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Form 6-K CNFinance Holdings Ltd. For: May 26

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UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM
6-K

 

REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of May 2022

 

Commission file number: 001-38726

 

 

CNFinance
Holdings Limited

(Exact Name of Registrant as Specified in Its Charter)

 

 

44/F, Tower G, No.
16 Zhujiang Dong Road

Tianhe District, Guangzhou
City, Guangdong Province 510620

People’s Republic
of China

+86-20-62316688


(Address of Principal Executive Offices)

 

 

Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.

Form 20-F         Form
40-F  

 

Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1):  

 

Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7):  

 

 

 

On May 26, 2022, CNFinance Holdings Limited (the “Company”)
issued press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

EXHIBIT INDEX

 

 

 

Signature

 

Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

  CNFINANCE HOLDINGS LIMITED
     
Date: May 26, 2022   By: /s/ Bin Zhai
        Name:  Bin Zhai
        Title: Chief Executive Officer and Chairman

 

 

2

 

Exhibit 99.1

 

CNFinance Announces First Quarter 2022 Unaudited
Financial Results

 

GUANGZHOU, China, May 26, 2022 /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 first quarter ended March 31, 2022.

 

First Quarter 2022 Operational and Financial
Highlights

 

Total loan origination volume1
was RMB2.3 billion (US$357.7 million) during the first quarter of 2022, representing a decrease of 17.9% from RMB2.8 billion in the same
period of 2021.

 

Total outstanding loan principal2
was RMB9.6 billion (US$1.5 billion) as of March 31, 2022, as compared to RMB10.4 billion as of December 31, 2021.

 

Total number of transactions3
was 4,321 during the first quarter of 2022, representing a decrease of 15.1% from 5,092 in the same period of 2021.

 

Total interest and fees income were RMB417.4 million (US$65.8 million) in the first quarter of 2022, representing
a decrease of 1.8% from RMB425.1 million in the same period of 2021.

 

Net income was RMB43.1 million (US$6.8 million) in the first quarter of 2022, compared to RMB85.6 million
in the same period of 2021.

 

Basic and diluted earnings per ADS were RMB0.63 (US$0.10) and RMB0.63 (US$0.10), respectively, in the
first quarter of 2022, as compared to RMB1.25 and RMB1.19, respectively, in the same period of 2021.

 

Mr. Bin Zhai, Chairman and CEO of CNFinance,
commented, In the first quarter of 2022, China’s
economic growth has slowed down. Regional lockdowns caused by unexpected local outbreaks of COVID-19 have negatively affected our
business. In response, the Company focused on stabilizing business operations and managing risks, and was able to deliver a stable
performance. During the first quarter of 2022, we facilitated loans of RMB2.3 billion, and recorded revenue and net income of
approximately RMB417 million and RMB43 million, respectively.

 

Going forward, we are likely
to be continuously challenged by economic fluctuations. At the same time, we are also presented with huge opportunities as the government
is now encouraging financial institutions to offer more support to MSEs. To seize such opportunities, we strive to upgrade our business
model to an operation-oriented and asset-light model, under which we will act as the service provider and the manager of loans. At the
same time, we will expand our business by diversifying our product portfolio, helping sales partners expand their business scale and reducing
our own funding cost.

 

We have always stayed true
to our mission of providing accessible, affordable and convenient financial services to MSE owners. With more supportive macro policies
taking effect, we are confident that there will be another surge of capital demand from MSE owners. We believe we will be well-prepared
to seize such opportunity and expand our business, increase our revenue and provide higher returns to our shareholders.”

 

1 Refers to the total amount of loans CNFinance originated
during the relevant period.
2 Refers to the total amount of loans outstanding for loans
CNFinance at the end of the relevant period.
3 Refers to the total number of loans CNFinance originated
during the relevant period.

 

 

First Quarter 2022 Financial Results

 

Total interest and fees income decreased
by 1.8% to RMB417.4 million (US$65.8 million) for the first quarter of 2022 from RMB425.1 million in the same period of 2021, primarily
due to a decrease in the Company’s interest income on loans.

 

Interest and financing service fees on loans
decreased by 1.7% to RMB414.7 million (US$65.4 million) for the first quarter of 2022 from RMB422.0 million in the same period of
2021, primarily due to (a) lower average effective interest rates of outstanding loans, and (b) the decrease of average daily outstanding
loan principal in the first quarter of 2022 as compared to the same period of 2021. The decrease in average daily outstanding loan principal
was due to the lower loan facilitation volume in the first quarter of 2022 resulted from the lockdowns due to local outbreaks of COVID-19
in multiple cities within China.

 

Interest on deposits with banks decreased
by 12.9% to RMB2.7 million (US$0.4 million) for the first quarter of 2022 from RMB3.1 million in the same period of 2021, primarily due
to smaller average daily balance of time deposits.

 

Interest and fees expenses increased by
28.5% to RMB200.9 million (US$31.7 million) for the first quarter of 2022, compared to RMB156.3 million in the same period of 2021, primarily
due to the increase in the outstanding principal of other borrowings as well as the funding costs from trust companies.

 

Net interest and fees income decreased
by 19.5% to RMB216.5 million (US$34.1 million) for the first quarter of 2022, from RMB268.8 million in the same period of 2021.

 

Collaboration cost for sales partners,
representing sales incentives paid to sales partners, decreased by 18.9% to RMB79.6 million (US$12.6 million) for the first quarter of
2022, compared to RMB98.1 million in the same period of 2021, primarily attributable to lower fee rate the Company paid to the sales partners
resulted from lower average effective interest rates of outstanding loans.

 

Net interest and fees income after collaboration
cost
was RMB136.9 million (US$21.5 million) for the first quarter of 2022, representing a decrease of 19.8% from RMB170.7 million
in the same period of 2021.

 

Provision for credit losses was RMB32.6
million (US$5.1 million) for the first quarter of 2022, as compared to a reversal of RMB17.2 million in the same period of 2021. The increase
was due to the increasing economic uncertainties caused by lockdowns in reaction to local outbreaks of COVID-19 as well as the downward
pressure faced by China’s real estate market during the first quarter of 2022.

 

Net gains on sales of loans decreased by
17.0% to RMB7.8 million (US$1.3 million) for the first quarter of 2022 from RMB9.4 million in the same period of 2021.

 

Other gains, net increased by 129.5% to
RMB17.9 million (US$2.8 million) for the first quarter of 2022 from RMB7.8 million in the same period of 2021, primarily due to the increase
of Credit Risk Mitigation Position forfeited by the sales partners.

 

Total operating expenses decreased by 15.2%
to RMB79.9 million (US$12.6 million) for the first quarter of 2022, compared to RMB94.2 million in the same period of 2021.

 

 

Employee compensation and benefits decreased
by 12.0% to RMB43.1 million (US$6.8 million) for the first quarter of 2022 from RMB49.0 million in the same period of 2021, primarily
attributable to smaller incentives paid to the employees resulted from lower loan origination volume during the first quarter of 2022.

 

Share-based compensation expenses decreased by 70.2% to RMB1.4
million (US$0.2 million) for the first quarter of 2022 from RMB4.7 million in the same period of 2021. According to the Company’s
share option plan adopted on December 31, 2019, approximately 50%, 30% and 20% of the option granted will be vested on December 31, 2020,
2021 and 2022, respectively. Related compensation cost of the option grants will be recognized over the requisite period.

 

Taxes and surcharges increased by 20.9% to RMB8.1 million (US$1.3
million) for the first quarter of 2022 from RMB6.7 million in the same period of 2021, primarily attributable to a increase in the non-deductible
value added tax (“VAT”). The increase in VAT was attributable to the characterization of certain amounts as “service
fees charged to trust plans” which are a non-deductible item. According to the PRC tax regulations, “service fees charged
to trust plans” incur a 6% VAT on the subsidiary level, but are not recorded as an input VAT on a consolidated trust plan level.
“Service fees charged to trust plans” was increased in the first quarter of 2022 compared to the same period of 2021 due to
newly established trust plans.

 

Operating lease cost decreased by 14.6% to RMB3.5 million (US$0.6
million) for the first quarter of 2022 as compared to RMB4.1 million for the same period of 2021, primarily due to the continued development
of the collaboration model that allowed the Company to further reduce the office leasing costs which previously used to rent offices to
accommodate sales staff.

 

Other expenses decreased by 19.9% to RMB23.8 million (US$3.7
million) for the first quarter of 2022 from RMB29.7 million in the same period of 2021, primarily due to (a) a decrease in fees paid to
local channels for introducing sales partners to the Company; (b) a decrease in travelling expenses and traffic expenses due to the lockdowns
due to the local outbreak of COVID-19 in multiple cities in China.

 

Income tax expense was RMB15.4 million
(US$2.4 million) for the first quarter of 2022, compared to RMB29.2 million in the same period of 2021, primarily due to decrease in taxable
income in the first quarter of 2022 as compared to the same period of 2021.

 

Effective tax rate increased slightly to
26.3% for the first quarter of 2022 as compared to 25.5% for the same period of 2021.

 

Net income was RMB43.1 million (US$6.8
million) for the first quarter of 2022, compared to RMB85.6 million in the same period of 2021.

 

Basic earnings per ADS and diluted earnings
per ADS
were RMB0.63 (US$0.10) and RMB0.63 (US$0.10), respectively, in the first quarter of 2022, compared to RMB1.25 and RMB1.19,
respectively, in the same period of 2021. One ADS represents 20 ordinary shares.

 

As of March 31, 2022, the Company had cash,
cash equivalents and restricted cash
of RMB1.7 billion (US$0.3 billion), compared to RMB2.2 billion as of December 31, 2021, including
RMB1.2 billion (US$ 0.2 billion) and RMB1.5 billion from structured funds as of March 31, 2022 and December 31, 2021, respectively, which
could only be used to grant new loans and activities.

 

 

The delinquency ratio for loans originated
by the Company increased from 24.1% as of December 31, 2021 to 25.9% as of March 31, 2022. Under the collaboration model, the delinquency
ratio for first lien loans increased from 29.1% as of December 31, 2021 to 30.3% as of March 31, 2022, and the delinquency ratio for second
lien loans increased from 19.5% as of December 31, 2021 to 22.6% as of March 31, 2022. Under the traditional facilitation model, the delinquency
ratio for first lien loans increased from 76.0% as of December 31, 2021 to 100.0% as of March 31, 2022, and the delinquency ratio for
second lien loans increased from 75.8% as of December 31, 2021 to 100.0% as of March 31, 2022.

 

The delinquency ratio (excluding loans held
for sale)
for loans originated by the Company increased from 16.2% as of December 31, 2021 to 16.8% as of March 31, 2022. Under the
collaboration model, the delinquency ratio for first lien loans (excluding loans held for sale) was 18.8% as of March 31, 2022 as compared
to 18.9% as of December 31, 2021, and the delinquency ratio for second lien loans (excluding loans held for sale) increased from 14.1%
as of December 31, 2021 to 15.9% as of March 31, 2022. Under the traditional facilitation model, the delinquency ratio for first lien
loans (excluding loans held for sale) increased from 49.7% as of December 31, 2021 to 100.0% as of March 31, 2022, and the outstanding
balance of second lien loans under the traditional facilitation model as of March 31, 2022 was nil.

 

The NPL ratio for loans originated by the
Company increased from 9.4% as of December 31, 2021 to 10.4% as of March 31, 2022. Under the collaboration model, the NPL ratio for first
lien loans increased from 12.5% as of December 31, 2021 to 13.8% as of March 31, 2022, and the NPL ratio for second lien loans increased
from 6.0% as of December 31, 2021 to 7.1% as of March 31, 2022. Under the traditional facilitation model, the NPL ratio for first lien
loans increased from 59.2% as of December 31, 2021 to 100.0% as of March 31, 2022, and the NPL ratio for second lien loans increased from
64.2% as of December 31, 2021 to 99.8% as of March 31, 2022.

 

The NPL ratio (excluding loans held for
sale)
for loans originated by the Company decreased from 2.1% as of December 31, 2021 to 1.8% as of March 31, 2022. Under the
collaboration model, the NPL ratio for first lien loans (excluding loans held for sale) decreased from 3.0% as of December 31, 2021
to 2.4% as of March 31, 2022, and the NPL ratio for second lien loans (excluding loans held for sale) was 1.5% as of March 31, 2022
as compared to 1.4% as of December 31, 2021. Under the traditional facilitation model, the NPL ratio for first lien loans (excluding
loans held for sale) increased from 14.4% as of December 31, 2021 to 100.0% as of March 31, 2022, and the outstanding balance of
second lien loans under the traditional facilitation model as of March 31, 2022 was nil.4

 

Recent Development

 

US$20 Million Share Repurchase Program

 

On March 16, 2022, the Company’s board of
directors authorized a share repurchase program under which the Company may repurchase up to US$20 million of its ordinary shares
in the form of American depositary shares (ADSs) during a period of up to 12 months commencing on March 16, 2022. As of March 31, 2022,
the Company had repurchased an aggregate of approximately US$334 thousand worth of its ADSs under this share repurchase program.

 

Business Outlook

 

The extent to which the COVID-19 pandemic impacts
the Company’s results of operations will depend on future developments of the pandemic in China and across the globe, which are
subject to changes and substantial uncertainty and therefore cannot be predicted. Based on the information available as of the date of
this press release, we expect net income to be between RMB10 million and RMB50 million for the second quarter of 2022.

 

4 The Company has ceased facilitating loans under the traditional
facilitation model since December 2018. As of March 31, 2022, the outstanding loan principal under the traditional facilitation model
was RMB84.1 million (RMB2.5 million excluding loans held for sale).

 

 

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 Thursday, May 26, 2022 (8:00 PM Beijing/ Hong Kong Time on the same day).

 

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 June 2, 2022.

 

Dial-in numbers for the replay are as follows:

 

International: +1-412-317-0088
United States: +1-877-344-7529
Passcode: 6229781

 

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 RMB6.3393 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Board of
Governors of the Federal Reserve System as of March 31, 2022. No representation is made that the RMB amounts could have been, or could
be, converted, realized or settled into U.S. dollars at that rate on March 31, 2022, or at any other rate.

 

 

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, fluctuations in general economic and business
conditions in China, the impact and future development of COVID-19 pandemic in China and across the globe, and relevant government law,
rules, policies or guidelines 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 conducts
business by collaborating with sales partners and trust company partners. Sales partners are responsible for recommending micro- and
small-enterprise (“MSE”) owners with financing needs to the Company and the Company introduces eligible borrowers to its
trust company partners who will then conduct their own risk assessments and make credit decisions. 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.

 

For more information, please contact:

 

CNFinance

E-mail: [email protected]

 

 

CNFINANCE HOLDINGS LIMITED

Unaudited condensed consolidated
balance sheets

(In thousands)

 

    December 31,
2021
    March 31,
2022
 
    RMB     RMB     US$  
Assets                  
                   
Cash, cash equivalents and restricted cash     2,231,437       1,697,992       267,852  
Loans principal, interest and financing service fee receivables     9,412,718       8,535,576       1,346,454  
Allowance for credit losses     975,851       861,867       135,956  
Net loans principal, interest and financing service fee receivables     8,436,867       7,673,709       1,210,498  
Loans held-for-sale (including RMB24,696,075 and RMB20,019,542 measured at fair value as of December 31, 2021 and March 31, 2022, respectively)     733,975       861,400       135,883  
Investment securities     1,088,044       1,635,653       258,018  
Property and equipment     3,042       2,720       429  
Intangible assets and goodwill     4,009       3,883       613  
Deferred tax assets     21,068       3,247       512  
Deposits     156,954       147,398       23,251  
Right-of-use assets     16,197       14,516       2,290  
Guaranteed assets     1,289,752       1,280,343       201,969  
Other assets     404,826       210,573       33,217  
Total assets     14,386,171       13,531,434       2,134,532  
                         
Liabilities and shareholders’ equity                        
                         
Interest-bearing borrowings                        
Borrowings under agreements to repurchase     45,250       18,376       2,899  
Other borrowings     8,041,892       7,431,208       1,172,244  
Accrued employee benefits     24,224       12,638       1,994  
Income taxes payable     154,957       148,677       23,453  
Deferred tax liabilities     151,829       108,802       17,163  
Lease liabilities     15,521       13,759       2,170  
Credit risk mitigation position     1,348,450       1,292,181       203,837  
Other liabilities     785,761       647,329       102,114  
Total liabilities     10,567,884       9,672,970       1,525,874  
                         
Ordinary shares (USD0.0001 par value; 3,800,000,000 shares authorized; 1,559,576,960 shares issued and 1,371,643,240 shares outstanding as of December 31, 2021 and March 31, 2022)     917       917       145  
Treasury stock           (2,105 )     (332 )
Additional paid-in capital     1,018,429       1,019,873       160,881  
Retained earnings     2,824,335       2,867,412       452,323  
Accumulated other comprehensive losses     (25,394 )     (27,633 )     (4,359 )
Total shareholders’ equity     3,818,287       3,858,464       608,658  
                         
Total liabilities and shareholders’ equity     14,386,171       13,531,434       2,134,532  

 

 

CNFINANCE HOLDINGS LIMITED

Unaudited condensed consolidated
statements of comprehensive income

(In thousands, except for earnings
per share and earnings per ADS)

 

    Three months ended March 31,  
    2021     2022     2022  
    RMB     RMB     US$  
Interest and fees income                  
                   
Interest and financing service fees on loans     421,980       414,660       65,411  
Interest on deposits with banks     3,082       2,749       434  
Total interest and fees income     425,062       417,409       65,845  
Interest
expenses on interest-bearing borrowings
   

(156,259

)

   

(200,890

)

   

(31,690

)

Total
interest and fees expenses

    (156,259 )     (200,890 )     (31,690 )
Net interest and fees income     268,803       216,519       34,155  
Collaboration cost for sales partners     (98,068 )     (79,604 )     (12,557 )
                         
Net interest and fees income after collaboration cost     170,735       136,915       21,598  
Provision for credit losses     17,188       (32,610 )     (5,144 )
Net interest and fees income after collaboration cost and provision for credit losses     187,923       104,305       16,454  
Realized gains on sales of investments, net     3,918       8,366       1,320  
Net gains on sales of loans     9,393       7,811       1,232  
Other gains, net     7,801       17,878       2,820  
Total non-interest income     21,112       34,055       5,372  
                         
Operating expenses                        
Employee compensation and benefits     (48,956 )     (43,048 )     (6,791 )
Share-based compensation expenses     (4,692 )     (1,443 )     (228 )
Taxes and surcharges     (6,706 )     (8,048 )     (1,269 )
Operating lease cost     (4,155 )     (3,548 )     (559 )
Other expenses     (29,711 )     (23,803 )     (3,755 )
Total operating expenses     (94,220 )     (79,890 )     (12,602 )
                         
Income before income tax expense     114,815       58,470       9,224  
Income tax expense     (29,235 )     (15,393 )     (2,428 )
Net income     85,580       43,077       6,796  
Earnings per share                        
Basic     0.06       0.03       0.005  
Diluted     0.06       0.03       0.005  
Earnings per ADS (1 ADS equals 20 ordinary shares)                        
Basic     1.25       0.63       0.10  
Diluted     1.19       0.63       0.10  
                         
Other comprehensive income/(losses)                        
Foreign currency translation adjustment     2,936       (2,239 )     (353 )
Comprehensive income     88,516       40,838       6,443  

 

 

8

 

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