But we believe this will eventually be a good foundation for long term for our sustainable profitability. Regarding asset quality, if you look at our net flow ratio over C-M3 net flow ratio, it didn’t change from the last quarter and then it still remains elevated from historical levels. As we said, it’s mostly because our declining new loan sales, thus decline in loan balance. But if you look at — if you want to have a different look free from this balance change, the [ full ] new loans generated in 2023 this year, we can see obvious improvements in the asset quality as compared with all the vintages. Although it’s obviously better than last year or 2 years ago, but it has not fully recovered back to before pre-COVID level in 2019. So in concluding in short, the asset quality for new loans obviously improving.
But as a whole portfolio, you cannot see the incremental net flow because of declining balance.
Operator: We now have our next question from Chiyao Huang of Morgan Stanley.
Chiyao Huang: I have two questions. One is, could you give us a little bit more color on the latest progress on the transition to 100% sure guarantee, especially with the arrangement with the funding partners? What type of institutions have been signing up for the new guarantee model? And what’s the new credit line given by those funding partners and how does that compare to previous CGI model? And the second question is, could you elaborate a little bit more on your new product strategy and client and strategy because we’re obviously transitioning to a higher quality or lower risk borrowers, but we’re still targeting around 20% loan pricing? So I guess I’m just wondering what’s the strategy to achieve that end while maintaining a similar pricing?
Gregory Gibb: Sure. Greg here. I’ll answer your questions. On the transition to the 100% guarantee model, we are very much in good shape that if we want, by the fourth quarter of this year, 100% of all new business can be done under this model. And that is what we will probably shoot to achieve. We’ve got out of our funding partners on ongoing process, so with 84 funding partners, 46 have already agreed to extend and out of this 46, a number have already starting to operate and cooperate with us under this model. This cuts across all types of funding partners. So be it large banks, mid-bank, smaller-sized banks and other trust-related cooperation that is — it’s across the board. So there isn’t a trend that says it’s just small banks signing up for the new model.
It is really all types. In terms of credit line that we were able to achieve with our funding partners under having the credit insurance versus now the guarantee, it is a transition process. Roughly, if you look at the line — I mean, some give actually more, some give less. But on average, we’re probably seeing a reduction of about 40% — 40% to 50%. But in the context of our focus on higher-quality customers and being more selective on regions in terms of the new business volume that we expect to generate this year and into next year, we have more than enough capacity with what we’ve got in place. The new guarantee model, based on our experience even in the past with CGI, once an institution cooperates with you on a model, they’re comfortable with the performance, the chance to increase credit lines going forward is always there.
So I think from a funding availability under the new model, really no issues at all. And in fact, given that all banks right now are being very tight on their own loan extensions, given their own views of the macro environment, being able to work with us where we do have the 100% guarantee, our assets are extremely attractive to them. And so we do see increasing competition amongst our funding partners to try and to get more business from us, right? So really no issue in terms of how it affects funding and the model will be very much complete, as I said, by the fourth quarter. In terms of the mix, right, I mean the — obviously, our focus is really on achieving that credit quality, really ensuring that the new business we do is getting back to as close to 2019 levels as possible.
