LU - Earnings call transcript Q1 2024

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Lufax Holding Limited First Quarter 2024 Earnings Call. [Operator Instructions] After the 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. Liu Xinyan, the company's Head of Board Office and Capital Markets. madam. ahead, go Please

Xinyan Liu

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

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

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

safe applies in which forward-looking Before press release, this harbor to statements. earnings we will I to statement like continue, our be also would as to call we refer making our you

I'm With and to to Chairman the over Cho, that, Y.S. Lufax. now Mr. pleased of call CEO turn Please.

Yong Suk Cho

today's fourth call. Thank you In indicators. see for quarter, improvement our lead the joining all in we

cost small and [indiscernible] [indiscernible] business we subdued. are our Why from business stemming exposure means from high new development. in we'll be model demand patient owners prudent remained However, XXX%

on be to quantity. continues over emphasis Our quality

trended environment, XX segment in Despite to manufacturing, at services. increased a the December Before XX trends from in for macro quarter. the Overall, improvement diving while pace. relatively during in PMI, measures prevailing business The slow recovered in The or which positively. both look performance, the XX.XX Purchasing showed XXXX manufacturing signs at the [indiscernible] improvement take a service into the environment. to first from environment macro let's the index of December, XXXX, Managers industries, Index and XX.X [indiscernible] March for

the enterprises XXXX. development SME for the XX.X for compared quarter medium XX.X for quarter quarter was index China of of the first and the to and example, of published XX.X XXXX fourth XXXX of first the small Association by For

development. this Now regarding

fourth X long-term quarter diversification yielded our we operational ensure although in critical and and X far, discussed de-risking in including growth in of model signs XXXX, quality, these have business asset completed Thus earnings to remains As changes prudence call we believe actions, sustainability. adjustment. mix improvement and X actions

new first the emphasis by quality to decreased total demand quarter, and own prudent mainly loans from XX.X% days operations. During weak year-on-year, SBOs on loan our due

SBO As in launch year-over-year. billion consumer an XX% diversified from to new more representing of quarter, we the approach, our shifted sales business a focus increase grew to first finance our XX.X

continue a SBO On the year-over-year. other business from decreased Puhui high-quality loan lack demand of by hand, XX.X% and new of sales

As mentioned previously, quarter we successfully our by completed end third the XXXX. for XXX% guarantee Puhui business model of transitioning to business the of

either enabled quarter business company fourth XXXX, risk-bearing the by [indiscernible] own our model. balance consumer as by new graded subsidiary of XXX% finance loans from all were the under Starting loans

our total balance a of XXXX. from XXXX of As as the end result, of as being risk the quarter of outstanding increased first XX.X% the to of of the XX.X% end

of effect take to the recover time switch impact a longer CGI higher a elevated it positive While guarantee the exert our as XXX% provisioning. take on will to our rate, will up-front premiums, profitability model due alleviates to

negative region, quarter. in environment, and the de-risking quality. restructuring branches, witnessed our turn macro the of of the impact the improvement our industry direct risk our of asset first indicators in Now by in execution channel improvements adjustments and segments of caused sales with to to early mix let's together products, removal Successful short-term we and

of year. first stable. is NPL quarter for of The rate from Puhui remained X.X% in ratio C-MX our of quarter fourth in The X% business -- X.X% decreased the last launch to this customer flow year. also the

is success and patient pleased asset are we ensure quality, improvements prudent these are a we this taking in sustainable. approach with While to

to more In and strategy, expanded in Bank a more of business. service strong announce potential to allowing set early strategic are of we as have to April dynamic to our underpin initiative offerings, provide us These the terms we part on broader acquisition further to our Ping completed of OneConnect An leverage that pleased diversify licenses. of licenses services

Annual AGM XX, date the a April on ordinary The also USD I held to X.XX per plan share. On is which to be remains General XXXX. approval provide an like This XX, dividend or would I XXXX. -- will shareholder that on Meeting we of special earlier. X, or official March subject ads USD for General per May at we Meeting Annual X.XX update dividend arrangement the announced the dividend announced special

To our we de-risking quarter, approach that remain this, asset fruit starting in are in demonstrates we first fit. encountered the we and maintain as see improvements Despite quality, we prudent demand. bear sum operations loan up, in initiatives -- high-quality weakness to SBO a our in diversification preliminary continued

David CFO, contributions the April reasons personal with with of tremendous years, resign an David to been will date effective Last nearly has company the for we XX. but least, his thank for our company. X not and

forward our future pain the his audit XX. from financial onboarding effective especially new has We finance, April to contributions. Peiqing our role Zhu Peiqing and as have experience in extensive CFO appointed assume and management. We CFO. in He look

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

Gregory Dean Gibb

results I'll year. unless renminbi provide quarter second our stated. otherwise And all and are more for note details Please Y.S.. XXXX in on focus our operational figures you, this Thank

our an overview performance. of quarter Let's begin with first

loan weakness on in small from sales. During prudence for business SBO, loans ongoing owners, high-quality continued our the combined with weighed quarter, operational demand new [indiscernible]on

the first loan loan from our This up new were year. XX% in consumer finance business. XX.X% in total XX% last same New is sales; the a the Among contributed quarter year-on-year representing decline. by billion, approximately period XX.X were CNY sales

offset as XXX% our CNY due comes our loan guarantee The X partially year-over-year. of in mainly the by was from loan a billion, take was in outstanding the balance and Revenue rate first sales model. decreases of our quarter book decrease the decline was to increased XX.X% new and more

profitable pretax first quarter. for loss Lufax basis, XXXX net quarter XXX with increased Earnings first million, in Our of for last the X.X On CNY CNY before period compares to same special mainly was was to the CNY due were XXX tax the the first in a billion in dividends. million tax marginally associated the quarter year.

model. costs continued For provisioning cost pretax pressures loss-making up-front loan our strength as XX this offsetting quarter, profitability were the months business under the new later-stage due continued XXX% in relatively a tining improvements being result, first and structure, in credit these pressure remains and to balances recoveries. reduction guarantee in Partially under in

of we our on in de-risking during asset of XXXX. walk and diversification strategic quarter impact I changes. how of operating our evolved light now the earlier, our As metrics Y.S. mentioned they've initiatives and through quality witnessed first these the will

of First, sales product quarter, of XX% accounted and first of for to year. saw up year. consumer in the the decreased loan secured in and XX% mix. respectively, last from last our XX% We consumer XX%, loans XX% Concurrently, terms In period loans X% the finance unsecured segment sales, grow. finance to new proportion from continued same and

XXXX these total of proportion to a finance balances March of remained of in have while of of Consumer balanced balance changes, a secured of the our end seen shift increased March end light the has as percentage compared March largely gradual mix. ongoing XX% the flat. In loans unsecured we proportion reached our the from at 'XX. Meanwhile, loans to at XXXX, X% of XX% XX% as

we of guarantee terms continue a model. In up business XXX% model, under the of build roster our to new loans

mix our and reshaped As portfolio mentioned, increased this we has previously risk bearing. our

enabled was risk-bearing from of of as quarter loan at As end guarantee XX.X% the our by up the and quarter XXX% grown end first quarter, the of of balance the model under has to of XX.X% the XX% fourth of new balance XXXX. the end first Puhui's of our

economically our prioritizing We sales more regions. in also kept on resilient focus

sales our maintained to majority our emphasis contributes which continues of terms sales major team, direct channel loan In new channel, our within to sales. and the excellence our a be on of we

quality. asset our Next,

environment, XXXX. impact X.X% quarter vintage removal X% as to restructuring up Our overall the our improvement improved a to negative in macro temporary and of new we was build in direct mainly from sales and quarter the fourth C-MX in due third book. from geographic of the runoff This

ratio we quarter future during about trend. the sustainability in C-MX first the we of observed remain cautious this improvement While

on quality during risk over prioritizing this exposure, Given XXXX. our strategy prudent heightened we quality and of will continue our

let's take unit Now look more at economics our detailed business. Puhui a of the

remain During stable. costs the quarter, funding

In addition, as our our to we XX.X% focus overall higher-quality APR maintained on decreased customers. slightly

for has to balance. total comprises risen percentage rate from under X.X% first loans based X% guarantee model loan the quarter take loan of the XXX% higher a as the slightly balance on Our

losses accounting is a higher it model we in be note due that of that calendar these under XXX% first set profitable, anticipate may While standard guarantee provisions. loans incur will loans important to their but up-front to the lifetime

to the business, we capital Under first end our we scale, its with subsidiaries of support our our business the the and leverage sheet XXXX, the special the guaranteed the increased have requirements. quarter to mainly the associated due was ratio operations, our and of assets by At balance of projected X.Xx dividend. strong increase guaranteed liquidity of exposure driven decrease of net believe a balance distribution

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

at for XX.X the net balance of the bank As cash billion amounting our CNY to XX.X we our of hold with billion sheet, quarter. balance assets CNY end

financial our to David, for CFO, performance. call the over turn now details on our more I'll

Siu Kam Choy

otherwise Greg. will renminbi provide company our a numbers terms, now I results. our and are conversions Please all are basis on first unless you, Thank that in all into look note closer a year-over-year stated. for

by As the pressure Y.S. impacted sector that broader have small business performance was conditions period. exerting this throughout have still economic mentioned, our been on

higher to we more quality company. XXX% it scale long the the the favorable of our and with shifting aim run of for regions, enhancing with believe strategically is geographical segments important future we of which loan some portfolio, the higher for While take opted customer rate, quality business model forgo our guarantee

average on product early of Our in be cycle new loan under a Thursday, continued led to the unavoidably strategic balance must declines our loss the up-front amplified which provision, for the total expected in the life Meanwhile, income. model. loss business accounted and credit transition the stages accounting

In decrease X XXXX, income was our billion, the first quarter CNY a total X.X%. of of representing

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

of line income to income income billion, in XX.X% less decrease loan outstanding interest X.XX X.X was by of billion, balance, decrease [indiscernible] guarantee net guaranteed effect decrease or Our basically due XX%. increase in company. of which by a with are CNY the offsetting in borne CNY And an the decreased the of our was a risk

of magnitude We XX% quarter and is highlight CNY X.X to other of in this This enhance remain to that losses income. that committed decrease our we year-over-year billion our the to the I finance by cost expenses losses, total operational XX.X% excluding decline continue efficiency. to optimizations. [indiscernible] Turning credit want than [indiscernible]. expense losses greater to total in decreased as

just few Let's expense items. the highlight of a key

a and expenses was XX% marketing well expenses, expenses sales billion as expenses include decreased to expenses decrease first the from [ Our sales The decreased acquisition X.X result CNY in ] expenses referral and total as decrease decrease borrower for due courses to and loan-related mainly the decreased them. sales quarter. well mainly platform the in by loan as in new a transaction mining which as for general as of to retention attributable services

balance to X.X X.X% first as and losses of primarily billion a due decrease impairment asset result the credit Our quality. in decreased loan receivables loans provision of in improved and quarter CNY to decrease by the of the

finance convertible Our and of period deposits. from quarter a in decrease other of the decreased result promissory million the by offset to partially mainly of XXXX from and income CNY interest by same expense due bank first C-Round, in XX.X% XXX of decrease costs CNY interest as notes million payment of to XX the debt the the

achieved PRC pretax The potential quarter in quarter, expenses that -- to billion is the of million were the XXX first of increase profit March support withholding This distribution associated period by X.X our quarter we CNY really with from tax. XXXX. due item mainly in CNY key our Whilst one-off CNY of increased XXXX. the in tax income this dividend to XX, the X.X income billion order subsidiaries first in we paid profit the same dividends tax the to special is announced the on in in

million first a XXX CNY in compared million As a was XXX XXXX. the for with quarter loss of same of the profit net result, CNY net quarter

quarter per X.XX. and were or X.XX Meanwhile, our basic loss first diluted the CNY during ADS both USD

to our balance Turning sheet. now

XX.X As of XXXX, CNY had net XX, cash of March balance a we XX.X assets billion. billion CNY of at

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

approximately Our consumer our of ratio also products parent due assets upstream risk increase exposure guaranteed as net driven the decrease our the navigate for to the And capital groundwork regulatory to ratio transition XX.X% different above rewarding at and in company stood subsidiaries these leverage to laying increased the increased the the finance macroeconomic to us business and continuously with requirement. guaranteed factors of period future. well landscape and interests while company significant by X.Xx for the the associated the support companies. provide required our XX.X% well to All the for evolving adequacy our

now prepared for ready That remarks are concludes to take Operator, our questions. today. we

Operator

first [Operator with Xu Your question comes Securities. Emma Bank Instructions] America from of

Emma Xu

I actually. have two

And money special guess dividend. progress the special is this Could on of distribution? about So have what's the your been tax, question the offshore. with I first give dividend the my of special dividend? So update you more should progress us incurred

term, for your mid-term shareholder after have And dividend? in the then, returns plans longer special any do future this you

asset question second is my And for quality. your

rate that and XX-day I in quality into think improvement quarters can notable is do coming lead to which lower So do notice So then the in the this also your impairment quarters? rate. you your achieve delinquency sustainable coming the you decline asset quarter? Do and flow losses of the first a

Yong Suk Cho

Thank speaking. is you. Y.S. This

March Annual this shareholder about General policy, is XX% dividends, plan is the annual dividend announced to XXXX, then So unchanged, will which it on But AGM, dividend. at we XX, to long-term of at which X, approval your announced The be held special also to XX. on March special the we dividends of about close will And be June Meeting, subject shareholders the first May on our it question receive remains net of a profit. entitled XX% special record XX. and

fourth yes, XXXX. down net asset yes, X.X% C-MX your to flow improvement, quarter X.X% of last see that And then in in second the answering from quality question about we improved quarter

mix those de-risking effect forth. underwriting gradually tightening, taken efforts segment credit sales process XXXX, and optimization measures such [indiscernible] optimization in our control so believe policy We come and and then as strengthening, into

And geography explained, built take been of portion that gradually quarter year, from we also nondirected loan the gradually larger Greg quality restructuring new better And fading balance. the also, XXXX impact third with from has away. last as part will total in policy our our concentrated tight with that portfolio debt,

improve forward. So going there is further helps to

still -- However, this while under we the observed first the exposure considering prudent very future in sustainability take this our approach action improvement to in remain C-MX cautious about trend. this risk in the we quarter, and model. higher third XXX% of And we'll continue guarantee

Operator

comes Chiyao next Your question Huang. from

Chiyao Huang

This the early indicator Morgan from quarter. the on risk to Chiyao see some Stanley. in is and Really the management. Thanks improvement pretax profitability happy

of I an you the what's So the two the -- questions. quality, the view have on there's on growth rest One into asset management see early This can the one. is improvement, year? loan

it Could expect talks? bit do this And discuss on you color more XXX% management guarantee a your transition unit model. of evolve is you economics. on more little a question management detailed unit previous the the to during the could we the economics. how to And give second And color and as

Gregory Dean Gibb

responding. Greg, Thanks. here

an So right? when we on that -- improvement terms news, is among a in the as to particularly just targeting, outlined, we've while haven't So subdued, that the quality is a first demand demand somewhat clearly uptick the on strong the seen demand by the we're uptick, of still of good customers, borrowers. at quarter, Y.S. which in we be seen meaningful look

of want volumes. where So would today our before beyond expand because that demand we continued terms to really are stronger to drive in see really we prudence is going we

we're business want that risk. all and now new we model, we have to more XXX% on XXX% guarantee given our -- a quarters observe more and transitioning the for more we right think do of model that taking be transitioned total guarantee will Obviously, to few as are we is book

of year in this us which -- guidance CNY new be we about CNY loan volume, we balance given XXX XXX billion terms to take So we've XXX the to billion CNY would billion, to still CNY end an of to ending of the to stick at expect the XXX year, billion. for

the remains since on this. unchanged, outlook gave quarter guess, the guidance and I So last that's we

this Puhui, shifted the watch we've model. of that I now important terms most fully trend think In the really to XXX% guarantee is also to

So As we've now from increased take rate said, loan if coming done and XX we XXX% a given CGI basically, of XXX% model, if gross you guarantee X% a from it's to more under approaching we percentage to now quarters where the now right? And X.X%. we balance, doubling business, rate the couple were model. guarantee shift look at the is the guarantee our as more points, that model, our the that's at being more under more take ago new model effectively has look and from from is

that will is this we continue. So expect a to trend

we as is the that about you converge the see book to rate guarantee the more of more take of should move this So XXX% overall XX%. such and year, course throughout up model, the

do that loans from provisions, then due on example, But to of we contribution the model, also and expect improvement, have that but line. to profitable. on guidance quality there, a in the P&L the them new given our first negative lifetime year And we note again, of question new the they we -- expect for XXXX, loans in do standard up-front lifetime but profitable, be calendar guarantee a under will XXX% do highlight yet. just continued bottom that it's haven't a cost hopefully, then we And management, to question will drive which credit when it's we

outlook So that's side. on economics our the unit

Operator

comes Lee from CICC. Li Your with next Yada question

Yada Li

quarter, of has question completed the guarantee Yada a towards CICC, first with XXX% the last the percentage. risk Since is company my transition regarding bearing This is and model.

you end more give could forward, to how color the the Looking future? the percentage of at this view please on us and year risk-bearing

if was you the about Secondly, share for the more outlook could I line. wondering bottom

elaborate In for the addition, can is about expected possible, profit loans? more what the take all. margin once rate the you we the period, gone if That's transition through have or SME

Yong Suk Cho

question. Thanks, Yada, for your

guarantee by Let the by me customer model last you on to first the model, end all will of which pass as risk-bearing and of that loans by total the fourth David. or about then -- as that, loans, from safe which on question, know quarter then loans XXX% previous balance company loan granted year base balance that our we year, responsibility And quarter, of your is is XX.X% out new XXX% booked The X.X% balance risk are up the were we the quarter the from guarantee was including loan right? I granted this take either fourth knowing sheet quarter. business fourth second finance company bearing total started that from for and transition,

XX% is then new And it loan of in is new our guarantee model. surely this our enabled total was model going balance, on XXX% that place. Puhui forward, is And

the of will So and continues to gradually it our mean, gradually -- balance grow. risk-bearing I portion

Siu Kam Choy

right. All

thanks for on question the So Yada, loss. this quarter net

I really this the this think tax. income achieve affecting The we quarter as on is for key pretax item mentioned quarter. we did before, a actually

operating CNY billion our know, which increased CNY in holding expenses Income you entities mainly the the billion in company immediate from dividend offshore. to to due associated PRC X.XX as withholding with This the billion, this tax, really cross-border of to is tax XXXX. X.X quarter same period upstream CNY X.X from

So arrangement cross-border arrangement of other announced we comment March is as my liquidity at at [indiscernible] and to dividend primarily level That's course, to on the offshore. XX covers that I plan want make. a [indiscernible] this special of distribution support general I for upstream mentioned,

Operator

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

Xinyan Liu

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

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

Operator

now This conference you. Thank is concluded.

now disconnect. You may

Lufax Holding (LU) 23 Apr 242024 Q1 Earnings call transcript