But directionally you will continue to see write-backs in the coming quarters. And we will — in terms of continued booking additional provision, we will take more prudent approach, based on where our observation of the macro environment, and if we feel necessary, we will book more provisions and to counter the potential risks. The provision coverage ratio you mentioned, the 511% versus last quarter’s 430% something, that’s not a metrics we have a target on. It’s more than a — rather than, it’s a calculated number. So we book the provision and then when we do the calculation, it happened to be 511% and so that’s not a something indication that we’re targeting a higher coverage ratio or something, no. It’s more — we book provision basically based on that quarter’s loan volume and third parties’ evaluation.
I will stop here. And the second part of question, I’ll hand over to Mr. Zheng.
Yan Zheng: We believe loan duration is a combined result of contractual tenor and early repayment. So first, I will talk about the early repayment. Early repayment was steadily declining, mainly due to the macro environment changes and the second reason is our operational efforts. From a macro perspective, the early repayment sentiment was cooling off. We have observed that the early repayment ratio for our historical loan portfolio has been decreasing for 4 consecutive months from April to July. And from operation perspective, we have refined our operation strategy to reduce the early repayment in 3 ways. The first is, we applied a new telemarketing rule, to incorporate the early repayment ratio into the KPI of the salespersons, so the salesperson tends to control this ratio.
Second, we offer some benefits to retain the users, when they have the intention for early repayments. Three, we reduced the 7-day interest free coupon to avoid those short-term borrowers. Based on those optimizations, we have seen improvement in our early repayment situation. As for contractual tenor, we won’t say shorter the better or vice versa. We offer the tenor based on the user’s profile. For example, for those who have stable income and higher creditworthiness, we tend to offer a longer tenor to lower their repayment pressure. But for those who have less long-term visibility, we tend to reduce the risk exposure and shorten the tenor to control the risk. So, different user profile and the ticket size, will have different impact on the short-term and the long-term credit risks.
We will further upgrade our self-developed GBST model, the Gradient Survival Tree model, to improve the fitness of long tenor and balance the profitability and risks. In conclusion, in the current macro conditions and our proactive management, we expect the early repayment ratio will further decline and our effective loan duration will increase in Q3. Hope this answered your question?
Operator: We’ll move on to the next questions from the line of Emma Xu from Bank of America Securities.
Emma Xu: So, I have two questions. The first one is about the loan demand in third quarter. We see the short-term consumption — household consumption loan declined RMB 42 billion in July and it seems the consumption recovery remained lackluster. So how — what’s your loan — what do you see — the loan demand at your side? And the second question is about loan pricing. So will the lackluster loan demand impact your loan pricing? And with the LPR being cut for twice since June, do you also need to adjust down your loan pricing?
Wu Haisheng : [Foreign Language] I will answer your question. We also noticed that the citizens’ short-term loan has decreased in this — in July. From our perspective, our loan balance continued to increase in July and August, unlike the declining trend of the citizens’ short-term loan balance. From demand perspective, since the beginning of this year, we have seen some structural changes in terms of users demand. From user quality perspective, the highest quality users tend to repay the loan earlier, while the lower quality users have relatively stable demand. And from the usage perspective, the broadly defined SME users are more active than the consumer credit users, especially for those in the construction, transportation, tourism, hotel and the catering industries.
