Lexinfintech ((LX)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Lexinfintech’s latest earnings call presented a mixed sentiment, with strong net profit growth and successful expansion in the e-commerce sector. The company also made notable advancements in AI deployment and risk management. However, these positives were tempered by concerns over industry-wide risk volatility, regulatory impacts on loan pricing, and an anticipated decline in Q4 net profit.
Solid Net Profit Growth
Lexinfintech reported a net profit of RMB 521 million, marking a 2% increase quarter-over-quarter and a significant 68% year-over-year rise. This achievement represents a record high in the last 15 quarters, underscoring the company’s robust financial performance.
E-commerce Business Expansion
The company’s e-commerce platform saw remarkable growth, with total GMV increasing by 38% year-over-year. The transaction volume for essential daily consumer goods surged by an impressive 237% year-over-year, highlighting the platform’s expanding reach and influence.
AI Technology Deployment
Lexinfintech accelerated its AI technology deployment, which enhanced decision-making capabilities and improved request solution efficiency by over 20%. This advancement underscores the company’s commitment to leveraging technology for operational improvements.
Enhanced Risk Management
The company strengthened its risk management practices by improving user categorization and risk identification. This effort helped maintain a balanced risk-return profile for new assets, reflecting Lexinfintech’s proactive approach to managing financial risks.
Industry-Wide Risk Volatility
Despite strong performance, the company faced challenges due to industry-wide liquidity tightening and risk fluctuations. This led to an increase in the day 1 delinquency ratio and collection rate of loan balance, indicating heightened risk volatility.
Regulatory Impact on Loan Pricing
Regulatory changes led to a shift towards business with pricing below 24%, resulting in the loss of higher-risk customers. This shift impacted both business volume and average loan pricing, posing challenges for the company’s revenue streams.
Potential Decline in Q4 Net Profit
Looking ahead, Lexinfintech anticipates a sequential decrease in net profit and net income take rate in Q4. This expectation is due to ongoing credit risk volatility and regulatory impacts, which are likely to affect the company’s financial performance.
Forward-Looking Guidance
During the earnings call, Lexinfintech provided detailed guidance on its financial performance and strategic initiatives. The company reported a loan volume of RMB 50.89 billion and revenue of RMB 3.42 billion. Despite regulatory challenges, Lexinfintech maintained a robust financial position with a cash balance of RMB 4.3 billion and shareholders’ equity at RMB 11.8 billion. The company expects a moderate decline in loan volume in Q4 but remains committed to enhancing shareholder returns through increased dividend payouts and a share repurchase plan.
In summary, Lexinfintech’s earnings call highlighted a strong financial performance with record net profit growth and significant advancements in e-commerce and AI deployment. However, the company faces challenges from industry-wide risk volatility and regulatory impacts, which are expected to influence its Q4 performance. Despite these challenges, Lexinfintech remains committed to strategic initiatives aimed at enhancing shareholder value.