Lufax Holding Ltd Q2 FY2024 earnings call

• Macroeconomic environment: SME development index trended down, Business Conditions Index fell below 50 threshold. - Puhui business: APR by balance decreased to 19.6% from 20.3% in Q2 2023; take rate by balance increased to 9.3% from 7% in Q2 2023 due to 100% guarantee model. - PAObank: Delivered solid growth in first half of 2024, loan balance at CNY 2.4 billion, up 45% y/y. - Special dividend: Completed distribution, Ping An Group's ownership increased to 56.8%. - Synergies with Ping An Group: Focus on branding, technology, and channel resources. - Financials: Net loss of CNY 730 million in Q2; APR by balance decreased, take rate increased, funding cost decreased slightly.

In the second quarter of 2024, total new loan sales were CNY 45.2 billion, a 15.5% year-over-year decline. Puhui loans, making up 51% of total new loan sales, decreased 35% year-over-year. Consumer finance loans, accounting for 49% of new loan sales, saw a 23.6% year-over-year increase. For asset quality, Puhui loans' C-M3 flow rate improved to 0.9% from 1.0% in the previous quarter, and consumer finance loans' NPL ratio decreased to 1.4% from 1.6% in Q1. PAObank's total loan balance stood at CNY 2.4 billion by the end of Q2, a 45% year-over-year increase. Total income in Q2 2024 was CNY 6 billion, a 35.5% decrease from the same period in 2023. Net loss for the second quarter was CNY 730 million. Total expenses decreased 20.3% to CNY 6.3 billion.

• Loan demand: Depends on macro environment improvement; focus on consumer finance in near term. - Asset quality: Confident in sustainability with portfolio mix improvement and risk model upgrades. - Funding cost: Expected to continue decreasing with synergy from Ping An and new lending license.

• Decrease in loan balances leading to increased unit operating expenses, impacting unit profitability. - Macro environment challenges persist for small business sector.

Q: About the overall loan demand and when loan growth recovery might occur A: Loan demand overall is still weak. Loan growth recovery largely depends on macro environment improvement. Focus more on consumer finance and relatively large consumption loan in near term, especially in regions where loan volume consumption is more significant Q: About areas of collaboration potential with Ping An Group, shareholder returns, funding cost outlook, and OpEx to income ratio hiked A: Collaboration in customer sourcing, technology, and channel resources; no immediate plan for semiannual dividend as net loss in first half; funding cost expected to continue decreasing with synergy from Ping An and new lending license; OpEx to income ratio hiked mainly due to loan scale contraction, room to improve via efficiency leveraging technology, synergy, digitalization, and internal efforts