Earnings call transcript Q1 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Lufax Holding Limited First Quarter 2023 earnings call. [Operator Instructions].

Now I'd like to hand the conference over to your speaker host today, Ms. Liu Xinyan, the Company's Head of Board Office and Capital Markets.

Liu Xinyan

Thank you very much. to quarter welcome call. earnings and everyone, our XXXX first conference Hello,

Today, from business. quarterly were Y.S. our and business development earlier online. briefly and Cho, recent are and the strategy, will by available Our an our latest services who released will financials update CEO, Chairman our and our provide newswire currently the our you Mr. trends hear of of today macroeconomic

will Mr. our Our more co-CEO, key will Gibb our before quarter up call priorities details closer provide Mr. will we and business then go on the financials a for first drivers. results through into Afterward, David Greg and offer questions. our open look the our Choy, CFO,

to which in earnings pleased the be I and Please. our Mr. safe Before to applies I also making of that, Y.S. over Lufax. Cho, we as continue, harbor press forward-looking our you would we release, now this turn refer like call to With will CEO to statements. statement call Chairman to

Y.S. Cho

for you joining. Thank

the on and to reflected continue environments many first challenges macro is clear for operating business pose owners. quarter, small that it As

We the cautious maintain However, by bond, committed us of U-shape focus some on optimism unwavering our challenges resilient navigating remain recovery. in more an we giving to business. that lie our and economic indications encouraged are ahead a building

prudence for anticipated the preparedness macro patients, our and to SBO in exercise segment. We continue upstream

first some quarter. the updates provide for Let me

track XXXX the X.X% First, great stage. that of at a quarter nascent expanding GDP target indicated country first environment is its there in distributed year-on-year are unevenly signs growth remained though some of a X%. by they macro recovery for China's on the growth

National that to was of Bureau promising recovery. first China's start quarter stated addition, In the macro of Statistics

continue a industries. Chinese see industry in year-over-year, of pace across declined to divergence the recovery and we profits XX% However,

XX% To more through confident of give takes about in showed are February, our core of are than survey owners some which Peking increases optimistic survey sentiment segments. flow approximately published business in outlook and that survey, year. to and volume SME to business this SBOs for more this University macroeconomic of improving While are of tailwinds small expecting was may XX% XXXX. an business becoming a Over time participants example half their

is lending holiday. it first for less the quarter SBOs note important X SBOs of demand. the to in and investments, But However, resume normal spike business take will COVID that the than it underpins time new in New to have which Year cases after Chinese months operations had fully

business. Now the talk to on let by U-shaped about impact our our me recovery. the on start I showing would outlook like

unsecured resort new for we rating During XX% within in new quarter the X loans mix fell on quarters. quarter, loans last XX% first and in a of initiated credit first year will the credit top our credit versus X the categories in improvement quality rating ago.

slowed down we environment is on the growth asset in the quality the improves. substantially our which concentrated quarter. more in be Notably, deterioration Year has as resilient top-third middle-third will believe regions, prove and macro preferred to in first increasingly

increments witnessed and certain regions early in industries. of vigilant have also We economically signs asset and quality

gradually will expect of the end operations of rate through recover. to year, We gradually improve when continue flow that SMEs this

year. in We of second quarter loans also charge-offs then this in expect and that half the the the risk-bearing second peak likely decline credit will for gradually

net the from beyond. margins and total we will elevated, costs driver In do XXXX credit to [indiscernible] be provide to full the portion in for. but half, supported arising shift expect increasing from second past guarantees loans, of we charge-offs This underlying will the remain for

the By pace expect portion progressively We will we This anticipate this at quarters. that the a the guaranteed and that at slower quarter. percentage us over decline As ratio end revenues they portion bear at several increased new stood growth by next of exceed of to did the quarter. XX.X% loans XX%. the as we entire risk of first portfolio a year-end, than

focus made necessary. of the improving where on by partners possible new to of made ongoing factors. difficult the our but in was line business three, One, X -- Our front recent restructuring, is And the by two, progress entire the which for deployment more macro ability provide we funding model environment, completion guarantee. our

shape. As of underpinned previously, But profits the recovery event. recovery expect we a the stated result, as a have drivers U-shaped our XXXX we in by taking main are notable to stabilized

have several our plan, of part implemented U-shaped strategic initiatives. As we recovery

of We and We and the The direct productivity as finance of other credit our positive to came year our the frontline first expenses, and top-third ago. middle-third of managed the of versus and operating including in quarter the total that XX% most departed. a team, by Total ago. with who more as costs. double line of quarter. first headquarter sales XX% In that from further business from excluding force of direct impairment whose new first sales around retain XXXX the decreased members than losses, end costs end our restructuring those regions year to of decreased plan, average versus completed a is have of quarter of optimized exchange XX.X% costs our number -- the the in

have restructuring. completed our we Now that organizational

are priorities. several on We focused

XXX% increase under proportion to , of our provides Firstly, subsidiary which continue risk-bearing or new we credit we guaranteed enhancement. the loans

focus and our diversification provide credit every retail funding partner Furthermore, month we we meet customer on an guarantee. model customer for encouraged as support see where to cross are We deepen needs. product our adviser. in the and between position to finance business our model as the selling entire our SBO We're

duration mix, adding duration gradually longer-term This products duration our diversify lending our will to shorter base.

in key new investments daily past small help technology continue claw to by are These the to Finally, losses. operations. us business during a first portion gain we into owners deployed quarter, back in insights we supported of post to our our efforts enhance recovery credit loan initiatives our continued technology, deeper

we customer our of onboarding, location embedding further capabilities facial, -- and by voice strengthened verification features. For

owners' to status. assess result, to a enhance As -- business further we access ability our

we introduced activities so-called marketing These evaluate For KYB. industries, historical to real-time credit capabilities. their a with in augmenting repayment owners assessment the underwriting of business individual customers' further credit assessment insight our online allowing and changes business process momentum us and KYC process, are deeper with

for corporate Next, XX. of completed on let's listing exposure our in move successfully continue base capital the Hong important increase by and our listing value development shareholders. milestone to on Marking through markets. investor broaden We to Hong production to the out our our market April will Kong Kong our on create

are stable out million, second of the XXXX in of that policy. dividend paid commitment announce demonstrating an aggregate Additionally, we XXXX, half to pleased amount a dividend April to our maintain we USD XXX.X

Finally, last call entering normalized a have We authorities will phase supervision. as industry, compliance believe -- work and for closely relevant regulatory now all provide with only of our with our in we completed rectification regulatory normalized we is predictability will industry we our supervisory and substantially our provision efforts, stability regulations. framework this to the heard and greater ensure

results. Greg over the on I for operating our will details now more to call turn

Gregory Gibb

performance our more Thank bottom operational by you, our figures renminbi our details environment. of XXXX, on unless and will I stated. adversely Y. macro results are the all quarter were provide the top note now line year. line in first challenging otherwise focus and In impacted Please S. for this quarter first

from was and This profitability credit a last partners. losses. Despite the XX.X% top did XX.X challenges insurance net Our quarter. XXX and of our a a the million, credit impairment new line in of XXXX. achieved the primarily decrease decrease our pressure performance, total income the CNY compared we on mainly profit this corner driven the due pricing quarter billion, CNY to loans with by representing turn with of in was decrease

performance. Now key let's details dive the line top the of of into drivers our

the to RX enabled geographies. top first the same scale, regions volume. to quarter, The from response higher-quality middle-third from period Meanwhile, Executing XX% last ago. quarter X we concentrated customer our loans by In initiative is One a loans impairment enabled credit more unsecured XX% standards the to first XX year-over-year continued in driven RX our our XX% were loans XX%. in losses proportion new of mainly of compared the are first RX to our prioritize customers in key to the tightened This on continue the contribution rankings in year. reached which in elevated strategic third of top quarter drivers SBO on RX in customers, quarter in was of of year credit increased a XXXX representing the our in XXXX, new new our enabled. billion, in resilient of CNY to and and the decrease loan the economically XX% to first increase segments the

see are our are sales development of expect in direct . members retain long-term reflected loans We the company. short New sales was employees run that path, and results average first the by upcoming retained to The the we productivity experienced than to impacted sales of which in team, but by difficult and productive we more our quarter, were we completed of the double more adversely was the managed necessary optimization for that in direct direct optimization right is the The and force. on quarters. believe the the

after asset standards loan quality with we have credit Additionally, loan enabled vintages. we compared improved observed vintages older that new tightened demonstrate our

the SBOs, higher-quality a average increased the unsecured CNY has quarter on the as XXXX CNY XXX,XXX result. of ticket focus size average from for first loans increased ticket XXXX. we Average revenue for As of size naturally XXX,XXX of year to

healthy and consumer growth CNY up first in XX% credit increased XXXX enablement of our Our business Contribution loans quarter and performance. in as XX% enabled year-over-year, our quarter performance XXXX in the finance outstanding despite grew in percentage the credit of was quarter Consumer of new first this the with total for from quarter. the balance saw business billion, model. consumer XX.X the Finance industry from XX% first to loans retail was in The a finance challenges line

offerings. product diversifying Further our

top is take rate. Another key of driver line performance our

the mainly remains charged As by take mentioned our elevated credit earlier, rate due which premiums compressed, partners. insurance is to

tightened asset remained premiums improved date. an our at standards to quality have Although new loans, elevated have insurance of credit credit level

insurance We arrangements. partners. the these of provides external arrangements, Under modify enhancement pressure by involvement our are the credit proactively without guaranteed our to full enhancement credit credit rate addressing continuing company take

are extend by our partners of X We the and agreed model fact to funding out Trust shift out the X are of encouraged as we guarantee. have bank of the provide XX under mid-May, partners entire XX the credit of partners supportive that where

of our are already the provide the partners loans we funding guarantee. In entire extending where addition, under XX model new

capital the adequate balance less support XX% as is expected increase this our risk-bearing end than we and XX.X% guaranteed regulatory And as limit increased by first the to Xx. We a the well believe exceed our As the in of result, to XXx. quarter, the to have of in the subsidiary further credit risk-bearing first by of loans was ratio leverage of below quarter, end of the year.

quarters take for portion such, guarantee the As our gradually expect new loan the rate improve as we we increase over next will several business.

to our a in In the with impairment first driver billion view a Next, post-pandemic to the fourth The a outlook let's line to CNY taken previous more on recovery notable bottom our the This by the XXXX. credit go for was of by we've quarter, was driven prior bottom credit of conservative main from declined the compared as line losses. decrease reopening. provisions quarter decrease in in quarter losses more credit mainly in than drivers. and X.X details billion impairment quality of

which the portion we impact a on released P&L. a the environment gradually had quarter, normalizes our previously of activity and positive is the As in first up provisions, partially macro [indiscernible] picking

delta quarter, X% The improvement quality the XXXX. in to quarter, loans also primarily general the asset the impairment rate by was first offset of asset fourth closely, for in the remaining compared our losses quarter ratios. was deterioration for XXXX secured quarter of X.X% attributable from loans in increase loans secured the first this we but unsecured X.X%. was basis from decrease XX clearly on fourth in flow slowed the noting of C-MX flow point has basis unsecured and monitor is C-MX increase in quarter a stood point the in of This partially loans the fourth of X.X% with quarter, in the substantially C-MX to asset improving, of credit is to while it the worth quality at it increase that rate a forward down unchanged in our indicator quality XX The the in versus XXXX. first of X.X% is visible

in indicators the recovery. such to our coming critical monitor continue of will We determining are the to quarters closely as U-shape they speed

guarantee planned to those the credit for first on impairment of XXXX, remainder is of with our net margins term. quarter. where model of each will the quarters. mainly quarter expect during we extension increase such should but par model be we This provide losses provision in the at due improved upfront expansion coming ahead the levels, entire over the Looking result medium the during The to

customer our our both to a platform, with intend to our to we industry use branded SBO referral. recap, tools cross-sell earlier stage, and make at We customers of an engage create an new business quarter, potential for with small new and progress platform populated deepen value-added our business ecosystem, continued platform development owners. operating first opportunities customers source this a new services interaction as existing the LuDianTong, During support and new is open digital content to on

XX, who has the of on roughly through registered their business XXXX end we an of of personal March X.X approximately LuDianTong complete first information, As customers quarter. sevenfold had and submitted or XXXX, million expansion from this

Y.S. post-pandemic economic realizing optimistic in recovery. we As an in U-shape uneven the are recovery, our mentioned of face cautiously

on in overall will definitive we growth demand lending and However, of remain prudent quality. new absolute until we credit improvement levels see

in While is performance a we gradual event. our year, this business improvement expect expected XXXX be half recovery to of to in bottom notable metrics the line second see core

CFO, I David, to now performance. turn more financial over will our on details it our for

David Choy

terms, quarter and at Greg. on all results. comparisons a unless otherwise Thank all are year-on-year a renminbi you. our basis numbers are now in closer I'll stated. note, provides Please first look

as our for by CNY CNY the environment and of to of decreased first performance resulting As impacted to RMB the quarter. Y.S. in customer before total our XX.X quarter million X.X% was on top first our was billion the result [indiscernible] total has by macro expenses selection Loss X XXXX. XX.X% income of billion XXX a line

an techcom-based was increase X of CNY this income revenue. representing billion, During XX.X% quarter, our income technology-based our -- of

CNY Our net was CNY and of XX.X%. our X.X billion, a income XX.X% representing X.X was income interest a billion, decrease decrease of guaranteed

As a ago. a a from declined XX.X% result, as fees percentage total platform-based technology income XX.X% income to our year of service

our net continue increase XX.X% through to as partners, a guaranteed of XX% of income more our expense to better In total bear XX.X% by more to addition, from guarantee credit the compared generated income company's total consumer income of risk from year abundant due finance increased of we loans, capital instead to actually XX.X% interest insurance ourselves our Furthermore, utilize a reaching the as we income, P&C with year ago. ago.

Our other charge of million 'XX which credit value-added first charged XXX the in fee that quarter The 'XX. enablement primary of to CNY in change was the period we partner. change structure part partners same compared due service mainly collections account as in other XXX credit to enhancement to CNY includes credit the to million our retail of enhancement the was income, fees mainly fees, and management process our

expenses. to Turning our

We operational prudently our expenses. manage to continue

decreased the our impairment quarter. and the and XX.X% Returning quarter Our losses and X other driven expenses. this billion CNY total by to X.X was quarter, by CNY total losses XX.X% CNY decrease by first This sales to from to year-over-year billion by marketing year. asset XX.X excluding a expense efficiency, billion operating expenses primarily in decreased credit

borrowers for marketing and and billion includes to expenses sales as quarter. investor mainly marketing well first X expenses, expenses XX.X% in general total CNY sales as the and costs Our by which acquisition decreased

in sales driven new The factors, loan a first, decrease by decrease and reduction X commissions. was in

And was for by acquisition driven decrease the marketing driven expenses and new services the in [indiscernible]. sales expenses platform decreased sales. which and and the finally, Second, expenses, general, decrease by investor retention in decrease referral

and Our CNY quarter, due in administrative by decreased the cost, million increased to fixed low which the X.X% general first XXX expenses mainly to volume.

new decreased by Our X.X to expense to balance measures first operating mainly loan and servicing loan billion expenses quarter, and due in decreased sales. and X% the CNY controlling the

the -- first with of offset increase CNY was [indiscernible] performance by credit increase X.X increase year due XX.X%, worsening of billion a losses . impairment it environment the the primarily credit to billion indemnity of was the due of quarter driven of result in a [indiscernible] driven losses pace partially largely an Our as by economic in in to part ago, X.X by CNY the compared

the costs from offset partly by bank from same the XXX increase business finance in of quarter rates. XXX XXXX, -- Our interest CNY to by decreased the million on for increased million the of due in the first XX.X% increase to CNY period spend driven of interest deposits, the mainly

the quarter quarter profit RMB both our result, first first billion quarter, net same and a ADS in per of [indiscernible]. profit million X.X As basic 'XX. with was CNY compared during USD CNY Meanwhile, earnings X.XX XXX diluted for net X.XX of or the the

balance sheet our with sheet On compared of last a cash at as remains CNY products XX.X of solid year. of side, bank the March XX.X as the of strong balance and CNY XXXX as billion increased with billion end cash balance XX,

assets or our our different amounted of In XXx. as of base All continue regulatory strong less payout guaranteed end stable limit actually subsidiary March of company other addition, liquid XX maturing CNY billion sensors XX.X the income policy. to [indiscernible] in this mainline X.Xx of support the XXXX, days to provides [indiscernible]

prepared today. our are concludes we That questions. for now Operator, for ready the

Operator

have now our first Ye question We Instructions]. from Alex UBS. [Operator from

Alex Ye

pricing So my question is outlook. mainly on the

and in loans. the could pricing unsecured for portfolio about terms give the pricing you new what's the average us So loan color of some for our

question. there are So X -- I and guess this to parts

front. First, on the regulatory

the been X price X some due pressure. to loan in the So regulatory lowering to we years have past

terms you the in regulator more where regulators comments reached follow-up a of now wondering Do I'm So with? is we have are? the where comfortable think if any there level or from we

upgrading and downward the we on demand just we the focus aside some better if now just now that further current customer to pace quality pricing on regulatory further dynamics be quite profile borrowers, SBO ahead the view. are to of modest, hear for given pressure our And loan segment, should given pressure supply Thanks for put and expect your to second, the recovery economic we and appear

Y.S. Cho

the Alex, Thanks, for question.

haven't any further we rolling far, APR. instructions regulators further from So got about

absolutely APR at we other lower all the APR. for than -- look then XX%. And in first quarter that, compare is the APR you quarter new are with you obviously if first If blended already peers, other less than and average loans peers,

low. We quite are

in our APR in and So more I And met flexibility I downwards, for whenever necessary. believe requirements now have really level. shape terms good of others are that a we'll we regulatory we believe in just upwards APR or also

determined the market of supply. Our expense, than and costs, credit and our overall includes our So sales the further necessarily operating more XX% then costs, the which include demand consider we which by price funding we we less And -- [indiscernible] our don't all loans. for cost already also, APR, operating right? segment, is high-risk and than which reviews that think it will less again, cost

I terms future. expect expect in -- I of change near notable So APR don't a in

Operator

our of have question of Bank Xu from Emma next now We America.

Emma Xu

I have two.

The first asset one is about quality.

So -- your signs portfolio. we we on hand, one see of some encouraging see

expect shoots improve is management the to gradually some As quarters. and business you that mentioned already in flow earlier the coming the in there rate green

remained total quarter-over-quarter. hand, we of to other flow the loan first on flow increase quarter your while the flat just in unsecured see However, rate rate continued

loan more about quality could So give the discussion portfolio. legacy -- of your your us you asset

how the question to are which recover past to in as net contribute also collection the of the losses, you trying credit effort is the in to And future. a may charge increase profit report of mentioned that the your is related the management loans

this you brand? more us could So on give details

demand. second is about The the loan question

move see major to the loan you cost, far? in is the growth guaranteed how expect the loan What's So high of your loan model? CGI demand XXX% we when so to And to the loan in model? the more And guaranteed growth strong reason is half second more quarter. growth your this progress first limit -- the entire moving to will see

Y.S. Cho

first the asset The Emma. down Thanks, in has slowed situation substantially quarter. in quality

X.X% you remained year, for from in which at growth we been first the C-MX loan was year. has that in quarter balance If after this the if -- balance rate But this month. quarter total our month, first declining month look last loans unchanged consider

if book milestone or So only analyzing for the you if example, months we're than whose is months. compare XX accounts, this, less X

we declining already rate. net can we flow on the we obvious trend. more onwards. see from next sort quarter believe an if So from balance Then I the can we impact remove increment -- our implements demonstrate now show

have loans the plan, credit continuously new you the that observe on confidence. improvement mix last initiated an now in So new for quality we rating quarters. sales carry And and in X credit credit company for as

of focus we so you had know charge-off our of year. that amount is year, Yes, a large this last that one

demand. cost are answer actions claw And We the more question now back our credit past from your strengthening losses. to loan recovery to about

Our how by sales new right? very is not actually, economy, we you a monthly is any then you if demand our seen your to share our regard obvious concern loan and decided share, but our industry because compared a haven't future And no the are what, about market is size, demand matter market our SBO world customers loan small. understand market change see in volume

new growth, our this a the progress. And credit really making And guaranteed to moment. driven demand of about reason. at mainly and we also policy great loan are partially was by worry That recent GST model, of we reform. the decrease So tightened XXX% loan our don't underwriting was decrease spin

We are happy. very

also out to We out provide the we where guarantee. model where XX are credit good a now agreed that X on X support the we partners partners they expand and XX for see full trust to model provide bank partners guarantee encouraged of entire did funding provide of they our agreed the by

are under XX addition, this model. partners providing In loans already funding of our

quick. good think formation So be we I can then And relatively making a progress. are the

Operator

We now Stanley. have of our next from question Richard Morgan Xu

Richard Xu

costs. funding on I have questions

from guaranteed to Just moment, model? expected And to as the and cost the the level basically, shift the wondering be on rate change what complete. model what's would funding impact we stabilize overall is guaranteed insurance take model to when the what's largely the at

Gregory Gibb

are Richard. basis. here. funding first a at look you about Greg It's XX points quarter on basis come overall. have which the the X% They you, Thank at costs, down If about look we if year-on-year

change shift that we to XXX% we're cost. As funding model, in much the seeing guaranteed not

the probably coming you're broadly more seeing fact, down. market In

So to model forward any cost not in a shift the be remainder guaranteed through of quite as look having really funding year. We increase. of stable it the the terms is we impact think will net

On the credit take rate, if you X%, kind that take of more sort X% costs, is go the and look in at about insurance recently historically, due higher our of to take XX% rates has range. now range, to been guarantee to rate X% closer the

X%. right? of will As number earned was when us. be more the premium model, our the that credit we now And over that partners out or insurance a to So you by guaranteed X.X guaranteed, portfolio about move historically CGI premium be years then look if or year credit to X% XXX% previously was to will from XXX% paid that

a So if about the guaranteed XX%. compressed on longer be looking the basis X% rate Then where you because over today of take obviously us. that term, to rate a of move which a higher and the you of take model, is should base to stabilized we at CGIPs moves to over take X%,

up years end we've will more things where Rich, that's, of think from when made in about now X.X complete the we probably shift. So

Operator

of Yada from Li question have now our CICC. We next

Yada Li

of today view credit percentage was impact all. trend Yada And how losses I question is going this And from that's on potential and the My risk-bearing wondering is what percentage. is top and to the the CICC. change forward? regarding line. impairment bottom this line our This And

Gregory Gibb

at of terms first the In of this XX%. percentage, the it was as risk-bearing end of quarter, about

of XXX% by XX%. half this new year, loans, of on you that model. self-guarantee higher year the a be percentage the much move over for And through means, basis expect will the end portfolio second the be a to We as under

moving you're process, just will Now partners the revenue top as therefore, basically it. will the question paid through previously guarantee insurance that to sheet, line credit increase our the we that onto come because asked, what go to was that balance similar with revenue Richard and

increase. basis So a that revenue will a for provide

provision have we new As we credit initially risk, take the for to on loans. more

So that the is model. front-loaded in

impairment So right? overall see our costs QX had what of We you'll costs X.X CNY credit in credit impairment in billion.

the driving is couple what's We of to it, expect mix this number quarters remain next over the stable, but changing.

the quarter from first will, is the impairment billion book. X.X CNY the mostly credit legacy existing from the if cost portfolio, in So you past

we the As year, the second more fact be business is done CNY about the move or from of into will you'll new percentage and a cost, this billion half done X of impairment business coming self-guarantee. be more of credit it at so new but has still -- higher that through

of a into new to be, levels. doing higher profitability. that line right, historical should credit the cost it very cost, forward insurance while XXXX if So we model with a perform our think from constructive shifting carries improve should And margin, today look we more that where upfront therefore, a business for XXXX, also should that our net XX%, in right? high over we're that you're Because

Operator

our session turn on the call closing remarks. for now question-and-answer to are line. concludes over That back There will I our today. the more for no questions management

Liu Xinyan

call. today's Thank you for the concludes This joining you. conference Thank call.

have more please If questions, not you do team. IR contact to the again. Thanks hesitate company's

Operator

This you today's for Thank call. joining. concludes

disconnect now may Thank you. your You lines.

Lufax Holding (LU) 22 May 232023 Q1 Earnings call transcript