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Source | Bedouin Finance
On August 22, Lufax Holdings (NYSE: LU, HK: 06623) released its second quarterly and semi-annual reports for 2023. The financial report shows that in the second quarter, Lufax Holdings achieved an operating income of 9.27 billion yuan and a net profit of 1.004 billion yuan. After turning losses in the first quarter, the net profit increased by 37% from the previous quarter. The business resilience has been shown, and the profitability has continued to improve. This is undoubtedly a hard-won report card.
Against the background of a weak recovery economy where the real estate engine stalled and the CPI performance was not as expected, most investors investing in Chinese stocks and Hong Kong stocks have been extremely difficult this year, but there are many stocks that have shown signs of reversal, such as Lufax Holdings. Let investors feel the continuous warmth.
The semi-annual report of Lufax Holdings announced that it will distribute an interim cash dividend of US$0.078 per ordinary share (US stock US$0.039/ADS), which is about 40% of the net profit attributable to the parent company in the first six months of 2023. In the face of short-term operating pressure, Lufax Holdings can maintain a high proportion of stable dividends. On the one hand, it reflects the current stable financial and capital conditions. On the other hand, it reflects the commitment to continue to create value for shareholders and confidence in long-term development. .
At the same time, the asset quality of Lufax Holdings continued to stabilize. The C-M3 indicator of new loans in the second quarter was flat compared with the first quarter of 2023, and credit impairment losses decreased slightly from the previous quarter.
Ji Kuisheng, co-CEO of Lufax Holdings, said, "The company will continue to reduce costs, increase efficiency, improve asset quality, and strive for continuous improvement in profitability."
The day after the financial report was released, analysis agencies CICC and Huaxing Securities released research reports one after another, all of which maintained Lufax’s ratings of “outperform the industry” and “hold”.
Since the beginning of this year, government departments have made clearer requirements for financial support for the development of small and micro enterprises. sex.
As China's leading financial service empowerment institution for small and micro business owners, Lufax Holdings actively responds to policy requirements, continues to firmly promote diversified strategic transformation in the field of small and micro finance, and is trying to use artificial intelligence to explore new solutions for small and micro finance.
1. The transformation strategy has achieved initial results, and both asset quality and profitability have stabilized
The second quarter report of Lufax Holdings is quite interesting. In the performance communication conference call, executives all said that the long-term promotion of diversified strategic transformation has achieved initial results, and profits have continued to improve.
First of all, since the beginning of this year, under the guidance of relevant policies such as expanding domestic demand and stabilizing the economy, Lufax Holdings has stepped up financial efforts to promote consumption, and the consumer finance business has grown steadily, making more contributions to the overall business development. The financial report shows that as of June 30, the proportion of consumer finance loans in the new loans of Lufax Holdings increased from 24.4% in the first quarter to 33.5%. The balance of consumer finance loans was 32.8 billion yuan, and the non-performing rate decreased month-on-month. Zhao Rongshi, chairman and CEO of Lufax Holdings, expects that in the next 12 to 18 months, the consumer finance business will become more and more important in the business layout of Lufax Holdings.
Second, continue to reduce costs and increase efficiency. Ji Kuisheng said that in the face of complex situations, the company took the initiative to make strategic adjustments, firmly promoted agile operations and cost control, and the total cost decreased by 27.2% year-on-year, helping the company successfully achieve continuous growth in net profit.
Finally, the quality of loan assets was continuously improved, and credit impairment losses were reduced. Cho Yong-seok said that the company adopted a prudent business strategy, focused on the quality of new assets, strengthened risk control, and focused more on more dynamic regions and high-quality customers. The effects of these measures are gradually being reflected. The asset quality of recent new loans is in line with expectations. In the second quarter, credit impairment losses decreased slightly quarter-on-quarter.
Cho Yong-seok said that in the face of multiple challenges, the strategy of focusing on the quality of loan assets, reducing costs and increasing efficiency, improving production capacity, and developing consumer finance business transformation strategies has achieved initial results.
2. Four strategic measures to improve financial services for small and micro enterprises, waiting for the "smiling curve" of performance
Small and micro enterprises constitute a large, fast-growing, and systemically important sector of the Chinese economy, and are strongly supported by national policies. The "Notice on Improving the Quality of Financial Services for Small and Micro Enterprises in 2023" previously issued by the State Administration of Financial Supervision and Administration proposes to form a financial service system for small and micro enterprises that is compatible with the development of the real economy and improve the quality of financial services for small and micro enterprises. Enhance the sense of access to financial services for small and micro enterprises.
Lufax Holdings responded positively, providing "answers" to the market in order to improve the quality of small and micro financing services and promote the U-shaped recovery of performance.
First, continue to promote and optimize the business model. Lufax Holdings continues to promote the 100% credit-increasing business model of its financial guarantee companies, consolidate guarantee responsibilities, and continuously increase the proportion of guarantees. Through the financing guarantee model, it helps cooperative banks better realize "dare to lend and willing to lend" small and micro loans. Zhao Rongshi said that the new business model has made good progress and has been recognized by the majority of cooperative banks, which is expected to improve the profitability of Lufax Holdings in the medium term.
Second, focus on precise support for small and micro enterprises and key groups in key areas. Zhao Rongshi said that Lufax Holdings will focus on more dynamic regions and high-quality customers.
Third, further develop the consumer finance business and focus on product diversification and cross-selling between small and micro credit services and consumer finance business to better meet customer needs. Zhao Rongxi expects that in the next 12 to 18 months, the consumer finance business will become more and more important in the business layout of Lufax Holdings.
Finally, strengthen risk control, improve production capacity and efficiency. According to Zhao Rongxi, Lufax Holdings has developed an "AI+expert" model, which integrates the experience and capabilities of artificial intelligence and risk control experts. The model strikes a balance between the efficiency and accuracy of risk assessment. In addition, the company upgraded its credit loss forecasting model. Recently, Lufax Holdings launched the first professional artificial intelligence big language model "Wu Shi", which provides intelligent guidance and services for risk control personnel in fields such as business investigation and anti-fraud, and helps improve risk control efficiency.
In addition, Zhao Rongshi said that the low-risk and diversified strategic transformation is a decision based on long-termism. We focus on sustainable and healthy development, continue to adhere to strategic goals, unswervingly put customers first, and intensively cultivate in subdivided fields. We believe that the continuously improving external environment and the solid long-term foundation of Lufax Holdings will eventually promote performance recovery and bring sustainable value to customers, employees and shareholders.
3. Integrate technological attributes and use artificial intelligence to explore new solutions for small and micro finance
Since the beginning of this year, the deep integration of artificial intelligence and financial services has consolidated the "safety base" and improved the quality and efficiency of serving small and micro entities, which has become a hot spot for exploration in the industry. As a non-traditional financial service provider serving small and micro business owners, Lufax Holdings has been actively exploring the embedding of artificial intelligence in all aspects of small and micro financing services for many years, and through digital transformation of business processes, it has promoted the evolution of the financial industry to technological inclusive finance.
Using AI technology, Ping An Pratt & Whitney, a subsidiary of Lufax Holdings, continues to meet the needs of small and micro business owners to complete financing services without leaving home. The AI video loan program "Xingyun" launched by the artificial intelligence customer service "Xiaohui" is "face-to-face" with customers throughout the process. "Service, which can achieve at least zero text input, greatly reduce waiting time, and greatly improve customer experience. The AI customer service can serve hundreds of customers online at the same time. On the one hand, it saves a lot of labor costs, and on the other hand, it can serve customers more intelligently, allowing customers to complete the entire loan process without leaving home. As of the end of July 2023, "Xingyun" has served a total of 747,000 customers, and customers have received a total of 199.4 billion yuan in loans. The average time-consuming application process has been reduced by 31%, and the number of breakpoints has been improved by 50%.
Consumer protection has also been greatly improved. In the application, signing and other links, through the upgrade of double-recorded video content, 100% page display and voice broadcast prompts are realized, which is convenient for customers to receive and understand information, improves cost perception, and protects customers' right to know. At the same time, the risk investigation of business development was increased, and the rate of customer complaints was improved by 17%.
In addition, the intelligent customer service team of Lufax Holdings won the gold medal in the national finals of the first artificial intelligence trainer "Future Star" competition. In the first half of the year, the intelligent customer service platform served a total of 4.9 million customer visits. Through the innovative application of customer service scenarios such as AI return visits, AI double recording, Askbob, and intelligent knowledge base, the customer experience was greatly improved, and the resolution rate of the intelligent customer service platform exceeded 84%. By optimizing the active message services for repayment, withdrawal progress, and settlement, the convenience of service has been improved. Nearly 7,000 customers have actively used this function in the first month of its launch.
Driven by technology and innovative services, financial institutions represented by Lufax Holdings are constantly leveraging the advantages of artificial intelligence applications to become a light cavalry that unblocks the financial blood, breaks through blockages and breakpoints, and stimulates the vitality of small and micro economies. While improving the quality of small and micro financing services, Lufax Holdings is undergoing a U-shaped reversal, and its market share is expected to continue to increase, ushering in long-term growth. The release of performance and the increase in valuation are worth looking forward to.