Lufax H1 Earnings Call Highlights

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Lufax (NYSE:LU) said its second-quarter results marked its return to a regular reporting schedule after the company completed re-audits of its 2022 and 2023 financial statements and audits for 2024 and 2025.

Director and Chief Executive Officer Ji Xiang said the company has brought its periodic SEC filings current and regained compliance with New York Stock Exchange continued-listing standards. Lufax also hired Deloitte Consulting (Shanghai) Co., Ltd. as an independent internal-control consultant, implemented remedial measures related to identified control deficiencies, restructured its board and established a Chief Compliance Officer role.

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Independent non-executive directors now comprise a majority of the board, according to Ji. He added that Lufax’s American depositary shares continue to trade on the NYSE, while its ordinary shares remain suspended on the Hong Kong Stock Exchange as the company works through the matter with the exchange.

Second-Quarter Lending Trends

Total new loan sales reached RMB51.1 billion in the second quarter, up 4.6% from a year earlier and 4.8% from the first quarter. The increase was driven by consumer finance, where new loan sales rose 27.6% year over year to RMB36.9 billion.

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Total outstanding loan balances were RMB167.3 billion at the end of the quarter, down 13.5% from a year earlier. Ji attributed the decline to weak financing demand among small business owners and the company’s prudent underwriting approach.

Lufax said total income declined 15.5% year over year, primarily because of a lower balance of Rongyi loans, formerly known as Puhui loans before a 2025 rebranding. Growth in consumer-finance loan balances, which rose nearly 20% year over year, partly offset the decline.

The company reported a net loss for the quarter. Ji said credit costs remained elevated relative to Lufax’s income base amid a difficult macroeconomic environment for small business owners and tighter regulatory requirements that affected the supply of higher-priced products.

Credit Metrics Show Sequential Improvement

Lufax reported sequential improvement in several asset-quality measures following changes to its risk controls and collection operations. Its CM3 flow rate was 1.0% in the second quarter, compared with 1.2% in the first quarter.

• Unsecured-loan CM3 flow rate was 1.0%, compared with 1.2% in the first quarter.
• Secured-loan CM3 flow rate was 0.9%, compared with 1.0% in the first quarter.
• The DPD 30-plus delinquency rate, excluding the consumer-finance subsidiary, declined to 5.8% from 6.1% sequentially.
• The nonperforming-loan ratio for consumer-finance loans fell to 1.3% at June 30 from 1.4% at March 31.

Ji said Lufax upgraded risk-control measures, refined its risk strategy and models, reformed collection processes and expanded the use of artificial intelligence in collections. He said the company expects the improving asset-quality trend to continue through the second half of the year.

Management also said loans issued during the first half of 2026 had improved profitability relative to assets originated in 2025, though it did not provide a specific expected net-rate target for new full-guarantee-model lending.

Strategy Centers on Lower-Risk Customers and AI

Over the next two to three years, Lufax plans to focus on expanding its base of mid- to low-risk customers, optimizing costs and strengthening internal controls and compliance, Ji said.

The company identified small business owners, individually owned businesses and salaried employees as its priority customer groups. Lufax intends to maintain two business-growth engines: small-business lending and consumer finance.

Ji said consumer finance is a newer growth engine and that Lufax is testing customer-acquisition models and product combinations aimed at serving higher-quality customers. The company views consumer finance and small-business lending as complementary because they have different demand characteristics and risk profiles.

For its small-business lending operations, Lufax is pursuing improved customer-acquisition efficiency, a broader product portfolio and stronger risk management. The company has also introduced an “Industry+” initiative that tailors financing products and operating priorities to regional and industry-specific customer needs.

Lufax is deploying AI-powered tools, including a digital twin system designed to support its direct sales staff in customer acquisition, product recommendations, post-loan management and customer engagement. Management said these efforts are intended to improve service quality and operating efficiency.

Pricing, Funding and Regulatory Pressures

The average pricing of Rongyi loans was 20.4% in the second quarter, while the average pricing of consumer-finance loans was 19%. Lufax’s funding cost by balance, including consumer finance, was 3.8%, down about 90 basis points from a year earlier.

Ji said Lufax has used banking relationships to lower funding costs under its guaranteed model and has accessed lower-cost interbank funding through its consumer-finance subsidiary.

Management described China’s regulatory environment as increasingly stringent, with policies since 2025 addressing collection practices, data security, personal-information protection, pricing, customer acquisition, risk management and post-loan operations. Ji said interest-rate compression and fee-transparency requirements are narrowing industry margins.

While the tighter rules may pressure growth and profitability in the near term, Ji said Lufax expects compliant, licensed industry participants to benefit over the medium to long term from a more disciplined competitive landscape.

Regarding capital returns, Ji said management considers the company’s current cash position appropriate given its business scale, capital requirements, regulations and future-growth needs. He said restoring profitability remains the company’s priority, after which management and the board will review the dividend policy.

About Lufax (NYSE:LU)

Lufax (NYSE: LU) is a leading provider of online wealth management and personal finance services in China. Established in 2011 as a spin-off from Ping An Insurance (Group) Company of China, Lufax has developed a digital ecosystem designed to match retail and institutional investors with a diverse array of financial products. The company went public on the New York Stock Exchange in October 2020, underscoring its ambition to expand beyond its domestic market.

The firm's core business activities include peer-to-peer lending, consumer finance, supply chain and small-business lending, as well as online asset management.

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