LU - Earnings call transcript Q4 2023

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Lufax Holding Limited Fourth Quarter 2023 Earnings Call. [Operator Instructions]. After management's prepared remarks, we will have a Q&A session. Please note, this event is being recorded.

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

Xinyan Liu

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

dividends. services were Our business will you strategies, our recent will our Mr. trend, by operating provide financial CEO, from currently developments results the and business Cho, quarterly our online. macroeconomic and hear and newswire of latest Y.S. and Chairman Today, an are available of special released our who update

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

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

Yong Suk Cho

for you. call. today's Thank joining Thanks

and completed complex major quarter, prioritize over remains pressure. now economy we environment Nevertheless, continue continue will quality out SBOs carry a During the prudent have come fourth as to actions the we derisking to and quantity, under our strategy.

that our recalibrate with China. believe cumulative and in impact that profile have confident implemented strategic longer and profitability will prevailing from return the optimize the we are strategic initiatives environment to for of We and a solid macro control foundation risk upgrades align our

our provide for me quarter. -- let updates to quarter Now, some the

Cheung index Small slightly fourth XX.X Medium reflected China This slower of recover in Enterprises, is School which to a Furthermore, somewhat that Kong business in XXXX. remained Business the This from XX.X environment by macro published September pace. December. challenging and the at segment First, likely SBOs. published for the in of of Association to is the XX.X the development in declined Graduate indicates conditions by index SME quarter declined SBO to SME broader

XXXX, X X mix changes Throughout actions, business. our to we've turn derisking and diversification adjustments. major let's made business and model X Next, including

changed segment First, and product our we have mix.

in to hasty concentration SBO offerings loans prior profit heavier the or segment generated XXXX. business both Our and

macro have the with past environment, product both strategically deterioration economic both of operational segments. change results the months. To drove environment, and such adjusted macro address However, in concentration financial we this, XX offerings our in and a

predominant balanced business In a product a focus terms to shifted of of we SBO offering offerings, loans. consumption more have loans from on and

we've options. comprehensive portfolio, and to encompassing revolving more installment expanded offerings For our be our both payment product

Within RX profiles, the SBO range. segment, we with the risk customers refined targeting rating RX in those to our focus by specifically better

Second, across regional reduction Accordingly, we mix. the on geographies we XXXX, areas. with higher-quality credit expected have our observe in performance our in different of the variations completed second economic significant and will Since resilience resilience. and have we footprint adjusted half focusing greater are

productivity and by and Third, our lower with optimized we sales scale the our expansion direct higher channel, our for of is channel optimizing risk recognize most team. important repeat sales sales had resulted team historical that especially our the business. our responded mix, which direct We have in direct

factors relative our around sales reduced sustainability XXXX. Fourth, from and XX,XXX great our predictiveness. of at the have end direct team result, XXXX mix, of the industry number and within internal stage assessment, to reflecting adjusted have macro XX,XXX industries a for we cycle assigned the As of industry's KYB of importance each industry we our increased of under model enhanced to environment. the end In changing at models conservation the economic

business our of model. migration completed have we Finally,

the either models with our the our by our expected business to model guarantee fourth of XXX% on-balance partners premium our finance the enabled and are restarted guarantee by end third-party revenue of all as loans lifetime drag eliminating profitability. account profit. charged enabled CGI XXX% our reliance partners realize subsidiary the the a the of reduced by negotiations CGI. new previously, risk-bearing on discussed new We quarter transitioning factor granted high model, business completed sheet had at recognize XXXX the successfully customer loans to end freedom, company XXXX, and XXX% are impacted were As single of under quarter by high third thus XXXX. In On a funding the our negatively therefore, technical loans the business basis, guarantee of

upfront made CGI higher provisioning first due calendar as record loss the year net the on with for compared to launch the However, accounting model.

us While this prudent risk it greater quantity remain over exposures. value, and quality prioritize Therefore, also capture strategic our we XXXX. to economic enables has throughout shift increased

of experienced by team restructuring the and reduction driven terms branches. of increase sales to asset flow the direct In short-term quarter. outstanding third quarter, quality the This our balance loan impact an C-MX from compared and fourth the in was mainly rate our in

completion businesses. we rate the the With have of flow the of To derisking our control of downsize up, gradual business the quarter visibility improvement sum the we the of fourth strong all measures, seen XXXX. during with quarter, initiative, of have is first completion restructuring of under and our in the

and model. to we strategy However, due still need the upside of our prudent transformation business more our time

we return shareholders' estimated capital billion. Thanks. XX an and request the returns our heard as next well investor our transformation years, have considering a to efficiency, and for of now over call in the over outlook capital improve as through the Greg. have to for several dividend special us the our size for past and return Finally, approximately derisking business the time to now will consistently RMB to and dividend capability model growth and requirements business I right the quarters, we shareholders we believe is value the progress

Gregory Dean Gibb

are like performance with during note overview fourth renminbi now provide our XXXX start year. details figures in of operational Thanks, otherwise quarter this fourth quarter. full our all year stated. I'd our the results I'll on for an and YS. more and unless focus Please to

During faced the XXXX, environment pressure of remained complex fourth under and macro by from our SBOs. performance quarter the challenges

recorded sales, This loan of of was RMB the of basis. decline year-on-year were quarter reduction total the guarantee the for sales XX net risk prudent XXX consumer driven to transition billion, quarter. outstanding at RMB XX.X%. credit RMB loans contributed balance, Among loan to which XXX% of due we new This was X.X mix. Fourth year-over-year. approximately finance one-off with was our overall mainly decline by loans subdued fourth XX% a certain new XXXX, the strategy portfolio loss decrease revenue at million end This our XX% under high-quality a an with representing model model. primarily losses. XXX annual We as and as billion a XXX% by was the coupled of billion, Our in from transit model, RMB we heightened a associated our demand front-loaded losses SBOs, provisions was due to XX.X% stood guarantee the exposure on under mainly nonoperating elevated stemming from enabled of

on Now, delve let's into we XXXX. progress that initiatives have in our derisking made

model. major on changes and have to included As new mix YS business our X to derisking just which strategies, transition business we significant the X executed explained,

in rated our XXXX, to to of customers. unsecured segment to XXXX. rated mix in XX% adjustments RX shifted RX new RX customers favor In RX of loan First, the compared have were XX% business fundamentally new

addition, resulted significant respectively, a that a has of reflects business adjustments the XXXX, derisking our portfolio mix. In XX% proportion from This our XXXX. XX% Concurrently, offerings for loan in up In in from gradual have sales, measures. product XX% of new prompted strategic to of new and in transformation loans XX% mix accounted to finance XXXX. sales and decreased existing secured our XX%, consumer loans XX% unsecured and

balance shifted of The with from balance to to XX% loans XX% the consumer of remained of As a at total proportion of of at as of a loans rising end XX% 'XX, finance percentage proportion the of unsecured end the result, from X% XXXX. flat. secured XXXX balance has as our the end while decreased compared mix

guarantee balances of by consumer under and of XXXX, model we continued end unsecured the During anticipated the fall XXXX. diversification the finance will XXX% majority

regional our which is strategic the the at adjustments XXXX. footprint reduction XXXX resilient of by XXX coverage, regions less over of characterized target has our in cities decreased from Next, shift end our relatively cities end at economically This to risk. XXX have of reflected geographic involved in higher the

end we channel concluded previous was of XX% reduced to by restructuring In of year direct in channel number terms of the have up XX,XXX XX% from to adjustments, the our The of team the the contributed sales year. XXXX, year. direct sales the In beginning at of the sales. from sales, new of members direct the XX,XXX

This model. vintages strategic a the as fully under Turning XXX% quarter, we shape. the and run-off to guarantee take in the loans portfolio completed our has model, our increased fourth mix transition business and starting model as transformed our to pivot we move the new risk-bearing

by a of XX.X% As the XX.X% risk-bearing up the at result, end previous increased from at the year. end our of balance to XXXX,

the past and in sales quarter. X.X% Puhui in and the prior geographic This a was quarter. C-MX X.X% to the quarter, During our primarily fourth from balance overall impact increased in outstanding our direct our restructuring from to reduction due temporary business negative

quantity Although, continue quality we to closure seen risk first given our the we improvement strategy quarter, C-MX have prudent new over the in ratio model, in increased XXXX. the under our prioritize in

XXXX. our to turn let's Now, for outlook

calendar XXX RMB balance believe to to leverage although and account sales XXx. of million XXX higher a XXX XXXX, At important the loss ending may basis, loan the subsidiary Meanwhile, loans support of billion. be business have the under guaranteed billion highlight new in expect lifetime the of end sheet below be our range a capital will RMB was accounting to of this RMB RMB the liquidity X.Xx, record requirements. guarantee upfront to profitable of loans scale, balance under to regulatory XXX% the the year it single be and due business to expect is model that provisions. on We between projected our operations, far and we XXX billion XXXX in limit Under first strong the we ratio model we

above ratio approximately well XX.X%, adequacy capital finance consumer Our XX.X%. at required the stood

we for and our XX XX.X balance balance bank of RMB As with assets hold sheet, outstanding billion. cash liquid the RMB billion, at

And dividend approved, business Directors either years, on term, we special are to increase respond all shareholder have we RMB offer well With visibility and top of shareholders' the share approximately in elect ordinary of shareholders dividend full total shareholder with XX subject or To size USD to estimated cash a has billion. per scrip. in each or may that ADS our Board the X.XX regular of performed to approval, flexibility, our the per a X medium buybacks our dividend receive in feedback returns. $X.XX consistent all of over to into positioned and strong shareholders' our the to share past the growth position further capital

As General be the special Annual for shareholders have CFO, on More dual the for in call and record we the special respective over The April Kong U.S. listed be in XX, markets, the to of dividend receiving more details stock Hong now to dividend. disclosed market of circulars Meeting, will details at is follow the will the to on performance. will are which course. date each will our our turn approval procedures a subject the shareholders our statutory due in with held announcements X. I and financial in May David, the

Siu Kam Choy

on provide close are I a are our otherwise Please all stated. all quarter basis Greg. renminbi fourth unless and terms into now numbers results. will year-over-year you, in that comparisons note Thank look

XX.X%. better As small we decrease. adjustments YS credit XXXX, transition strategic loan higher-quality be in business-owned business total the model sacrificed expected the for of loss fourth out balance was which total provision X.X performance to required and decreasing income under environment sector loss quality the billion, the day the to our in pressure in prioritizing before, scale and customer impacted in business some to and was throughout XXX% caused been quarter macroeconomic geographical is inactively the period. continue model. In accounting strategic under cycle boosting X, average has booked early future. to by This guarantee and Greg by income quarter upfront mentioned RMB backlog our regions, the segments Through Whilst life our

billion, X During of the was XX%. a quarter, technology our decrease RMB platform based income representing

guarantee XXX due RMB net was magnitude balance, are decrease in guarantee basically income our by of RMB interest which to a of increase All income decrease a Our the decrease a outstanding with by the was income line billion, and XX% [indiscernible] effect the XX%. decreased of loan in company. an of offsetting million, in X.X lesser

expenses. Turning optimization. cost We committed to to our remain

billion XX.X% by total losses, impairment asset and losses to this year-over-year ago. billion quarter, due and of to to other credit quarter, losses enhance and efficiency. This we RMB RMB key decrease excluding in here. sales impairment marketing the a credit finance XX.X operational fourth expenses, X.X expenses decreased total costs a In to as few RMB Our a decreased expenses. Highlighting expense by primarily from items XX.X% just was billion the year decrease X.X and continue

Our costs was in XX.X% and general marketing in include significantly and expenses, decreased and attributable quarter. to total the decreased mainly volume. the transaction of mainly to RMB expenses to decreased fourth retention the result the loan-related sales expenses due expenses X referral acquisition decreased and as sales decrease by decrease which as a expenses as billion well for new The sales expenses platform loan from the service marketing

quarter, due RMB XX% by and decrease as receivables in the decreased X.X a to Our result loans billion primarily loan of provision credit in the of fourth losses volume. the impairment in decrease to

decreased Our in as costs million An Notes of year. mainly XX.X% XX C-Round in result quarter of of by due a repayment of XXX the and RMB XXXX, same the decrease the Promissory RMB Convertible the finance during from period to interest expenses Ping to fourth the million

for net were loss fourth compared XXX Meanwhile, fourth net per ADS same basic loss was RMB As RMB million the or X.XX. quarter as our million, XXX USD XXXX. in loss the X.XX flat RMB of a quarter quarter the result, diluted both and in basically to

had optionally With promissory bond RMB for abundant note balance Turning billion of RMB billion. equity and RMB RMB XXXX, we repaid convertible to fair of P&L an of all of total have XX.X our the assets cash December of now value After company as XXXX. balance billion payments year XX.X RMB billion, we financial of owners XX, attributable outstanding these to through and XX.X X.X through X.X of the billion a sheet. cash,

of In entities are terms well of capital as main of operating December XXXX, capitalized. end the the X

ratio to well company leverage stood external ratio cash we was finance XXx, guaranteed approximately regulatory Our debt. well net the maximum as of limit subsidiary's taking Overall requirement. above are required into position regulatory the a adequacy speaking, consumer bank in XX.X% compared a only account and our after at X.Xx capital XX.X%, all

All factors are our period prepared investors. That us now of take these through back and while today. providing backing the foundations to for the transition for for continue the challenging navigate ready questions. to substantial our company remarks offer we rewarding to to macroeconomic environment Operator, concludes

Operator

Thank you.

from We Instructions] Securities. session. will now with Emma begin America the question-and-answer Xu [Operator of Your first question comes Bank

Emma Xu

and first special everybody think, I care about the dividend. foremost,

XX the what's billion the key RMB on I special or are behind this to So, question arrive have you What this another information your XX that about rely And numbers consideration dividend? quality. RMB billion asset special dividend?

in you But of quarter first continued leading a fourth rate, for your to rate in flow that the your noticed the rise quarter-to-date. flow delinquency see report, to So quarter X.X%. indicator in improvement actually the also also I you mentioned or

quarter? asset tell what's for much already the the improvement in quality expectation you how first your could seen in coming you overall And quarters? us trend So,

Yong Suk Cho

question. your for Thanks

Let answer. me

to coming clear dividend. visibility time and this now Let now you I we why completion including risk ADS derisking X control the lower. ADS has by next return. And adjustments, me far you X compare our at a we is requirement is enhance model -- is of the PV successful mentioned, than years, our see -- far with start is requested we then then that X with right With believe our been lower, to have our continuously X X And and capital believe cash price if for we under mix per stock the have investment X.Xx business and for years. traded less major been our changes the X, X of initiatives special investors

So, operable cash our market valuation. book has even not on in the reflected our

dividend. value And RMB to we value why hope we amount, through arrived XX how So, explain on our arrived, at this this cash our hidden shareholder increasing by this right, unlock number. billion, hand if we why I behind

potential much first, characterization, first future. reasonably in also support in we buffer X how future the a then operation assumed, started need course, we we capital this development large we And development. years to our the ensure also and our Of stable to assumed

of at it XX just seems XX% is is I roughly how a it dividend, with this of And size to our So our cap. maybe the net we it RMB billion. market arrived the actually, looks like big emphasize, company asset. want then But only -- very

last So, is reasonably to quality. this about your a asset I then amount, good believe. And answer question

[indiscernible] gradual and is see adjustment we on has business. explain if with off. net flow. And is also, me now ratio around explain old we the from finance NPL X.XX% last side, restructuring. flow our mainly And X.X%, of geography believe direct Their port what's fourth outstanding in see first we I reduction And quarter then been loan at consumer those temporary third said before in and measures, our impact X.X%. flow that Let fourth then our sales Puhui all about about increases from coming for going in you we with C-MX running the improvements last loan it to year of ratio quarter, quarters. resourcing Puhui's of completion X.XX% in to net Puhui right? increased worst consistent And year, the portfolio And we balance But the in our XXXX that quality. quarter booked rate due understand of improvements

So our in take when words, XXXX, total portfolio, XX% end we XXXX, you other legacy accounts before booked nearly OI we of get to that portfolio. the of

continuous doubt. gradual our improvement that of in I is think So sense, no

Operator

from Stanley. comes Yu next Morgan with Your question Richard

Richard Xu

from questions couple me. A

to you growth after your for what enough the special still there dividend, the own guaranteed do be buffer at support by the given needs loans? the of will capital of the First Will most obviously gain, think on loans be all capital moment. capital

side, on further balance reduced projection base loan room [Technical reduce the and then the some the smaller the volume, on flip do dividends So Difficulty]. given loan more special with to maybe the are there capital

Lastly...

Gregory Dean Gibb

You were just just repeat cutting off X Could last sentences? there. you the

Richard Xu

And just still like, after excess special to to the we're dividends of I one, are another And are loan support there's volume loan enough right? funding I moment. want if cost dividend? the volume at seeing opportunities smaller, that capital if there the will road. whether trends mean there Sure. be excessive lastly growth release the the down is say, potentially for capital secondly, then the

So, two the on cost. the capital. funding on is One

Gregory Dean Gibb

Richard, thanks. was comprehensive here. looking expected industry guarantee requirements, obviously relative process This just have operate laying Greg as speaking years out the our the is next buffer, Overall, a out trend, capital gone over we licenses. trend, liquidity requirements, multiple we of quite couple growth through, license. have on YS We

we and We keep the other finance the license have always mind future. our for consumer licenses open in

we were all certainly couple higher going to current growth. prudent. enough over quite cash But still quality our we've going over X, at we that still position, that retained situation macro release there in opportunities, more today of were So could licenses meet given in market buffer after the gives or on a a forward deploy through focusing that, change -- us the year to that can capital We're we and a is quantity. significant years. Obviously, substantial next very outlook what view arrived still now on for our right our

is XX We're outlook, the more flexibility for We your not say, market think down there to could additional a for moment. maybe keep road. be to the our down months question positive the want XX considering release or that let's I whether capital not that road. So,

leaving in going opportunities want make has here a cash some that strategy to But buffer. meaningful to to actually company continue they thing to it flexibility been effectively taking our the do to whether do number to make meaningful that down deliver a make to to reward think I to capture allows the choice while on sufficient it provide investors double in the and company with they want way forward the right a today. So, or with take shares

So I this. think, on the or ranging the that's, grounding

of last over been One see continue drivers been to has of the X cost, lower terms overall funding rate months In costs funding environment. we down. that. did the XX come There's

tap been our the and lower has consumer finance. multiple able has though, the second, than working net the funding with sources cost the a market, and of interbank new Consumer in funding banks mix guarantee facilitation business model change The companies. between by finance to trust

mix much will greater optimize the model. we that see in there we to change consumer our the overall the necessarily continue do though continue environment don't cost of the future, proportion we even think will is foreseeable in as slightly finance, rate funds change drop to that so So, think the that mix a of

Operator

with CICC. Your next from question comes Yada Li

Yada Li

with by Yada And was under could is And recovery? wondering before the still This for completed it main drivers the causes XXX% and the how 'XX, secondly, has be we the consumer the long we what profits lastly, what we my company which model, be main back? first balance strategic one buybacks? wondering, of And transition growth how take segments and considering released? of finance dividend into line but what the instead development, profitability the XQ was pressure. the could CICC. are cost was SBO And And the main is guarantee question are the are I choose bottom profitability And focus. could buying special is how company, the the and finance future consumer I for the was the that and does additional

Yong Suk Cho

shrinkage. enable generate lifetime lot net adjust on XXX% up on Let our first model of we new the guarantee -- single me question. because we to all business. speaking. volume you Because record of higher, cannot revenue the of And higher new decrease accounting a calendar the book first a year new and that delivering loss offset But that accrue we our public the that provision. off-loan the YS know loan XXX% in caused group for higher on is the model, is delay account model decline profitability, from a the your account the lot provision account by guarantee have pick basis, but new loans new This

original delaying actually that's you the I performance, profitability mentioned, credit operating [indiscernible]. And -- which in can our right? new understand we costs So drivers And second dividends The then main Greg the last How rate. funding the coming further what things, say lastly, and if recovering. over -- years. And X it decided importantly, is portfolio growth. have decide pace explain your measure special buyback. buybacks, are We by to also I And this loan about you then is of sales net optimization, ahead? optimization of our I public for considered can recovery costs. make was first was why flow the X what factors mostly answer if question, would will about profitability

you in, If we several more the considering believe versus dividend compare buyback, dividend situation advantages. we are has

because limited to First, low quite liquidity. is ability buyback through shareholders to deliver return of our

public dual we as than U.S. maintain company Hong primarily list, listing in in is Kong And float XX% The Kong, by only current a our a also second do now. Hong less listed XX% float and rules. public

So time, with comes scrip. an our we to this dividend buyback or have limited this And choose very for that moment. it at option cash very, space

more So we buyback our believe shareholders. to this flexibility provides than

provide to reason we dividends the that's then decided over buybacks. And why one question. more So special

Gregory Dean Gibb

operation of and has license when the acquired. the up scratch here. for basically, been Greg company finance, full On kind was it XXXX the consumer Yes. from year scaling third of was

consumer year profitable a is XXXX finance. for So,

is it's focus going the balance question strategic that still up As portfolio. the we do there The scale continues how continues what as the it mix increase, this of some relative of efficiency, and forward. room scale business of main change to we there's to and our overall

shorter-term we I business our This think there more nimble to owners consumer work focus, channels opportunities us capacity company capabilities consumer finance act is sometimes playing the are loans to offering element. Where environment, our that makes dynamic cover more So, the that in to business still these to around also our small good really but through us diversify serving differentiation describe believe small model. market core product is multiple is business into this owner. Puhui the remains providing under is the we our see a important way ticket, the small One to X role in because finance in in their smaller needs, owners of ways. for do be well as an providing main we strategic business which that

sometimes, they needs. And have their individual

looking business course, have customers loan, we long-term needs. that a credit from small they Of smaller still we're have full may right? But taken they find interim once view, at a owners, these sometimes

interaction, we a serve them longer want the And interact so with them to needs. to creating more cycle more in a kind and be of life data through points on position to these with customers opportunities to understand and their

to some deeper of additional the consumer provide to to market. our existing diversify in terms ticket our some provide well a additional touch way, in into reach of customers terms way behavior finance So as data as nimbleness a a well it product to offering points is is as size as

you have at model near last to in change continue quite the look balanced to a XX So, if mix medium between finance Puhui the that But core that consumer the term. continue we to development, a probably as bit model, the months and seen see capability. a more will mix over you'll SBO and the you've transition

Operator

Thank the remarks. to turn for you. I'll That over back today. concludes management our call for closing question-and-answer now session

Xinyan Liu

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

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

Operator

This is concluded. Thank you. conference now

now You may disconnect.

Lufax Holding (LU) 22 Mar 242023 Q4 Earnings call transcript