Lufax Reports First Quarter 2024 Financial Results

SHANGHAI, April 22, 2024 /PRNewswire/ -- Lufax Holding Ltd ("Lufax" or the "Company") (NYSE: LU and HKEX: 6623), a leading financial services enabler for small business owners in China, today announced its unaudited financial results for the first quarter ended March 31, 2024.

First Quarter 2024 Financial Highlights

• Total income was RMB6,964 million (US$964 million) in the first quarter of 2024, compared to RMB10,078 million in the same period of 2023.
• Net loss was RMB830 million (US$115 million) in the first quarter of 2024, compared to net profit of RMB732 million in the same period of 2023.

First Quarter 2024 Operational Highlights

• Outstanding balance of loans enabled was RMB270.2 billion as of March 31, 2024 compared to RMB495.2 billion as of March 31, 2023, representing a decrease of 45.4%.
• Cumulative number of borrowers increased by 12.4% to approximately 21.7 million as of March 31, 2024 from approximately 19.4 million as of March 31, 2023.
• New loans enabled were RMB48.1 billion in the first quarter of 2024, compared to RMB57.0 billion in the same period of 2023, representing a decrease of 15.6%.
• During the first quarter of 2024, excluding the consumer finance subsidiary, the Company bore risk on 100% of its new loans enabled, up from 22.6% in the same period of 2023.
• As of March 31, 2024, including the consumer finance subsidiary, the Company bore risk on 48.3% of its outstanding balance, up from 24.5% as of March 31, 2023. Credit enhancement partners bore risk on 50.1% of outstanding balance, among which Ping An Property & Casualty Insurance Company of China, Ltd. accounted for a majority.
• As of March 31, 2024, excluding the consumer finance subsidiary, the Company bore risk on 41.6% of its outstanding balance, up from 20.4% as of March 31, 2023.
• For the first quarter of 2024, the Company's retail credit enablement business take rate^[1] based on loan balance was 9.0%, as compared to 7.3% for the first quarter of 2023.
• C-M3 flow rate^[2] for the total loans the Company had enabled, excluding the consumer finance subsidiary, was 1.0% in the first quarter of 2024, compared to 1.2% in the fourth quarter of 2023. Flow rates for the general unsecured loans and secured loans the Company had enabled were 1.0% and 0.7% respectively in the first quarter of 2024, as compared to 1.4% and 0.8% respectively in the fourth quarter of 2023.
• Days past due ("DPD") 30+ delinquency rate^[3] for the total loans the Company had enabled, excluding the consumer finance subsidiary, was 6.6% as of March 31, 2024, as compared to 6.9% as of December 31, 2023. DPD 30+ delinquency rate for general unsecured loans was 7.4% as of March 31, 2024, as compared to 7.7% as of December 31, 2023. DPD 30+ delinquency rate for secured loans was 4.5% as of March 31, 2024, as compared to 4.4% as of December 31, 2023.
• DPD 90+ delinquency rate^[4] for total loans enabled, excluding the consumer finance subsidiary, was 4.4% as of March 31, 2024, as compared to 4.1% as of December 31, 2023. DPD 90+ delinquency rate for general unsecured loans was 5.0% as of March 31, 2024, as compared to 4.6% as of December 31, 2023. DPD 90+ delinquency rate for secured loans was 2.6% as of March 31, 2024, as compared to 2.6% as of December 31, 2023.
• As of March 31, 2024, the non-performing loan (NPL) ratio^[5] for consumer finance loans was 1.6% as compared to 1.5% as of December 31, 2023.

Mr. YongSuk Cho, Chairman and Chief Executive Officer of Lufax, commented, "During the first quarter, we maintained our emphasis on quality over quantity as we continued to prioritize operational prudence and long-term stability. Following the completion of five major de-risking and diversification actions, including four mix changes and one business model adjustment, we witnessed some improvements in our early risk indicators. However, we maintained a patient approach to ensure that this success will be sustainable. We have strategically shifted our product mix from SBO loans to a more diverse approach which puts a greater emphasis on consumer finance products. Meanwhile, all new loans during the quarter were either granted by our consumer finance subsidiary or enabled by our guarantee company under our 100% guarantee model. This switch will have a positive impact on our take rate as it eases the burden of elevated CGI premiums, though the upfront provisioning of these loans means our bottom-line will take longer to recover. In terms of asset quality, the C-M3 flow rate for our Puhui business improved from the fourth quarter of 2023 to the first quarter of 2024. Having already witnessed preliminary enhancements to some key operating metrics, we believe that our strategic initiatives have created a solid foundation for ongoing success. We will remain vigilant, and plan to embrace a cautious approach to our operations for the foreseeable future."

Mr. Gregory Gibb, Co-Chief Executive Officer of Lufax, commented, "We began to feel the impact of our refined strategic initiatives during the first quarter of 2024. We witnessed the growth of our consumer finance business, with consumer finance loans accounting for 42% of new loan sales in the quarter, up from 24% in the same period last year. Consumer finance loans now comprise 14% of our total balance, an increase from both the year and quarter prior. We have also been growing the portion of loans under our 100% guarantee model, with 26% of Puhui's loan balance now enabled under this model. As of the end of the first quarter, our take rate stood at 9.0% as we built up this balance, and we expect it to rise further in the future through ongoing strategic execution. The improvement in the macro environment, removal of temporary negative impacts from our geographic and direct sales restructuring in the third quarter, and the vintage run off as we build up a new book helped improve our asset quality."

Mr. David Choy, Chief Financial Officer of Lufax, commented, "We remain committed to ongoing cost optimizations, as evidenced by the 37% year-over-year decrease in total expenses, excluding credit and asset impairment losses, finance costs, and other losses, and the 27% year-over-year decrease in our total expenses. Furthermore, our leverage level remains low, and both of our main operating entities are well-capitalized. Our guarantee subsidiary's leverage ratio increased to 2.4x, driven by the increase of our guarantee balance associated with our increased risk exposure and the decrease of net assets due to the distribution of dividends, compared to a maximum regulatory limit of 10x. Our consumer finance company's capital adequacy ratio stood at approximately 15.1%, exceeding the required 10.5% regulatory requirement. As of March 31, 2024, our cash at bank balance amounted to RMB39.4 billion."

First Quarter 2024 Financial Results

TOTAL INCOME

Total income was RMB6,964 million (US$964 million) in the first quarter of 2024, compared to RMB10,078 million in the same period of 2023, representing a decrease of 31%.

• Technology platform-based income was RMB2,553 million (US$354 million) in the first quarter of 2024, compared to RMB5,010 million in the same period of 2023, representing a decrease of 49.0%, due to 1) the decrease of retail credit service fees due to the decrease in new loan sales and loan balance and 2) the decrease of referral and other technology platform-based income due to the decrease in transaction volume.
• Net interest income was RMB2,845 million (US$394 million) in the first quarter of 2024, compared to RMB3,349 million in the same period of 2023, representing a decrease of 15.0%, mainly due to the decrease in loan balance, partially offset by the increase of net interest income from the Company's consumer finance business.
• Guarantee income was RMB925 million (US$128 million) in the first quarter of 2024, compared to RMB1,417 million in the same period of 2023, representing a decrease of 34.7%, primarily due to the decrease in loan balance and a lower average fee rate.
• Other income was RMB319 million (US$44 million) in the first quarter of 2024, compared to other income of RMB227 million in the same period of 2023. The increase was mainly due to the increased account management fees driven by improved collection performance.
• Investment income was RMB322 million (US$45 million) in the first quarter of 2024, compared to RMB75 million in the same period of 2023, mainly due to the decrease of losses associated with certain risk assets, offset by the increase of income from investment assets.

TOTAL EXPENSES

Total expenses decreased by 27% to RMB6,517 million (US$903 million) in the first quarter of 2024 from RMB8,964 million in the same period of 2023. This decrease was mainly due to the decrease in sales and marketing expenses by 50% to RMB1,518 million (US$210 million) in the first quarter of 2024 from RMB3,030 million in the same period of 2023. Total expenses excluding credit impairment losses, finance costs and other (gains)/losses decreased by 37% to RMB3,580 million (US$496 million) in the first quarter of 2024 from RMB5,685 million in the same period of 2023.

• Sales and marketing expenses decreased by 49.9% to RMB1,518 million (US$210 million) in the first quarter of 2024 from RMB3,030 million in the same period of 2023. The decrease was mainly due to 1) the decreased loan-related expenses as a result of the decrease in loan balance and 2) decreased retention expenses and referral expenses from platform service attributable to the decreased transaction volume.
• General and administrative expenses decreased by 36.2% to RMB483 million (US$67 million) in the first quarter of 2024 from RMB756 million in the same period of 2023, mainly due to the Company's expense control measures and the decrease in taxes and surcharges.
• Operation and servicing expenses decreased by 14.8% to RMB1,327 million (US$184 million) in the first quarter of 2024 from RMB1,558 million in the same period of 2023, due to the Company's expense control measures and decrease of loan balance, partially offset by increased commission associated with improved collection performance.
• Technology and analytics expenses decreased by 26.1% to RMB252 million (US$35 million) in the first quarter of 2024 from RMB341 million in the same period of 2023, primarily due to the Company's improved efficiency and expense control measures.
• Credit impairment losses decreased by 8.6% to RMB2,861 million (US$396 million) in the first quarter of 2024 from RMB3,132 million in the same period of 2023, mainly due to the decrease in provision of loans and receivables as a result of the improvement of credit performance.
• Finance costs decreased by 69.2% to RMB58 million (US$8 million) in the first quarter of 2024 from RMB189 million in the same period of 2023, mainly due to the decrease of interest expenses as a result of repayment of C-Round Convertible Promissory Notes and other debts, partially offset by the decrease of interest income from bank deposits.
• Other losses were RMB17 million (US$2 million) in the first quarter of 2024, compared to other gains of RMB42 million in the same period of 2023, mainly due to the increase of foreign exchange losses.

NET LOSS

Net loss was RMB830 million (US$115 million) in the first quarter of 2024, compared to a net profit of RMB732 million in the same period of 2023, as a result of the aforementioned factors and increased withholding tax of RMB1,050 million associated with one-off dividends that were paid by the Company's PRC subsidiaries in order to support the distribution of the special dividend the Company announced on March 21, 2024.

LOSS PER ADS

Basic and diluted loss per American Depositary Share ("ADS") were both RMB1.52 (US$0.21) in the first quarter of 2024. Each one ADS represents two ordinary shares.

BALANCE SHEET

The Company had RMB39,442 million (US$5,463 million) in cash at bank as of March 31, 2024, as compared to RMB39,599 million as of December 31, 2023. Net assets of the Company amounted to RMB92,825 million (US$12,856 million) as of March 31, 2024, as compared to RMB93,684 million as of December 31, 2023.

Change in Management Team

Mr. David Siu Kam Choy has tendered his resignation as the chief financial officer of the Company due to personal reasons. Mr. Peiqing Zhu has been appointed as the new chief financial officer and the board secretary of the Company. This change will take effect on April 30, 2024.

Mr. Zhu joined Ping An Bank in April 2018, where he served as the general manager of the financial planning department at the Head Office of Ping An Bank from April 2018 to April 2024. Prior to that, Mr. Zhu served as the managing partner of the financial services industry in Greater China at Capgemini China from May 2016 to April 2018 and as the first vice president and deputy chief financial officer at United Overseas Bank (China) from May 2013 to May 2016. From June 2003 to May 2013, he held various positions at PricewaterhouseCoopers, Ernst & Young, and Deloitte Consulting, providing audit, financial management, risk, tax, and digital services to the financial industry. Mr. Zhu began his career at the Industrial and Commercial Bank of China in September 2002. Mr. Zhu received his bachelor's degree in economics at the University of International Business and Economics. Mr. Zhu is a member of the AICPA, the CIMA, the Association of Chartered Certified Accountants in the United Kingdom, and the Certified Public Accountants Australia

Conference Call Information

The Company's management will hold an earnings conference call at 9:00 P.M. U.S. Eastern Time on Monday, April 22, 2024 (9:00 A.M. Beijing Time on Tuesday, April 23, 2024) to discuss the financial results. For participants who wish to join the call, please complete online registration using the link provided below in advance of the conference call. Upon registering, each participant will receive a set of participant dial-in numbers, the event passcode, and a unique access PIN, which can be used to join the conference call.

Registration Link: https://dpregister.com/sreg/10188298/fc485dda60

A live and archived webcast of the conference call will also be available at the Company's investor relations website at https://ir.lufaxholding.com.

The replay will be accessible through April 29, 2024, by dialing the following numbers:

United States:  1-877-344-7529
International:  1-412-317-0088
Conference ID: 2835954

About Lufax

Lufax is a leading financial services enabler for small business owners in China. The Company offers financing products designed principally to address the needs of small business owners. In doing so, the Company has established relationships with 85 financial institutions in China as funding partners, many of which have worked with the Company for over three years.

Exchange Rate Information

This announcement contains translations of certain RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB7.2203 to US$1.00, the rate in effect as of March 31, 2024, as certified for customs purposes by the Federal Reserve Bank of New York.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the United States 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" and similar statements. Statements that are not historical facts, including statements about Lufax' s beliefs and expectations, are forward-looking statements. Lufax has based these forward-looking statements largely on its current expectations and projections about future events and financial trends, which 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. These forward-looking statements include, but are not limited to, statements about Lufax' s goals and strategies; Lufax' s future business development, financial condition and results of operations; expected changes in Lufax' s income, expenses or expenditures; expected growth of the retail credit enablement; Lufax' s expectations regarding demand for, and market acceptance of, its services; Lufax's expectations regarding its relationship with borrowers, platform investors, funding sources, product providers and other business partners; general economic and business conditions; and government policies and regulations relating to the industry Lufax operates in. Forward-looking statements involve inherent risks and uncertainties. Further information regarding these and other risks is included in Lufax's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is as of the date of this press release, and Lufax does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

Investor Relations Contact

Lufax Holding Ltd
Email: [email protected]

ICR, LLC
Robin Yang
Tel: +1 (646) 308-0546
Email: [email protected]

SOURCE Lufax Holding Ltd

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