Lufax Holding Ltd Q3 FY2024 earnings call

• Macro environment: SME development index declined, but consumption sector showed mild recovery. Chinese government stimulus policies announced in late September are expected to positively impact the economy and SBOs in the long run, but short-term prudence is needed.
• Operating results: Total new loans sales were RMB 50.5 billion; consumer finance business grew. Asset quality remained stable. Technology platform-based income decreased due to lower loan balances and cessation of Lujintong business. Net interest income decreased, but consumer finance revenue helped. Guarantee income decreased. Expenses decreased, with operating efficiency improving.
• Ping An Group: Mandatory general offer commenced on September 27, with offer period ending October 28; Lufax intends to remain independent on NYSE and HKEX.

In the third quarter, total new loans sales were RMB 50.5 billion, flattish year-over-year but up 11.7% quarter-over-quarter. New consumer finance loans increased by 27.8% year-over-year and accounted for 52% of total new loans sales. Total loan balance stood at RMB 213.1 billion as of the end of the third quarter, with consumer finance loans making up 22%. Asset quality was stable: Puhui loans had a C-M3 flow rate of 0.9%, and consumer finance loans had an NPL ratio that decreased to 1.2% from 1.4% in the second quarter. The balance take rate rose by 1.9 percentage points year-over-year to 9.7%. Cost of funds decreased, and the company provided over RMB 1 billion in new loans under the newly acquired nationwide small lending license.

• Volume guidance: RMB 190 billion to RMB 220 billion for volume, and RMB 200 billion to RMB 230 billion for loan balance, unchanged.
• Loans under 100% guarantee model: Expected to be lifetime profitable, but may incur accounting losses in the first calendar year due to upfront provisions, with long-term improvement expected as the portfolio matures.

• Risk exposure on the 100% guarantee business model.
• Macro environment challenges affecting SBOs, with time needed for them to benefit from stimulus measures.

Q: Could you express what will be the impact of the new policy stimulus on your business and share more about the business outlook for this year and beyond?

A: Stimulus is positive but SBOs will take time to benefit; near term remains prudent, focusing on non-SBO segments and using licenses for growth. Volume guidance RMB 190-220 billion and loan balance RMB 200-230 billion unchanged; loans under 100% guarantee model have short-term accounting losses but long-term profitability.

Q: Regarding asset quality and plan to boost shareholders' return?

A: Asset quality indicators stable; no specific plan for another special dividend yet, but management committed to long-term shareholder returns.

Q: Regarding credit impairment loss and funding cost trend?

A: Credit impairment loss increase due to provisions for loans and investment assets; funding costs decreased due to monetary policy and diversified licenses, expected to further decrease by optimizing funding structure.