Financial Data and Key Metrics Changes - In Q2 2024, total income decreased by 35.5% to CNY 6 billion from CNY 9.3 billion in Q2 2023, primarily due to a 44.8% decrease in outstanding loan balance [14] - Total expenses decreased by 20.3% from CNY 8 billion to CNY 6.3 billion, with operating expenses declining by 29.7% [15] - A net loss of CNY 730 million was recorded for the second quarter [15] Business Line Data and Key Metrics Changes - Total new loan sales in Q2 2024 were CNY 45.2 billion, a 15.5% year-over-year decline, with Puhui loans down 35% year-over-year [6] - Consumer finance loans increased by 23.6% year-over-year, representing 49% of new loan sales [6] - The C-M3 flow rate for Puhui loans improved to 0.9% from 1.0% in the previous quarter, while the NPL ratio for consumer finance loans decreased to 1.4% from 1.6% [7] Market Data and Key Metrics Changes - The SME development index trended down by 0.3 points quarter-over-quarter to 89 in June, indicating persistent challenges in the small business sector [5] - The Business Conditions Index fell from 50.1 in March to 49.3 in June, reaching its lowest level for the first half of 2024 [5] Company Strategy and Development Direction - The company is focusing on improving asset quality and implementing prudent business strategies to provide a solid foundation for future growth [5] - The acquisition of a nationwide small lending license is expected to reduce funding costs and diversify product offerings [9] - The relationship with Ping An Group is expected to enhance branding, technology, and distribution channels, improving overall operational efficiency [10][11] Management Comments on Operating Environment and Future Outlook - Management noted that loan demand remains weak, particularly in the small business sector, and recovery largely depends on macroeconomic improvements [23] - There is confidence in sustaining improvements in asset quality due to ongoing enhancements in risk management and underwriting processes [24] - The company remains committed to a strategic approach aimed at achieving sustainable quality growth despite the complex macro environment [12] Other Important Information - The distribution of special dividends was completed at the end of July, increasing Ping An Group's ownership to 56.8% [10] - The company plans to leverage Ping An Group's technological resources to enhance risk management and fraud prevention [11] Q&A Session Summary Question: What is the current loan demand and outlook for loan growth recovery? - Loan demand is still weak, and recovery depends on macroeconomic improvements, with a focus on consumer finance to cope with declining SBO loan demand [23] Question: Can the improvement in asset quality continue? - Continuous portfolio mix improvement and efforts in risk management and collection processes are expected to sustain asset quality improvements [24] Question: What areas will see more collaboration with Ping An Group? - Collaboration will focus on customer sourcing, technology development, and brand enhancement, which are expected to reduce funding costs [26] Question: Are there plans to increase shareholder returns? - While no semiannual dividend will be paid due to a net loss, management is dedicated to returning value to shareholders and maintaining an annual dividend policy of 20% to 40% of net profit [28] Question: What is the outlook for future funding costs? - Funding costs are expected to continue decreasing due to favorable monetary policies and synergies with Ping An Group [27][29] Question: Why did the OpEx to income ratio increase in Q2? - The increase was mainly due to loan scale contraction leading to a decline in economies of scale, but efforts will be made to improve operational efficiency [30]
LUFAX(LU) - 2024 Q2 - Earnings Call Transcript