Earnings call transcript: CNFinance Q2 2025 reveals strategic shift amid losses

CNFinance Holdings Ltd reported its Q2 2025 earnings, revealing a strategic pivot towards asset quality amid challenging market conditions. Despite a net loss of RMB 40.4 million, the company emphasized its focus on risk mitigation and operational efficiency. The stock price showed a modest gain of 3.09% recently, reflecting mixed investor sentiment. According to InvestingPro analysis, CNF is currently trading at attractive valuations with a P/E ratio of 6.48 and a notably low Price/Book ratio of 0.06, suggesting the stock may be undervalued compared to its Fair Value.

Key Takeaways

• Operating expenses decreased by 74%, highlighting cost efficiency.
• The non-performing loan recovery rate was 103%, indicating effective asset management.
• Interest income fell by 55% year-over-year, contributing to financial losses.
• The company is prioritizing asset quality over loan volume.

Company Performance

CNFinance Holdings Ltd experienced a challenging Q2 2025, with a notable decrease in total loan balance and interest income. The company’s strategic shift towards improving asset quality and reducing non-performing loans reflects its adaptation to a complex market environment. Despite the financial setbacks, the company’s operational restructuring and focus on cost efficiency are key components of its long-term strategy.

Financial Highlights

• Total loan balance: RMB 11.2 billion (29.6% decrease YoY)
• Interest income: RMB 416 million (55% decline YoY)
• Net loss: RMB 40.4 million
• Operating expenses: Decreased by 74%
• Non-performing loan ratio: 16.9%
• NPL recovery rate: 103%

Outlook & Guidance

Looking forward, CNFinance plans to continue its focus on containing non-performing loans and enhancing asset quality. The company aims to stabilize its funding channels and explore new business development opportunities. The strategic principle of "Survival first, victory first" underscores its approach to navigating market challenges. Analysts tracked by InvestingPro maintain a strong buy consensus, with revenue growth forecast at 2.49% for the current year. For deeper insights into CNF’s valuation and growth prospects, including 12+ additional ProTips and comprehensive financial analysis, explore InvestingPro’s detailed research report.

Executive Commentary

• "We adhere to the strategy of leveraging existing assets and optimizing new ones," stated Mr. Chen, Director and Vice President, emphasizing the company’s asset-focused strategy.
• Mr. Chen also remarked, "Facing continued market challenges, the company will uphold the survival first, victory first principle," highlighting the company’s resilience in a difficult environment.
• "Although this approach puts pressure on short-term performance, it lays a solid foundation for long-term steady growth," added Mr. Chen, indicating a focus on sustainable growth.

Risks and Challenges

• High non-performing loan ratio: At 16.9%, it poses a significant risk to financial stability.
• Declining interest income: A 55% decrease YoY could impact profitability.
• Market volatility: The complex market environment may affect future operations.
• Impairment losses: Continued provisions could further impact financial results.

CNFinance’s strategic focus on asset quality and operational efficiency highlights its adaptability in a challenging market, despite the financial setbacks faced in Q2 2025.

Full transcript - CNFinance Holdings Ltd (CNF) Q2 2025:

Conference Operator: Good day, and welcome to the CN Finance Holdings Limited First Half of twenty twenty five Financial Results Conference Call. All participants will be in a listen only mode. Please note this event is being recorded. I would now like to turn the conference over to IR Manager, Matthew Lu. Please go ahead.

Matthew Lu, IR Manager, CN Finance Holdings Limited: Thank you, and welcome to the CN Finance first half of twenty twenty five financial results conference call. Our Director and Vice President, Mr. Xianjun, will walk us through the operating and financial results. After that, we will have a Q and A session. Before we start, I would like to remind you that this conference call contains forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in The U.

S. Private Securities Litigation Reform Act of 1995. These forward looking statements can be identified by terminologies such as will, expects, anticipates, future, intends, plans, believes, estimates, target, going forward, outlook and similar statements. Such statements are based upon management’s current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company’s control, which may cause the company’s actual results, performance or achievements to differ materially from those in the forward looking statements. Further information regarding these and other risks, uncertainties or factors is included in the company’s filings with the U.

S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward looking statement as a result of new information, future events or otherwise, except as required under law. Now please welcome Mr. Chen Hello, everyone.

In the first half of twenty twenty five, amidst a complex and ever changing market environment, CNF adhere to the guiding principle of survival first, victory first, actively tackled challenges and steadily advanced strategic adjustments and business optimizations. Now, I’d like to report to you on our operational and financial performance for the first half of the year. As of 06/30/2025, our company has signed a total of 2,184 sales partners, marking a year on year increase of 2%. We had an aggregate of fourteen eighty five sales partners who has introduced borrowers to us, representing a 3.3% growth. However, due to our proactive efforts to control loan issuance and focus on reducing non performing loans in our existing portfolio, the number of loan transactions decreased by 78.1% year on year and the total loan origination dropped by 85.4%.

By the end of the second quarter, our loan balance stood at RMB11.2 billion, a decrease of 29.6% compared to that of last year. We adhere to the strategy of leveraging existing assets and optimizing new ones, focusing our resources on risk mitigation and asset quality enhancement. Although this approach puts pressure on short term performance, it lays a solid foundation for long term steady growth. In the first half of the year, our interest income was RMB416 million, a decline of 55% year on year. Our financing costs decreased by 32% and operating expenses fell by 74%, demonstrating the company’s strong cost control capabilities.

Our net loss was RMB40.4 million, primarily due to an impairment loss provision of RMB31.3 million. As of 06/30/2025, the non performing loan ratio of the company’s loan was 16.9%. Although the NPL ratio rose, the increase of new NPLs was effectively contained. Through diversified NPL reduction measures, the company achieved a 103% NPL recovery rate in the first half. During the first half, the company optimized its organizational structure and streamlined personnel, resulting in a significant reduction in operating costs.

In one word, our key priorities in the first half included: first, reducing NPLs by innovating and leveraging effective reduction tools Second, we have stabilized our funding source by bringing in a bunch of new institutional investors, mainly local AMCs to ensure smooth financing channels. Third, we have expanded into new business areas. We refined our existing products and launched new ones that meet market demands. Facing continued market challenges, the company will uphold the survival first, victory first principle. With containing non performing loans and optimizing new growth as the core strategy, we will persist in these three key priorities, dedicating resources to NPL reduction, ensuring stable funding channels and supporting new business development.

Conference Operator: We will now begin the question and answer session. There are no questions at this time. I’d like to hand the call back over for any closing remarks.

Matthew Lu, IR Manager, CN Finance Holdings Limited: Thank you, and thank you again for joining us today. If you have any further questions, you can contact us at ircashchina. Cn. Thank you.

Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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