acquired through this segment now accounting for 41%. With improved user profiling accuracy on partner platforms, both credit costs and operational efficiency further improved, driving an ROA increase of approximately 2.48 percentage points from last year. Additionally, our embedded finance model further expanded its reach and now covers the majority of leading internet traffic platforms in China, with penetration rates also increasing.

Haisheng Wu
CEO at Qifu Technology

Simultaneously, we deepened collaboration with financial institutions to engage with their existing customer bases, leveraging their proprietary traffic and our precise user identification capabilities, and differentiated risk strategies to extend our credit product offerings. As we expand into more channels and strengthen our presence across platforms, we expect loan volume from our embedded finance business to maintain rapid growth momentum in 2025. Additionally, we are developing our intelligent marketing capabilities. 74% of the graphics and 27% of the videos we deploy are now generated by AIGC technology, resulting in a 25.1% improvement in user outreach efficiency and an approximately 10% reduction in average cost per credit line user. Furthermore, with 40% of our ad placements now automated, we achieved a 9% improvement in ROI compared to manual placements.

Haisheng Wu
CEO at Qifu Technology

Second, our asset quality improved significantly in 2024, following the decisive initiatives we implemented to optimize our loan portfolio and prioritize high-quality growth. We upgraded our application scorecard, or A-scorecard, by integrating AI to enhance credit data analysis. This allowed us to lower risk metrics back to target levels and establish a foundation for continuous improvements. Within our post-lending processes, we enhanced overall collection efficiency by upgrading our collection scorecard, or C-scorecard, with large language models for real-time analysis of user communication data and refining partner management and case assignment strategies. In the second half of the year, despite a moderate recovery in market demand, we maintained a disciplined risk strategy and focused on differentiated user operations, driving further improvements in our risk indicators. In Q4, our D1 delinquency rate decreased by 0.21 percentage points year-over-year, while 30-day collection rate increased by 3.23 percentage points.

Haisheng Wu
CEO at Qifu Technology

This robust asset quality has laid a solid foundation for our 2025 strategic planning, and with optimized risk strategies now firmly in place, we expect risk performance to remain stable in the coming quarters. Benefiting from a favorable interest rate environment and robust asset quality, we maintained our negotiating leverage on the funding side and drove a continuous decline in funding costs throughout the year. Our ABS issuance for the year increased by 21.6% to RMB 15.2 billion, further optimizing our funding structure. We also issued the first domestic exchange-traded ABS with a AAA international rating, which attracted subscriptions from multiple international institutional investors and expanded our funding channels globally. Our leadership in ABS issuance has given us a distinct competitive advantage in funding. In 2025, we plan to ramp up ABS issuance and increase the share of ABS in our funding mix.

Haisheng Wu
CEO at Qifu Technology

Although there has been a slight uptick in interest rate uncertainty this year, we are confident in our ability to drive a moderate decline in our funding costs in the coming year. The proportion of loan volume from our capital light segment increased by approximately 10 percentage points to 53% throughout 2024. We are the first mover to adopt this model and now boast the highest ratio when compared to our industry peers, a direct result of our strong asset quality and precise asset allocation capabilities. Our flexible asset structure ensures that our loan portfolio remains significantly more resilient during market cycles. Over the past year, by onboarding funding partners with more diverse risk appetites, we have strengthened our ability to serve various loan segments and further optimized our asset allocation strategy. This has driven continuous improvements in our ROA under the capital light model.

Haisheng Wu
CEO at Qifu Technology

Our technology solution business reached meaningful scale in 2024. We continued to enhance and upgrade our credit tech solution, Focus PRO, to meet the diverse needs of financial institutions. Over the year, we added 11 new partner institutions, bringing the total to 16, with 11 already live on our platform. Loan volume under the Focus PRO model grew at a compound monthly growth rate of 17% in 2024. By extensively engaging with our partners, we have seen strong demand from financial institutions for AI-driven solutions. In response, we plan to develop AI-plus bank agent platform to help banks address pain points in their core business processes and improve operational efficiency. We look forward to sharing more updates on this initiative in the coming quarters. AI is deeply embedded in our DNA, empowering every stage of our operations.

Haisheng Wu
CEO at Qifu Technology

Over the past year, AI has driven significant efficiency improvements across our business, from AI copilot models in loan collection and telemarketing to automating the development of marketing materials with AIGC technology and assisting developers with coding. As large language models increasingly mature and DeepSeek significantly improves inference efficiency, we will allocate more resources to the application of AI across credit scenarios going forward. First and foremost, risk management is the cornerstone of our business. We have gained valuable insights from over 200 million users and developed more than 2,400 models with 590,000 data dimensions. In 2024 alone, we iterated our models more than 670x. We believe DeepSeek will revolutionize how data is mined and analyzed in risk management, transitioning us from a single modal to a multi-modal approach and driving exponential growth in data dimensions.

Haisheng Wu
CEO at Qifu Technology

Its powerful reasoning capabilities will enable us to further enhance user profiling and improve the accuracy of end-to-end risk identification. Second, we are fully committed to advancing our AI-plus strategy. We plan to build an agent platform that will empower core lending processes. Leveraging the memory, planning, and collaboration capabilities of AI agents, this platform will fundamentally reshape how we operate, boosting efficiency while unlocking greater potential within our teams to drive even more business value. We have assembled a dedicated team to execute this strategy and expect one-third of our core business processes to be powered by this agent platform in the next one or two years. This initiative has already gained strong traction among our financial institution partners, and we believe AI-plus bank will become a key pillar of our Technology Solutions business moving forward.

Haisheng Wu
CEO at Qifu Technology

In the second half of 2024, we saw marginal improvements in the macroeconomic environment and a modest recovery in credit demand. The 2025 government work report emphasized a commitment to supporting technological innovation, boosting consumption, and advancing the AI-plus initiative, including the widespread adoption of large language models. We will continue to observe the impact these initiatives will have on our business. From a long-term perspective, our vision is to become a globally respected fintech company. To achieve this vision, we are executing a one-core, two-wings strategy, where our domestic credit business serves as the core and our technology solutions business and international expansion serve as the two wings. This strategy will allow us to continuously expand business boundaries and drive digital financial inclusion on a larger scale.

Haisheng Wu
CEO at Qifu Technology

Looking ahead to 2025, we remain cautiously optimistic and expect our core credit business to maintain high-quality development, while our technology solutions business will expand the depth and breadth of our partnerships with banks through our AI-plus strategy. For international expansion, we will maintain a disciplined approach, focusing on markets with stable regulatory environments and solid infrastructure. We will start small, move quickly, and iterate continuously as we progress. We look forward to sharing more updates on our journey in the future. In 2024, we further optimized capital allocation to enhance shareholder returns, executing our share repurchase plan at a pace significantly ahead of market expectations. Our dividends and buybacks for 2024 amounted to $180 million and $410 million, respectively, with total shareholder returns reaching 100% of our 2023 GAAP net income.

Haisheng Wu
CEO at Qifu Technology

As of the end of 2024, we had repurchased a total of 24.5 million ADSs and have begun executing a new repurchase plan of up to $450 million in 2025. We are confident in the future of our company and remain dedicated to delivering long-term value to our shareholders. Moving forward, we will continue to prioritize efficient capital allocation and shareholder value creation through recurring share buybacks and dividends. With that, I will now turn the call over to Alex.

Alex Xu
CFO at Qifu Technology

Thank you, Haisheng. Good morning and good evening, everyone. Welcome to our fourth quarter earnings call. We closed the year with a strong Q4 as microenvironments start to see tentative indication of modest improvement in user activities. Our continuous effort to optimize operations, improve efficiencies, and manage risk exposures generates healthy financial results and operating metrics.

Alex Xu
CFO at Qifu Technology

Total net revenue for Q4 was RMB 4.48 billion versus RMB 4.37 billion in Q3 and RMB 4.5 billion a year ago. Revenue from credit-driven service, capital-heavy, was RMB 2.89 billion in Q4 compared to RMB 2.9 billion in Q3 and RMB 3.25 billion a year ago. The year-on-year decline was mainly due to significant decline in off-balance sheet loans despite strong contribution from on-balance sheet loans and other value-added services. Overall funding costs were stable QoQ in a seasonally tightening funding environment. Revenue from platform service, capital-light, was RMB 1.59 billion in Q4 compared to RMB 1.47 billion in Q3 and RMB 1.25 billion a year ago. The year-on-year growth was mainly due to strong contribution from ICE and other value-added service, more than offsetting the decline in capital-light loan facilitation. For the full year 2024, platform service accounted for roughly 53% of the total loan volume and 58% of the year-end loan balance.

Alex Xu
CFO at Qifu Technology

We expect the ratio to be roughly stable in the near term. During the quarter, average IRR of loans we originated and/or facilitated was 21.3% compared to 21.4% in the prior quarter. Looking forward, we expect pricing to be fluctuated around this level for the coming quarters. Sales and marketing expenses increased 25% QoQ but declined 5% year-on-year. The sequential increase was mainly due to increased customers' activity and the typical Q4 seasonality. We added approximately 1.69 million new credit line users in Q4 versus 1.58 million in Q3. We will continue to make timely adjustments to the pace of new user acquisition based on micro-conditions from time to time and further diversify our user acquisition channels and improve user engagement and retention. Meanwhile, we will also continue to focus on re-energizing existing user base as repeat borrowers historically contribute the vast majority of our business.

Alex Xu
CFO at Qifu Technology

90-day delinquency rate was 2.09% in Q4 compared to 2.7% in Q3. Day-one delinquency was 4.8% in Q4 versus 4.6% in Q3. 30-day collection rate was 88.1% in Q4 versus 87.4% in Q3. Another key risk metric, C-M2, which represents the outstanding delinquency rate after 30-day collection, improved slightly QoQ to 0.57% with higher loan volume. We are comfortable with our current risk exposure, and we expect to see relatively stable risk metrics in the coming months. Under current micro-conditions and geopolitical uncertainties, we continue to take a prudent approach to book provisions against potential credit losses. Total new provision for risk-bearing loans in Q4 were approximately RMB 2.07 billion versus RMB 1.63 billion in Q3. The increase in new provision was mainly due to increase in risk-bearing loan volume QoQ and higher provision booking ratios.

Alex Xu
CFO at Qifu Technology

Buybacks of previous provisions were approximately RMB 1.02 billion in Q4 versus RMB 910 million in Q3. Provision coverage ratio, which is defined as total outstanding provisions divided by total outstanding delinquent risk-bearing loan balance between 90 and 180 days, was 617% in Q4, a historical high compared to 482% in Q3. Non-GAAP net profit was RMB 1.97 billion in Q4 compared to RMB 1.83 billion in Q3. The significant improvement in profitability was mainly due to favorable year-end tax adjustments. Non-GAAP net income per fully diluted ADS was RMB 13.66 in Q4 compared to RMB 12.35 in Q3 and RMB 7.14 a year ago, as strong earning growth and proactive share repurchase created significant EP ADS accretion. Effective tax rate for Q4 was 1.0% compared to our typical ETR of approximately 15%. The lower-than-normal ETR was mainly due to benefit from withholding tax provision adjustments, as withholding tax rate was lower to 5% in Q4.

Alex Xu
CFO at Qifu Technology

With solid operating result and higher contribution from capital-light model, our leverage ratio, which is defined as risk-bearing loan balance divided by shareholders' equity, was 2.4x in Q4, near historical low. We expect to see leverage ratio fluctuate around this level in the near future. We generate approximately RMB 3.05 billion cash from operations in Q4 compared to RMB 2.37 billion in Q3. The sequential increase in operating cash flow was mainly due to better operating results and lower tax payout. Total cash and cash equivalent and short-term investments was RMB 10.36 billion in Q4 compared to RMB 9.77 billion in Q3. As we continue to generate strong cash flow from operations, we will further optimize our capital allocation to support our business initiatives and to return our shareholders.

Alex Xu
CFO at Qifu Technology

During Q4, we in aggregate repurchased approximately 3.1 million ADS in open market for a total amount of approximately $107 million, inclusive of commissions, at the average price of $34.5 per ADS. As such, we have completed substantially all of the $350 million share repurchase plan we announced on March 12, 2024. Furthermore, on November 19, 2024, our board of directors approved a new share repurchase plan to buy back up to $450 million worth of ADS over a 12-month period starting January 1st, 2025. As of March 14, 2025, we have in aggregate purchased approximately 2.2 million ADS in open market for a total amount of approximately $86 million, inclusive of commissions, at the average price of $39.7 per ADS under the new share repurchase plan.

Alex Xu
CFO at Qifu Technology

The proactive execution of share repurchase plan demonstrates management confidence and commitment to the future of the company, and the management intend to further use share repurchase to accelerate EP ADS accretion. In accordance with our current dividend policy, our board has approved a dividend of $0.35 per Class A ordinary share, or $0.70 per ADS for the second half of 2024, to holders of record of Class A ordinary shares and ADSs as of the close of the business on April 23, 2025, Hong Kong Time and New York Time, respectively. We intend to gradually increase the dividend per ADS on a semi-annual basis. Finally, regarding our business outlook, while we start to see some tentative sign of marginal improvement in user activity, we will continue to take a prudent approach in business planning for 2025 and focus on enhancing efficiency of our operations.

Alex Xu
CFO at Qifu Technology

For the first quarter of 2025, the company expects to generate non-GAAP net income between RMB 1.8 billion and RMB 1.9 billion, representing a year-over-year growth between 49% and 58%. This outlook reflects the company's current and preliminary view, which is subject to material changes. With that, I would like to conclude our prepared remarks. Operator, we can now take some questions.

Operator

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. For those who can speak Chinese, please start your question in Chinese followed by an English translation.

Operator

To allow enough time to address everyone on the call, please keep to one question and one follow-up, and return to the queue if you have more questions. Thank you. Your first question comes from Richard Xu with Morgan Stanley. Please go ahead.

Richard Xu
Richard Xu
Managing Director at Morgan Stanley

[Foreign language].

Translator

Quick two questions for me number one on the AI management discuss what areas we're seeing the most potential to integrate it you know, maybe DeepSeek and other AI modules and what type of efficiency gain could be achieved and any progress so far? second of all, you know, there's been some, you know, obviously policy support since September of last year. Are we seeing any credit demand recovery at the moment? And what's the, you know, credit demand at the moment outlook for 2025? Any improved on credit outlook as well as supply maybe credit growth outlook? Thank you.

Haisheng Wu
CEO at Qifu Technology

Okay, Richard, thank you. For your first question about the AI and DeepSeek, actually it's a really hot topic for now. Over the past year, we are happy to see the great improvement in large language model technology, especially in its reasoning efficiency. We believe credit is a perfect scenario for AI application because this industry has a strong data foundation and a high degree of digitalization. Last year, we had a lot of AI practice on efficiency work like sales, loan collection, intelligence marketing, and R&D. For example, we launched the Copilot System to empower our collection team. By analyzing our historical phone calls, the system can effectively read users' intent and suggest how to effectively communicate with the users. So far, the adoption rate of the Copilot System among our collection team has reached about 84%. Daily usage is roughly 30x per person.

Haisheng Wu
CEO at Qifu Technology

This year, we will allocate more resources to applying AI into our credit assessment, leveraging the AI reasoning capabilities to enhance our ability to analyze credit reports. One example is when we use feature recognition during the loan application process, AI will recognize additional information from the pictures or videos, such as users' clothing or their surroundings. This information can be cross-checked with the identity information provided by the users to reduce the fraud risk. This year, we will put a small portion of our traffic into the end-to-end AI-driven risk decision-making process. We are really looking forward to the results of this test. In addition, we are fully committed to advancing our AI-plus strategy. We plan to build an agent platform that will empower our whole company. This AI agent could become our digital employees working together with us.

Haisheng Wu
CEO at Qifu Technology

We have built a dedicated team to execute this AI-plus strategy, and by the end of the year, we expect this team to grow to around 150 people. In the next one year, we expect 1/3 of our core business processes will be powered by this agent platform. We have seen strong interest for the agent platform among our financial institution partners, and we believe AI-plus bank will make our technology solution business more competitive. I want to say over the past decade, we have captured the growth opportunities in the next class era. We are confident that based on our scenario, technology, and data, we are also at a good position to capture the AI-plus opportunities. That is for your first question. For the second question about customer demand, yes, we did observe some improvements in user activities after September 21st.

Haisheng Wu
CEO at Qifu Technology

For example, the loan application ratio was 10% higher in Q4 versus Q3. In January, we also noticed a seasonal pickup in credit demand ahead of Chinese New Year, especially from SME users. Credit demand declined in February due to the holiday, but rebounded in March. Based on the current situation, we expect Q1 loan volume to grow by more than 10% year over year. At this stage, I think it is still too early for us to call a macro recovery. We still want to adopt a prudent approach to plan our business for this year. If the market environment improves meaningfully, we will adjust our strategy timely to capture the growth opportunities. Thank you.

Operator

Your next question comes from Alex Ye with UBS. Please go ahead.

Alex Ye
Alex Ye
Greater China Financials Research Analyst at UBS

[Foreign language].

Translator

So my first question is about what's the drivers for the movement of the two early asset indicators in Q4, including Day 1 delinquency ratio and 30-day collection ratio. what's the latest trend in Q1 so far and the outlook going forward? And second question is about the Net Take Rate outlook which was guided by management previously at around slightly above 5% for the full year. So, based on your latest results and your operation into this year so far, is there any adjustment to this guidance? Thank you.

Zheng Yan
Chief Risk Officer at Qifu Technology

[Foreign language].

Alex Ye
Alex Ye
Greater China Financials Research Analyst at UBS

Okay, yeah.

Zheng Yan
Chief Risk Officer at Qifu Technology

[Foreign language].

Translator

Okay, let me do the translation for Mr. Zheng. first let me explain how we monitor our risk internally. We usually look at both the Day 1 delinquency rate and the 30-day collection rate together because individual matrix can fluctuate for various reasons. What we focus on more is the C-M2 ratio, which is the delinquency rate after a 30-day collection period. Based on this matrix, our risk level is very, very stable. Now about the slight increase of our Day-One delinquency rate and the collection rate compared to Q3, it was mainly due to the optimization we've made to our repayment reminder strategy. We reduced the coverage of our early reminder by about 30% to improve user experience without compromising our loss rate. As a result, some of our high-quality users missed the repayment on the due date, but they quickly caught up. That's why you will see a small increase in both Day-One delinquency rate and collection rate, but it didn't have any meaningful impact on our actual credit losses.

Translator

Our risk performance in January and February was pretty much in line with Q4, with overall risk levels remaining stable. I also want to emphasize that we are not aiming to reduce our risk to the absolute lowest level, as it does not serve the best interest of the company. Right now, with a decent level of take rate, we have a solid margin of safety to experiment with new strategies and find a better balance between growth and risk. Thank you.

Haisheng Wu
CEO at Qifu Technology

Okay, and Alex, I will respond to your second part of the question about the take rate. As you know, throughout 2024, we have been on a steady improvement trend in take rate as we, you know, reduce the risk and with the funding cost continue to trending lower throughout last year.

Haisheng Wu
CEO at Qifu Technology

By the end of last year, in Q4, you know our take rate, net take rate, already approached 6%. That is the trend for last year. Obviously, there are some one-off factors, as you guys know, for example, the mix change resulting in the revenue recognition different between the second half and first half. Excluding all these kind of one-off factors, I think we are looking at, for this year, it's a reasonable assumption. As you mentioned, we achieved a sort of 5% above kind of a take rate for the year. Overall, you know, as our CRO just mentioned, we have enough sort of a cushion in our take rate or our risk metrics that enable us to actually do a little bit testing around the margin.

Haisheng Wu
CEO at Qifu Technology

You know if we see the opportunity which could be resulted by the micro environment change or could be resulted by the user activity change, if we see the opportunity, we will take that and try on the margin to see whether we can bring the incremental marginal probability on top of our sort of a base case. that will be the process we will continue to pushing throughout 2025. the end results or the or the ultimate goal is to really drive our higher profit, total profit on top of the the sort of the the base case there. so that's the our approach to looking at this year's profitability and this year's kind of a take rate. Thank you.

Operator

Your next question comes from Cindy Wang with China Renaissance. Please go ahead.

Cindy Wang
Cindy Wang
Director at China Renaissance

[Foreign language].

Translator

Thanks for taking my question. I have a question related to the regulation side. Last week, National Financial Regulatory Administration issued a notice requiring financial institutions to promote consumer finance and boost consumption in China. How do you see the new policy impact to the overall industry and the company? Thank you.

Haisheng Wu
CEO at Qifu Technology

Okay, Cindy. I'm glad you mentioned this. It's really a big news for our industry. We believe this document sends a very positive signal, and we are very encouraged. It is very clear that the government's direction is to boost consumption by encouraging the development of consumer credit industry. I mean, I think there will be a series of policies to support that direction. I think we noticed three details in the document. The first, increasing the supply of consumer loans, which means support in terms of monetary policy and liquidity.

Haisheng Wu
CEO at Qifu Technology

Secondly, they encourage financial institutions to increase loan volumes and set reasonable terms for loan products, which means that the regulator will provide more flexible space for financial institutions. Thirdly, they emphasize consumer protection and providing support for users who have difficulty in repayment. In other words, the regulators have fully recognized the value of consumer finance in boosting consumption. Therefore, we expect that the regulator environment will remain relatively stable, leaving us more room to innovate and serve our customers. Thank you.

Operator

Your next question comes from Emma Xu with Bank of America Securities. Please go ahead.

Emma Xu
Greater China Banks and FinTech Research Analyst at Bank of America Securities

[Foreign language].

Translator

I have a question about the funding cost. Is your funding cost continuing to decline, and what's the lowest level you think the funding cost can go to?

Haisheng Wu
CEO at Qifu Technology

Thank you, Emma. In terms of funding cost, over the past few years, our funding cost has continued to decline, even much faster compared to the LPR. This is partially driven by the risk cost, but more driven by the demand over supply of consumer credit as asset. In the future, if macro improves, the supply and demand situation will also change. We always emphasize that financial institutions have their operating cost. The current cost of fund has already approached the bottom line of financial institutions. There is limited room for further decline. In addition to the funding provided by financial institutions, a significant portion of our funding comes from ABS. We will continue to issue more ABS this year to further optimize our funding structure. Hope we can achieve further decline in overall funding cost. Thank you.

Alex Xu
CFO at Qifu Technology

Yeah, just Emma just wanted to add a couple of points. So basically you can see there's three factors to really drive the funding cost, two external and one internal. The two external are one that you know the LPR obviously is the you know if you see the reduction in the LPR, it will it will more or less kind of a kind of a pass through to us a little bit. At the same time, the supply demand situation will also have the impact on the funding cost. In particular, you know if the macro situation getting a little bit hot, then you will you may run into a you know short of a fund kind of an environment overall. That certainly will put some pressure on our funding cost there. So that's two external factors.

Alex Xu
CFO at Qifu Technology

The internal one on the ABS side, you know last year we did about RMB 15 billion, a little bit over RMB 15 billion in the ABS issuance, and which should represent about 20% some percent increase over the year before. I think at least from our planning perspective, we try to maintain this kind of a year-over-year growth pace for this year. If we can achieve that, that will certainly help us from a mix perspective, reduce the overall funding cost a little bit. The net net, given how low we already are, there is limited space in terms of downward movement, will still be quite limited. Thank you.

Operator

Your next question comes from Yada Li with CICC. Please go ahead.

Yada Li
Yada Li
Research Analyst at CICC

[Foreign language].

Translator

Then I'll do the translation. Hello management, thank you for taking my questions. My question is about the shareholders' return. I was wondering do we expect to deliver more value to the shareholders and how to view the sustainability and if there's still potential for future growth? That's all, thank you.

Haisheng Wu
CEO at Qifu Technology

Sure, thank you Yada. I'll take this one. You know we have been very committed to return values to our shareholder, in the past couple years. You know, we, looking at, if you look at the 2024, the actual, payout, almost represent 100% of our earnings for 2023, there. Going forward, we have been saying that we try to maintain a 70+% payout ratio, for the next few years. Given that we also have a target to kind of shrink our share base, by a significant percentage.

Haisheng Wu
CEO at Qifu Technology

We put the current priority and also maybe the next year's priority into the share buyback side. We have the current $450 million share buyback program running. So far in the first quarter, even though our share price has been moving up quite significantly, we still maintain a very consistent pace in terms of executing the current $450 million buyback program. We intend to continue to do so for the remainder of the year. If there's an opportunity arise, we also, you know, may consider to accelerate the buyback program, you know, down the road. On the dividend side, you know, given the priority for now is on the buyback, we try to achieve a continued increased per share dividend on a semi-annual basis.

Haisheng Wu
CEO at Qifu Technology

For example, this quarter, we declared a $0.70 per ABS dividend, versus two, half six months ago, that's only about $0.60. It's a pretty significant raise in dividends. You should expect that the dividend per share number to continue to increase over the course of the next few dividends, given that we are shrinking our share base quite significantly. We also have to meet the board authorized at least 20% dividend payout ratio. Mathematically, you have to see an increased DPS in the going forward basis there. In the long run, once we achieve our sort of share repurchase target, you know, which may be about two years down the road, we will at that time reconsider the mix between the buyback and the dividends but that's still a little bit a long time away. so for now the priority is still beyond the buyback side. Thank you.

Operator

Thank you. There are no further questions at this time. I'll now hand back to management for closing remarks.

Haisheng Wu
CEO at Qifu Technology

Okay, thank you everyone to join us for today's conference. we are very efficient to make the call going very quickly than we thought. But, if you have any additional questions, please feel free to contact us offline. Thank you.

Operator

That does conclude our conference for today. Thank you for participating. You may now disconnect.

Analysts
    • Karen Ji
      Senior Director of Capital Markets at Qifu Technology
    • Haisheng Wu
      CEO at Qifu Technology
    • Alex Xu
      CFO at Qifu Technology
    • Richard Xu
      Managing Director at Morgan Stanley
    • Translator
    • Alex Ye
      Greater China Financials Research Analyst at UBS
    • Zheng Yan
      Chief Risk Officer at Qifu Technology
    • Cindy Wang
      Director at China Renaissance
    • Emma Xu
      Greater China Banks and FinTech Research Analyst at Bank of America Securities
    • Yada Li
      Research Analyst at CICC
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