Lufax Reports First Quarter 2021 Unaudited Financial Results

Rhea-AI Summary

Lufax Holding Ltd (NYSE: LU) reported a strong performance for Q1 2021, with total income rising by 16.9% year-over-year to RMB 15,251 million (US $2,328 million). Net profit also increased by 18.7% to RMB 4,969 million (US $758 million), maintaining a net margin of 32.6%. Key operational metrics include a 15.1% rise in loan balances and a 17.1% increase in the cumulative number of borrowers. The company saw improved loan quality with a more substantial share of new loans going to high-quality borrowers. These results reflect Lufax's effective risk management and growth strategy amidst regulatory changes.

Positive

• Net profit increased by 18.7% to RMB 4,969 million (US $758 million).
• Total income growth of 16.9% to RMB 15,251 million (US $2,328 million).
• Outstanding balance of loans facilitated rose by 15.1% to RMB 582.6 billion (US $88.9 billion).
• Stable delinquency rates, with DPD 30+ delinquency at 2.0%.
• Growth in active investors to 14.8 million, a 17.5% increase.

Negative

• Total expenses increased by 17.1% to RMB 8,530 million, outpacing income growth.
• Credit impairment losses significantly rose by 109.8% to RMB 1,053 million.

Lufax Holding Ltd (“Lufax” or the “Company”) (NYSE: LU), a leading technology-empowered personal financial services platform in China, today announced its unaudited financial results for the first quarter ended March 31, 2021.

First Quarter 2021 Financial Highlights

• Total income increased by 16.9% to RMB 15,251 million (US $2,328 million) in the first quarter of 2021 from RMB 13,046 million in the same period of 2020.
• Net profit increased by 18.7% to RMB 4,969 million (US $758 million) in first quarter of 2021 from RMB 4,185 million in the same period of 2020.

(In millions except percentages, unaudited)				Three Months Ended March 31,
				2020			2021						YoY
				RMB			RMB			USD
Total income				13,046			15,251			2,328			16.9	%
Total expenses				(7,284	)		(8,530	)		(1,302	)		17.1	%
Total expenses excluding credit impairment losses, financial costs and other losses				(6,407	)		(7,055	)		(1,077	)		10.1	%
Credit impairment losses				(502	)		(1,053	)		(161	)		109.8	%
Financial costs and other losses, net				(375	)		(422	)		(64	)		12.5	%
Net profit				4,185			4,969			758			18.7	%
Net margin				32.1	%		32.6	%		32.6	%		1.6	%

First Quarter 2021 Operational Highlights

Retail credit facilitation business:

• Outstanding balance of loans facilitated increased by 15.1% to RMB 582.6 billion (US $88.9 billion) as of March 31, 2021, from RMB 506.3 billion as of March 31, 2020.
• Cumulative number of borrowers increased by 17.1% to approximately 15.1 million as of March 31, 2021, from approximately 12.9 million as of March 31, 2020.
• During the first quarter of 2021, excluding the consumer finance subsidiary, 75.7% of new loans facilitated were disbursed to small business owners, up from 65.9% in the same period of 2020.
• As of March 31, 2021, excluding the consumer finance subsidiary, outstanding balance of loans facilitated with guarantees from third-party insurance partners accounted for 86.8% of the total outstanding balance of loans facilitated, a decrease from 95.1% as of March 31, 2020.
• During the first quarter of 2021, excluding the consumer finance subsidiary, the Company bore risk on 12.5% of its new loans facilitated, up from 1.3% in the same period of 2020.
• For the first quarter, the Company’s retail credit facilitation revenue take rate¹ based on loan balance rebounded from 9.1% for the fourth quarter of 2020 to 10.0%, as compared to 10.3% for the first quarter of 2020.
• Despite the planned reduction in APRs starting from September 2020, the Company has maintained its solid business growth. New loans facilitated increased by 17.3% to RMB 172.4 billion (US$ 26.3 billion) in the first quarter of 2021 from RMB 147.0 billion in the same period of 2020. High quality borrowers² contributed 65.9% of the new general unsecured loans facilitated in the first quarter of 2021 as compared to 58.7% in the same period of 2020.
• C-M3 flow rates³ for the total loans the Company had facilitated were 0.4% in the first quarter of 2021, as compared to peak of 1.0% in February 2020 during the COVID-19 pandemic in China. Flow rates for the general unsecured loans the Company had facilitated were 0.5% in the first quarter of 2021, as compared to peak of 1.0% in February 2020 during the COVID-19 pandemic in China. Flow rates for the secured loans the Company had facilitated were 0.1% in the first quarter of 2021, as compared to peak of 0.7% in February 2020 during the COVID-19 pandemic in China.
• Days past due (“DPD”) 30+ delinquency rate⁴ for the total loans the Company had facilitated stabilized at 2.0% as of March 31, 2021, identical to the rate as of December 31, 2020. DPD 30+ delinquency rate for general unsecured loans stabilized at 2.3% as of March 31, 2021, identical to the rate as of December 31, 2020. DPD 30+ delinquency rate for secured loans improved to 0.6% as of March 31, 2021, down from 0.7% as of December 31, 2020.
• DPD 90+ delinquency rate⁵ for the total loans facilitated improved to 1.1% as of March 31, 2021, from 1.2% as of December 31, 2020. DPD 90+ delinquency rate for general unsecured loans improved to 1.2% as of March 31, 2021, from 1.3% as of December 31, 2020. DPD 90+ delinquency rate for secured loans improved to 0.3% as of March 31, 2021, from 0.4% as of December 31, 2020.

Wealth management business:

• Total number of registered users grew to 46.5 million as of March 31, 2021, from 44.3 million as of March 31, 2020.
• Total number of active investors grew to 14.8 million as of March 31, 2021, from 12.6 million as of March 31, 2020.
• Total client assets grew by 18.7% to RMB 421.1 billion (US$ 64.3 billion) as of March 31, 2021, from RMB 354.8 billion as of March 31, 2020.
• Client assets in the Company’s current products (excluding legacy products⁶) increased by 48.0% to RMB 417.1 billion (US$ 63.7 billion) as of March 31, 2021, from RMB 281.8 billion as of March 31, 2020.
• As of March 31, 2021, legacy products accounted for 0.9% of total client assets, down from 20.6% as of March 31, 2020.
• 12-month investor retention rate as of March 31, 2021 slightly increased to 96.6% from 94.3% as of March 31, 2020.
• Contribution to total client assets from customers with investments of more than RMB 300,000 on the Company’s platform increased to 76.3% as of March 31, 2021, from 74.1% as of March 31, 2020.
• During the first quarter of 2021, the annualized take rate⁷ for current products and services on the Company’s wealth management platform was 28.2 bps, up from 25.7 bps during the first quarter of 2020.

Mr. Ji Guangheng, Chairman of Lufax, commented, “Thanks to our careful navigation through the recent regulatory uncertainty, we were able to position ourselves favorably to execute our growth strategy in alignment with policy direction to produce strong results for the first quarter. With increased transparency in policy, we are able to confidently push forward with our mission to responsibly and compassionately serve small businesses and underbanked customers, while facilitating the growth of China’s real economy. We’ve now provided financing services to more than 15 million cumulative customers with an outstanding loan balance of more than RMB 580 billion as of March 31, 2021. Our results have given us confidence that even as we transition our business to meet regulatory requirements, we can continue to sustain solid profit growth for our investors.”

Mr. Gregory Gibb, Co-Chief Executive Officer of Lufax, commented, “We produced strong results for the first quarter, exceeding our guidance while delivering strong top- and bottom-line growth. This was driven by a significant rebound in our retail credit facilitation unit economics, as we were able to achieve a 10.0% take rate based on loan balance in the first quarter, all while keeping our APR for new borrowers below 24%. Meanwhile, we made good progress with our funding and insurance partners on our risk-sharing model, as we saw our outstanding balance of loans facilitated with guarantees from third-party partner excluding our consumer finance subsidiary decrease from 95.1% a year ago to 86.8% for this quarter. Looking forward, we plan to prioritize the growth of unsecured loans over secured loans, as unsecured loans provide higher operating margins but smaller ticket sizes and continue improving our technology deployment to enhance our O2O sales productivity and achieve greater operating efficiency. We have already begun to integrate lending and wealth client sourcing within third party channels and will move to an integrated APP for all services during this year.”

Mr. James Zheng, Chief Financial Officer of Lufax, commented, “Driven by robust volume, lower funding costs, lower insurance premiums, and improved operating efficiency, our total income increased by 16.9% year over year to RMB 15.3 billion and net profit grew by 18.7% to RMB 5.0 billion. Although our total expenses grew by 17.1% year over year to RMB 8.5 billion, total expenses excluding credit impairment losses, financial costs and other losses grew by only 10.1% as a result of improved operating efficiencies across most of our business segments. We expect to maintain the momentum in our income growth and margin expansion for the remainder of 2021 as our underlying unit economics continue to strengthen.”

First Quarter 2021 Financial Results

TOTAL INCOME

Total income increased by 16.9% to RMB 15,251 million (US $2,328 million) in the first quarter of 2021 from RMB 13,046 million in the same period of 2020. The Company's revenue mix changed with the evolution of its business model as it started to gradually bear more credit risk and increased funding from consolidated trust plans that providing lower funding costs.

		Three Months Ended March 31,
(In millions except percentages, unaudited)		2020				2021					YoY
		RMB		% of income		RMB		% of income
Technology platform-based income		11,079		84.9	%	10,290		67.5	%		(7.1	%)
Retail credit facilitation service fees		10,670		81.8	%	9,665		63.4	%		(9.4	%)
Wealth management transaction and service fees		409		3.1	%	625		4.1	%		52.8	%
Net interest income		1,375		10.5	%	2,911		19.1	%		111.7	%
Guarantee income		79		0.6	%	551		3.6	%		597.5	%
Other income		304		2.3	%	1,039		6.8	%		241.8	%
Investment income		226		1.7	%	490		3.2	%		116.8	%
Share of net profits of investments accounted for using the equity method		(17	)	(0.1	%)	(30	)

FAQ

What were Lufax's Q1 2021 financial results?

Lufax reported a total income of RMB 15,251 million and a net profit of RMB 4,969 million, marking increases of 16.9% and 18.7%, respectively.

How did Lufax manage its credit risk in Q1 2021?

Lufax increased the proportion of loans facilitated to high-quality borrowers and reduced reliance on third-party insurance guarantees.

What were the key operational highlights for Lufax in Q1 2021?

Key operational highlights include a 15.1% increase in loan balances and an increase in cumulative borrowers to approximately 15.1 million.

What impact did total expenses have on Lufax's profitability in Q1 2021?

Total expenses grew by 17.1%, which was higher than the growth in total income, impacting the overall profit margins.