Lufax reports Q4 EPS (21c), consensus (2c)

YongSuk Cho, chairman and CEO of Lufax, commented, “Complex macro conditions continued to impact SBOs during the fourth quarter. Against this backdrop, we prioritized asset quality over quantity and successfully completed our five major de-risking and diversification initiatives, including four “mix” changes and one business model adjustment. First, we strategically adjusted our segment and product mix by diversifying our product offerings to include both business and consumption loans, broadening our loan repayment options, and targeting customers with better risk profiles within the SBO segment. Second, recognizing significant disparities in credit and economic performance across regions, we optimized our geographic footprint and focused on higher-quality, more resilient locations. Third, we further streamlined and optimized our direct sales team to increase productivity and reduce risk within our direct sales channel. Fourth, as we evaluated our industry mix, we assigned greater importance to consideration of each industry’s economic cycle stage within our models. Meanwhile, we successfully completed our transition to the 100% guarantee model, eliminating the negative impact of CGI. On a single account basis, new loans enabled under the 100% guarantee model are expected to realize lifetime profitability, but may record net accounting loss for the first calendar year due to higher upfront provisioning as compared with the loans under CGI model. As a result, we will remain prudent and continue to prioritize quality over quantity going forward. Compared to the third quarter, C-M3 flow rate experienced an increase in the fourth quarter, mainly attributable to the reduction in outstanding loan balances and the short-term impact from the restructuring of our direct sales team and branches. With the completion of all the restructuring measures, we have seen improvement of the flow rate in the first quarter of 2024. Considering the progress in our business de-risking and transformation, as well as our outlook for the growth and capital requirement for the next one to two years, our board of directors has approved a special dividend with an estimated dividend size of approximately RMB10 billion as we continue to deliver value to our shareholders.”