Operator, Conference Call Operator: Good day and thank you for standing by. Welcome to Lexin’s second quarter 2026 earnings conference call. At this time, all participants are in a listen only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question during the session, you need to press star followed by 1 1 on your telephone. Please be advised that today’s conference is being recorded. I will now like to hand the conference over to your first speaker today, Head of Capital Markets Mr. Will Tan. Thank you. Please go ahead.

Will Tan, Head of Capital Markets, Lexin: Thank you operator. Hello everyone, welcome to our second quarter 2026 earnings conference call. Our results were released earlier today and are currently available on our IR website. Today, you will hear from our Chairman and CEO, Mr. Jay Wenjie Xiao, who will provide an update on overall performance and the strategies of our business. Our CRO, Mr. Arvin Zhanwen Qiao, will then provide more details on our risk management initiatives and updates. Lastly, our CFO, Mr. James Xigui Zheng, will discuss our financial performance. Before we continue, I would like to refer you to our Safe Harbor statement in our earnings press release, which will also apply to this call as we will be making forward-looking statements. Last, please note that all figures are presented in RMB terms, and all comparisons are made on a quarter-over-quarter basis unless otherwise stated. Please kindly note Jay and Arvin will give their whole remarks in Chinese first. Then the English version will be delivered by Jay’s and Arvin’s AI-based voices. With that, I’m now pleased to turn over the call to Mr. Jay Wenjie Xiao, Chairman and CEO of Lexin. Please.

Jay Wenjie Xiao, Chairman and CEO, Lexin: 好的，大家好。首先由我向各位分享我们2026年二季度的经营情况。二季度以来，行业经营环境持续承压，特别是6月末行业个别平台出现风险事件，引发了行业资金供给的大面积暂停收紧，对行业生态和市场信心带来重大影响。公司的线上消费金融、普惠金融等助贷业务受到了较大程度的波及。为有效地降低对公司的影响，我们在近期果断地推进了以下的一些应对举措。第一，降本增效，提升穿越周期的能力。公司快速地调整组织架构，精简优化了部分人员，加快AI技术的应用，有效地降低了公司的运营成本，提升长期持续运营和应对周期变化的能力。第二，收紧风险管理，保持了资产质量的稳定。公司主动压降资产规模，审慎控制新增资产，确保新增资产风险稳定可控，提升业务发展的长期安全性。第三，加强财务管控，提高运营效率。我们重点推进应收账款和保证金的回收工作，实现担保助贷余额有序平稳下降，保障公司的资金安全与运营稳定。第四，坚定推进多元化的战略，加快推动业务的结构转型。在非助贷的业务上，公司具备多年积累的生态业务优势，我们持续加快从担保助贷向科技赋能转型，为未来的恢复打下比较好的基础。公司始终坚持合规经营放在首位，在当前行业的危机之下，仍然保持经营韧性，拥有持续的造血能力，长期经营安全可靠。下面我介绍一下公司二季度的具体情况。二季度公司实现交易额554.3亿元，营收31.9亿元，净利润1.01亿元。资产风险指标方面，受行业影响，入催率有所上升，但出催率也相应有所改善。面对行业的变化，我们对公司的长期发展仍然坚持信心，主要来自以下几个方面。第一，公司始终深耕场景科技零售业务独特优势。在政策导向和需求增长下，我们预计未来科技零售业务拥有良好的成长空间。公司将不断完善我们的供应链体系，围绕用户刚需场景消费需求，提升平台的经营效率。第二，To B数字科技业务保持较快增长，持续满足持牌机构优质资产的需求。公司多年深耕数字科技领域，行业优势显著。二季度，To B数字科技业务迎来较好的增长，实现了规模化的盈利。这项业务符合未来监管的导向，具备长期商业价值，我们将持续加大投入。第三，AI落地赋能业务降本显著。AI在业务全链条已经落地，效果比较显著，已上线100多个AI智能岗位，全面覆盖策略智能化生成、合规教验、贷后管理、智能客服等业务场景，助力公司完成降本目标。二季度公司运营成本环比下降17.6%。随着AI技术的持续落地，我们预计三季度公司成本将进一步下降。展望未来，单个事件带来的冲击仍将继续，行业依然存在较大的不确定性，我们将继续审慎经营。第一，我们将继续加强经营管理，优化财务状况，推进电商多元非助贷业务发展，坚定应对行业危机的信心。第二，我们把分红政策调整为一年一次，为业务的转型提供充足的资金储备和安全边际。第三，加快AI投入，尤其在科技赋能领域落地应用，联合合作伙伴加快资金的恢复。伴随行业逐步明朗，我们将结合公司的情况，积极探索多元股东回报政策，让大家更好地分享公司成长的收益。接下来我把发言时间交给Arvin，谢谢大家。

Jay Wenjie Xiao, Chairman and CEO, Lexin: Hi everyone, let me start by sharing our business performance for the second quarter of 2026. Since the second quarter, the industry operating environment has faced ongoing headwinds. Most notably, in late June, risk events involving certain peers triggered a widespread tightening and even suspension of funding supply across the industry, severely impacting the industry landscape and shaking market confidence. As a result, our loan facilitation operations across both online consumer finance and offline inclusive finance were materially affected. We swiftly took the following decisive measures to mitigate the impacts on us. First, driving cost efficiency to enhance resilience through market cycles. We rapidly streamlined our organizational structure, optimized headcount, and accelerated AI adoption. These measures effectively reduced operating expenses and enhanced our long-term sustainability through industry cycles. Second, tightening risk controls to maintain stable asset quality.

We proactively scaled back overall loan volume and adopted a prudent approach to new loan originations. This ensures the risk profile of new loans remains well controlled, safeguarding the long-term stability and resilience of our business. Third, strengthening financial discipline to enhance operational efficiency. We prioritize the recovery of receivables and security deposits, and drove a measured and steady scale down of facilitated loan balance, safeguarding our funding security and operational stability. Fourth, advancing our diversification strategy and accelerating business transformation. In our non-loan facilitation operations, we leveraged years of ecosystem advantages to accelerate our transition from a 担保助贷 model to a 科技赋能 model, laying a solid foundation for business recovery. We have always placed compliance at the forefront of our operations. Despite current industry headwinds, we continue to demonstrate strong operational resilience, maintain organic cash generation capability, and ensure long-term operational safety and reliability.

Now, let me walk you through our second quarter business performance. In the second quarter, we achieved a loan volume of 55.43 billion RMB, generated revenue of 3.19 billion RMB and net profit of 101 million RMB. On the risk front, while day one delinquency ratio picked up due to broader industry headwinds, our 30-day collection rate showed an improvement. Despite current industry volatility, we remain confident in our long-term prospects. Let me explain why. First, our deep integration with consumption scenarios gives our e-commerce business unique advantages. Supported by favorable policies and growing consumer demand, we expect our e-commerce business to enjoy healthy growth going forward. We will continue to refine our supply chain system around essential consumer needs and enhance overall operational efficiency. Second, our fintech empowerment business serving corporate clients maintains rapid growth, continuously satisfying licensed institutions’ demands for high quality assets.

Backed by years of expertise in digital technology, we have established a clear market leading position. In the second quarter, our fintech empowerment business delivered solid growth and achieved profitability. As this business well aligns with future regulatory directions and has long-term commercial value, we will continue to increase our investments in this area. Third, AI adoption across our operations has delivered tangible cost savings. AI has been effectively deployed across the entire business processes. Over 100 AI agent roles are currently deployed across key operational scenarios such as intelligent strategy generation, compliance check, post loan management, and smart customer services, all contributing to our cost reduction targets. In the second quarter, our operating expenses decreased by 17.6% quarter-over-quarter. As AI adoption continues to gain traction, we expect further cost reductions in the third quarter.

Looking ahead, the impact of the standalone event may persist and industry uncertainties remain significant. We will continue to adopt a prudent operational approach by adopting the following initiatives. First, we will continue to strengthen our operational management, improve our financial position, and advance the development of non-loan facilitation business like e-commerce to navigate this industry headwind with confidence. Second, we are adjusting our dividend policy to an annual distribution to provide sufficient capital reserves and a financial buffer for our business transformation. Third, we will accelerate AI investment, particularly in the tech-empowered service space, and work with our partners to expedite the recovery of funding supply. When industry certainty gradually emerges, we will actively explore various shareholder return initiatives in light of our own circumstances, enabling our investors to better share in the value created by the company.

With that, I will now turn the call over to our CRO, Arvin. Thank you.

Jay Wenjie Xiao, Chairman and CEO, Lexin: 二季度受新规持续影响，助贷行业流动性供需偏紧，存量资产风险有所反弹，存量资产入催率环比上涨9.5%左右。90+余额不良率从3.5%上升到

Arvin Zhanwen Qiao, Chief Risk Officer (CRO), Lexin: 3.6。三季度助贷资金供给进一步收紧，新增放款大幅下降。我们预计存量资产风险环比仍将面临上行压力，叠加余额规模持续收缩，90+余额不良率预计仍将上涨。在存量资产风险管理方面，我们持续加强入催管理、差异化还款短信提醒等多种方式，来控制存量风险上升幅度。同时加大风险拨备计提，保障存量资产规模有序压降退出。在新增资产风险管理方面，二季度我们针对行业新的风险形势，持续收紧新增放款标准。二季度新放款FPD30环比Q1小幅上涨4.6%左右。三季度我们会继续加强审核以及多头管控，收紧准入标准，拦截高风险资产，确保新增资产风险保持稳定。在风控能力升级方面，我们持续加大AI风控能力探索和建设，并且取得了不错的成效。在信贷审批领域，我们成功推动信审agent从辅助人工决策走向自主风控决策，其自主拒绝的风险识别能力达到人工审核的三倍，符合建议达到人工的1.2倍，并仍在快速迭代升级。此外，我们正在开发内部风控agent专家平台，打通底层大数据，汇集各种风控角色专业技能与本地大模型算力的闭环，让大部分风控任务实现AI专家化与标准化。这一举措不仅将通用风险模型和常规策略的产出效率提升了5倍以上，更为我们未来向行业进行科技输出、风控赋能做好能力储备。展望未来，虽然短期受行业影响，风险有所波动，但我们有信心在严控风险的前提下，保障存量资产有序压降，新增资产质量平稳运行，为后续稳健经营打下坚实基础。

Jay Wenjie Xiao, Chairman and CEO, Lexin: In the second quarter, under the ongoing impact of the new regulations, funding supply across the industry remained tight, leading to a rebound in asset risk within our existing portfolio. Day 1 delinquency ratio across our total assets rose by roughly 9.5% quarter-over-quarter, while 90-day plus delinquency ratio rose from 3.5% to 3.6%. In the third quarter, as funding supply tightened further and new loan originations dropped sharply, we expect risk indicators on our outstanding loan portfolio to continue trending upwards on a sequential basis. Compounded by a shrinking loan balance, the 90-day plus delinquency ratio is expected to rise further. Regarding the risk management of our existing portfolio, we continue to strengthen early-stage collections and implement differentiated SMS repayment reminders, among other measures, to control the magnitude of risk elevation. Meanwhile, we are stepping up provisioning and ensuring an orderly runoff of these existing assets.

On the new loan front, we proactively raised our underwriting standards in response to the evolving risk landscape during the second quarter, limiting the quarter-over-quarter uptick in FPD30 to a minor level of around 4.6%. For the third quarter, we will maintain tight entry criteria, strengthen risk assessment for borrowers with cross-platform debt, and filter out high-risk applicants to maintain a stable risk profile for our new loans. On the technology front, our continued investments and explorations in AI-driven risk control are yielding meaningful results. In credit approval, our 信审agent has evolved from merely assisting human reviewers to making autonomous decisions. Notably, its risk detection capability is 3 times that of manual review for autonomous rejection and 1.2 times for review recommendations, and it continues to iterate rapidly.

Beyond that, we are building an internal 风控agent expert platform by integrating underlying big data, domain expertise across risk management roles, and localized LLM capabilities into a seamless closed loop. We are enabling AI-driven expertise and standardization across the majority of our risk management tasks. This initiative has not only boosted the output efficiency of general risk models and routing strategies by over 5 times, but also positioned us well for future 科技赋能 and risk solution offerings to the industry. Looking ahead, while risk may experience short-term fluctuations due to industry headwinds, we are confident that with stringent risk control in place, we can ensure an orderly runoff of existing assets and steady asset quality for new loans, laying a solid foundation for sustainable operations. Next, I will hand over to our CFO, James, to provide a review of the company’s financial performance for the second quarter.

James Xigui Zheng, Chief Financial Officer (CFO), Lexin: Thanks, Arvin. I will now provide a detailed overview of our second quarter financial results. Please note that all figures are presented in RMB terms, and all comparisons are made on a quarter-over-quarter basis unless otherwise stated. During the second quarter, we continued to advance our business transformation and the new regulatory framework that took effect in the fourth quarter last year, achieving progress that largely met our expectations. However, the landscape has shifted notably just before the second quarter ended. Before I dive into our second quarter financial details, I would like to briefly address recent developments that have created some uncertainty for the industry. Recently, risk events involving certain industry players have triggered heightened regulatory scrutiny. This raised caution among funding partners, leading to an ongoing sector-wide tightening of funding supply. This has impacted loan volumes across the industry, including Lexin.

That being said, I would like to emphasize two key points to our investors. First, compliance has always been our operational bottom line. We have never engaged in any similar non-compliant practices, and our business operations stand up to strict scrutiny. Second, we currently have a cash position of RMB 2.5 billion, which provides a financial buffer to help us navigate industry volatility and ensure the steady operations of our business. I will talk more about the impact of these recent developments and our countermeasures later in my remarks. With this context, let’s now review our second quarter financial performance. During the second quarter, total loan origination volume was RMB 55 billion, representing a 4.3% decrease sequentially, due to the continuous decline in our consumer finance business, and partially offset by the steady growth of our 科技赋能 business and e-commerce business.

Total revenue came in at RMB 3.2 billion, and net income stood at RMB 101 million. Now, let me dive into the details and walk you through the key numbers. First, the net revenue of the credit business, which is derived by adding up credit facilitation service income and tech empowerment service income, net of credit costs, which consists of provisions, and the fair value changes and funding costs, was RMB 981 million, representing a 32.5% or RMB 473 million decrease quarter-over-quarter. This was due to the decline of both credit facilitation service income and the tech empowerment service income. Specifically, credit facilitation service income, representing our capital-heavy business, decreased by 43.6% to RMB 508 million, primarily driven by lower loan volumes in our online consumer finance business, rising funding costs, and our prudent decision to maintain adequate provisioning.

Meanwhile, our tech empowerment service income, representing our capital-light business, decreased by 14.4% to RMB 473 million. This was mainly attributable to the revenue decrease from value-added services and the scale-down of legacy ICP portfolios. Second, net revenue of the installment e-commerce business, defined as the installment e-commerce revenue, net of cost of inventory sold, increased by RMB 122 million to RMB 329 million. The total net revenue summing the credit business and the installment e-commerce business added up to RMB 1.3 billion, a 21.1% or RMB 351 million decrease quarter-over-quarter. On the expense side, operating expenses, including sales and marketing, research and development, general and administrative expenses, and processing and servicing costs, decreased by 17.6% or RMB 244 million to RMB 1.2 billion. Tax and others decreased by 9.3% or RMB 6 million to RMB 62 million. Consequently, total expenses added up to RMB 1.2 billion, a decrease of 17.2% or RMB 251 million.

By deducting the total expenses of RMB 1.2 billion from the total net revenue of RMB 1.3 billion, we arrive at a net income of RMB 101 million, a decrease of 49.7% or about RMB 100 million quarter-over-quarter. To sum up, the decrease in this quarter’s net income was largely attributable to three combined factors, a revenue decrease resulting from the ongoing scale-down of our loan facilitation business due to regulatory impact, an increase in provisioning driven by our prudent risk approach, and despite our cost optimization efforts, expense reduction lacked top-line contraction, temporarily squeezing our near-term profitability. Now I would like to walk you through the three key highlights from this quarter. First, the growing diversification of our business mix. While our overall loan origination volume experienced a minor decline of 4.3% in the second quarter, our 科技赋能 service successfully bucked the trend with continued growth of 8%.

As a result, the loan volume contribution from our fintech empowerment and the e-commerce business has now reached 45%. As we discussed last quarter, the steady expansion of our fintech empowerment business continues to lay the groundwork for highly visible long-term revenue pipeline and higher asset quality. Complementing this pivotal shift, our installment e-commerce business maintained a steady momentum, continuing to serve as reliable stabilizer for our broader portfolio. Second, the solid growth and expanding profitability of our installment e-commerce business. Consistent with our strategy from the previous quarter, we maintained a disciplined approach, prioritizing asset quality and risk control over sheer volume expansion amidst the current macro environment. As a result, our e-commerce loan volume maintained stable at RMB 2.3 billion. More importantly, our ongoing focus on operational refinement yielded solid profitability improvement.

Gross profit for this segment reached RMB 329 million, representing a 58.7% increase, while gross profit margin expanded from 9.4% last quarter to 14.1%. By seamlessly integrating consumption scenario into our broader ecosystem, this segment continues to serve as a valuable revenue driver, adding another layer of resilience to our diversified revenue streams. Third, our prudent provisioning strategy. The industry dynamics unfolding in late June, including a tightened funding supply and as anticipated, upward tick in sector-wide risk resulting from peer-level risk events, which I noted earlier, have introduced a new market complexity. Incorporating these cautious forward-looking industry expectations into our risk assessment models, we adopted a more conservative provisioning approach for our second quarter portfolio. As a result of this strict and prudent stance, our overall credit cost increased 9.6% sequentially to RMB 1.4 billion during the quarter. To better understand of our provisioning, let’s look at our gross provision metrics.

By stripping out the net accounting impact of fair value changes, our gross provision ratio for new capital-heavy loans was at 7.8%, higher than the last quarter. Furthermore, our provision coverage ratio remained robust at 230%. Now let’s move on to our operating expense items. On the cost and expense side, our total operating expenses decreased by 17.6%, or RMB 244 million to RMB 1.1 billion, mainly due to the decrease of the sales marketing expenses of RMB 165 million and partially offset by a one-time decrease in G&A expenses, driven by costs associated with our organizational optimization. For balance sheet items, as of June 30th, our cash position, which includes cash equivalents, and restricted cash, was approximately RMB 2.5 billion. Shareholders’ equity remains solid at about RMB 12 billion. Now turning to our business outlook.

As I mentioned earlier, the recent risk events involving certain players have created sector-wide impacts, and Lexin has not been immune to these headwinds. Specifically, we are facing two main challenges. First, a contraction in new loan volumes. Second, the liquidity squeeze resulting from funding supply has constrained some borrowers’ cash flows and could potentially impair their repayment capacity, leading to increased risk volatility in the coming quarters. Against this backdrop, we are taking proactive and decisive measures to navigate this environment. First, we are maintaining dialogue with our funding partners to reinforce mutual trust. This ensures that we are well-positioned to resume normal funding supply as soon as the market conditions permit. Second, amidst the industry-wide funding squeeze, we are prioritizing cash flow management while optimization and operational efficiency, including staff reduction, to safeguard our core business fundamentals.

Third, like Jay mentioned earlier, we are proactively exploring new business models centering on technology empowerment services for To B and consumer. These initiatives will safeguard our long-term sustainable growth and lay a solid foundation for our future business trajectory. Looking ahead, given the regulators heightened their scrutiny to resolve the risks associated with certain industry players, along with the potential introduction of new industry regulations, we have limited visibility on when funding partners will resume normal operations, and the exact timeline for our loan volumes to normalize remains uncertain. Compounded by the industry-wide liquidity squeeze, we expect our revenue to further decrease and the credit risks and the costs to trend upward in the third quarter, for which we will make adequate provisions. Additionally, we have initiated a series of organizational optimization to navigate industry uncertainties with the resulting one-time expenses primarily recognized in the third quarter.

Consequently, we expect the company to record a net loss in the third quarter. As for the remainder of the year, due to the limited visibility at this time, we will provide further guidance as the year progresses. In light of ongoing industry uncertainties, the board has made a decision to adjust our dividend distribution policy from a semiannual to annual payment. Therefore, any potential dividend declarations for 2026 will be assessed when we announce our fourth quarter results in early 2027. This proactive step allows us to optimize liquidity, fortify our core operations, and maintain strategic flexibility needed to navigate near-term market volatility. I want to emphasize that delivering shareholder value remains our top priority, and we view this as a prudent adjustment that may be temporary as the market visibility improves.

The board will actively reassess our capital allocation strategy and explore renewed initiatives to drive shareholder returns. In conclusion, while navigating this industry-wide transition, we are taking decisive and proactive measures to safeguard our liquidity, protect the long-term shareholder value, and pivot ourselves for sustainable growth once the market normalizes. Operator, we are now ready to open the lines for questions.

Operator, Conference Call Operator: Thank you. As a reminder, to ask a question, you need to press star 1 and 1 on your telephone. For the benefit of all participants, if you wish to ask your questions to management in Chinese, please translate them to English. One moment for the first question. Our first question comes from the line of Judy Zhang of Citi. Your line is open. Please go ahead.

Judy Zhang, Analyst, Citi: Let me translate. I have two questions. The first question is, what is your take on the recent risk events in the industry? How has it affected the industry and your business, and what steps are you taking in response? The second question is, how do you expect the risk trend to evolve in the third quarter? Thank you.

James Xigui Zheng, Chief Financial Officer (CFO), Lexin: This is the translation for Jay’s remarks. The recent risk events involving certain peers have triggered a crisis of confidence among funding providers, causing a broad-based tightening and even suspension of funding supply across the industry. That said, these are isolated cases, though they do involve potential criminal conduct, and we would not be surprised to see more regulatory measures follow. We expect funding supply in the loan facilitation sector to remain tight for a while, and the adjusting period will likely last longer than initially expected. As for us, we have always operated strictly in compliance with regulations, and we do not have any of the issues seen at these institutions. But we are not immune to the broader industry trend. With funding supply tightening, our loan facilitation business took a meaningful hit in July.

As a result, new loan originations have contracted notably and asset quality is facing further volatility in line with the broader markets. That said, we are in a solid position. We have ample capital reserves and organic cash generation capability to meet the needs of ongoing operations. We remain on the white list of major funding partners, which should allow us to resume loan origination as soon as conditions allow.

Judy Zhang, Analyst, Citi: We have sufficient provision in place to manage an orderly wind down of existing portfolios.

Jay Wenjie Xiao, Chairman and CEO, Lexin: 面对新的行业环境，公司经营战略正在加速调整。我们将聚焦以下核心的几个方向。第一，我们还是要坚持多元化的战略，加快推动科技的转型。经济持续增长，为信贷需求提供了底层的支撑。金融机构合规自营将成为行业的趋势，公司顺应这一趋势，大力发展科技赋能模式，利用平台流量、风控、AI科技及运营能力，全方位助力金融机构发展自营业务，实现低风险、可持续的增长。在科技业务上，公司具备多年积累的生态业务优势，我们将继续推动从融担助贷模式向科技赋能模式转变，为未来长期稳定的发展打下基础。同时，电商业务也将稳定地发展并持续贡献利润。这些多元的业务是我们与其他相比的一个竞争优势。

Judy Zhang, Analyst, Citi: In response to the new environment, we are accelerating our transaction focusing on a few key areas. First, we are doubling down on our diversification strategy and accelerating on our tech empowerment transition. As economic growth continue to provide underlying support for credit demand, we see a clear industry trend for financial institutions to develop their own lending business compliantly. We are well positioned to ride this trend with our 科技赋能 model. Leveraging our capabilities in traffic, risk management, AI and operations to help financial institutions grow their lending business in a low risk and sustainable way. We’ve been building our ecosystem for years and we are advancing the transition from 担保助贷 backed loan facilitation model to a 科技赋能 model, and that positions us well for long term sustainable growth ahead. Meanwhile, it’s worth stressing that our e-commerce business will keep growing steadily and continue to contribute profit. These diverse businesses are our differentiated advantages compared with our peers.

Jay Wenjie Xiao, Chairman and CEO, Lexin: 继续推动降本增效，提升公司穿越周期的能力。公司已经推进一系列的组织精简与效率提升，管理成本未来预计将降低30%到40%。调整后组织响应速度会更快，人效会显著的提升，长期持续运营和应对周期变化的能力将进一步得到加强，为公司转型发展提供有力的保障。AI驱动运营的升级，公司将人工智能技术更深入地嵌入到核心运营、风险、客户服务等各环节。通过AI智能化升级精简流程，提升效率，进一步压降经营成本，确保公司在周期波动中保持坚毅的运营能力。展望未来，我们认为助贷行业监管和资金收缩的态势短期之内不会改变，恢复需要更长的时间。短期内，公司将继续审慎经营，确保风险资产有序压降。中长期通过科技赋能金融机构与AI驱动运营效率的提升，加速向科技模式转型，以适应监管新常态，并为长期稳定增长奠定基础。

Judy Zhang, Analyst, Citi: Second, we are driving cost efficiency to strengthen our ability to navigate industry cycle. We’ve rolled out a series of organizational streamlining and efficiency measures, and we expect management costs to come down by 30%-40%. As a result, we are seeing faster decision making, significantly higher productivity per employee and a stronger foundation for long term operational sustainability and resilience to market cycle, all of which create a runway we need to execute our transformation. Third, we are deepening our AI integration across the board in key operations, risk management and customer services. By embedded AI more deeply into our processes, we are simplifying workflows, improving efficiency, and further reducing operating costs so that we stay lean and agile even in a volatile environment. Looking ahead, we don’t expect the regulatory and funding environment to ease anytime soon. Recovery will take time. In the near term, we will stay disciplined, continue to adopt prudent operational approach, and ensure an orderly wind down of risk assets. Over the medium to long term, we will accelerate the transition to a 科技赋能 model by empowering financial institutions with our technology solutions and driving our operational efficiency through AI so that we are well adapted to the new regulatory landscape and positioned for long term sustainable growth. Thanks.

Arvin Zhanwen Qiao, Chief Risk Officer (CRO), Lexin: 好，我来回答一下关于Q3的风险情况。受6月底行业风险事件的影响和冲击，行业整个流动性的供给受到显著的影响，从而导致一些风险指标在近期出现波动上涨的情况。展望第三季度，我们预估助贷资金供给将进一步收紧，叠加我们主动地进行风险管理和控制，预计新增放款规模会有明显的下降。受此影响，我们预计存量资产的风险较Q2仍将面临上行的压力。同时叠加余额规模的持续收缩，我们90+余额不良率预计也将有一定的上涨。同时在催收方面，因为行业合规收紧以及近期政策的影响，预计回款率也会受到一定的影响，出现一定的下降。针对这个行业风险，我们持续加强审慎的风险管理策略，足额地进行风险拨备计提。我们将有序地推进存量资产的压降和退出，努力把风险的波动幅度控制在公司的偏好之内。

Judy Zhang, Analyst, Citi: This is the translation for Arvin’s remarks. Following the industry risk event in late June, we did see some volatilities in a few risk indicators recently, driven by a sector-wide liquidity shock. Looking ahead to Q3, with funding supply tightening further and our active risk management measures in place, new loan originations will decline materially. As a result, we expect existing portfolio risk to remain upward pressure sequentially. Compounded by a further contracting loan balance, the 90+ delinquency ratio is expected to rise further. On the collection side, due to the industry-wide regulatory campaign and higher compliance requirements for loan collection practices, our collection rate will also see a decline. That said, with our prudent risk approach and adequate provisioning, we have the capability to manage an orderly wind down of existing risk assets. Our goal is to keep any risk fluctuation within our risk appetite.

Operator, Conference Call Operator: Thank you for the question. Please hold for our next question. The next question will come from the line of Alex Ye of UBS. Your line is open. Please go ahead.

Alex Ye, Analyst, UBS: [Foreign language] My question is, given the impact of recent industry risk event, how should we think about the financial performance for the second half of the year? Thank you.

James Xigui Zheng, Chief Financial Officer (CFO), Lexin: This is James, I am going to take this question. Looking ahead to the second half, the overall market visibility still remains limited, given the ongoing uncertainties around the funding supply recovery and the regulatory trends. As a result, we are not providing any specific financial guidance at this point. However, against the backdrop of sector-wide liquidity tightening, we expect our third quarter performance to be under pressure, mainly due to the following factors. On the revenue side, obviously the sector-wide funding tightening had a material impact on our new loan originations in supply in July and August, the last 2 months. If this situation continues, our Q3 loan origination volume will come down a lot, which will directly weigh on our top line. On the cost and expense side, there are 2 structural factors at play. One is the credit cost. Liquidity tightening across the sector has led to an uptick in default risks within our existing portfolio. In line with our prudent risk management approach, we will set aside sufficient provisions for the associated potential risks, which obviously will drive up the credit cost for the quarter. Second, the operating expenses. In Q3, we proactively streamlined our organizational structure, optimized headcount, and enhanced efficiency. This generated a one-off severance related cost, which will temporarily drive up our G&A expenses for the quarter. Over the long run, however, the benefits of these cost savings and efficiency initiatives will gradually flow through to our financials. If I factor in all of this, we expect the company to record a net loss in the third quarter. For Q4, we will update our business and financial guidance as we get more clarity on the regulatory front. While the short-term performance is under pressure, we are steadily resolving existing portfolio risks, advancing our technology-empowered transformation, and driving organizational efficiency. This will for sure solidify our capitalized operation foundations and position ourselves well for steady, resilient growth under the new regulatory cycle.

Operator, Conference Call Operator: Thank you for the question. Our next questions will come from the line of Yu Jie Jing of CICC. Please go ahead.

Yu Jie Jing, Analyst, CICC: 感谢公司给我这个提问的机会，我是中金公司的金玉洁。想请教一下管理层关于股东回报的问题。上半年公司调整了分红政策，那公司对股东回报的长期计划是怎样的？

Judy Zhang, Analyst, Citi: Let me quickly translate my question. Following the change to your dividend policy, how should we view your long term plans to return value to shareholders? Thanks.

Jay Wenjie Xiao, Chairman and CEO, Lexin: 好的。近期由于同业风险事件引发了行业的一个波动，董事会经过审慎的评估，决定将公司的分红周期由半年度调整为年度。董事会认为，保持充裕的流动性和财务韧性，为业务转型提供充足的资金储备和安全边际，有助于公司在行业调整期内能够稳健运行，这也将更好地保护股东长期的利益。在此，我也想向大家明确，管理层致力于持续创造并回馈股东价值的理念从未动摇。随着未来行业逐渐复苏，公司业绩逐步恢复，董事会将会结合公司的实际状况，积极评估包括回购在内的多元化股东回报的路径。

Judy Zhang, Analyst, Citi: In response to the recent industry volatility triggered by recent events at certain peers, the board, after careful consideration, has decided to change our dividend distribution from a semi-annual to an annual schedule. The board believes that maintaining ample liquidity and financial flexibility and preserving sufficient capital resources and financial buffers for our business transformation will help us navigate the industry adjustment more smoothly, and that, in turn, will better protect long-term shareholder interest. I would like to stress that our commitment to creating and returning value to shareholders has not wavered. As the industry gradually recovers and the business performance improves over time, the board will actively evaluate a range of shareholder return options, including share buybacks based on our specific circumstances at that time. Thank you.

Operator, Conference Call Operator: Thank you for the questions. At this time, there are no further questions from the line. I would like to hand the call back to management for closing.

Will Tan, Head of Capital Markets, Lexin: Thank you. This conference is now concluded. Thank you for joining today’s call. If you have any more questions, please do not hesitate to contact us. Thanks again.

Operator, Conference Call Operator: That concludes today’s conference call. Thank you for your participation. You may now disconnect.