LexinFintech Holdings (NASDAQ: LX) just posted impressive first quarter 2021 results. Adjusted net profit of China’s consumer finance platform hit a new all-time high of 771 million yuan (roughly $ 121 million) thanks to a record number of loans and active users in the quarter.
But beyond the headlines, there is a lot more to LexinFintech’s latest earnings report. Here are three important takeaways from the report.
Recovery from COVID-19 Accelerates
The new coronavirus pandemic has become a devastating event around the world. When the virus began spreading across China early last year, LexinFintech was among the hard hit companies, posting a first-quarter net loss due to soaring prices. provisions for credit losses… But LexinFintech will continue its robust recovery through 2020, ending the year in positive territory. In fact, his fourth quarter net income was down by only 2% over the same period a year earlier – a clear sign that business is returning to normal.
LexinFintech’s latest reports confirm its recovery is picking up steam. Net profit on Generally Accepted Accounting Principles (GAAP) reached 711 million yuan in the first quarter of 2021, a decrease from a net loss of 678 million yuan a year ago. These strong figures were driven by an 18% increase in revenues, as well as a decrease in loan loss provisions.
Along with strong financial performance, LexinFintech also reported exceptional operating performance. Lending and loan balances hit a record high, increasing 58% and 41% to 53.8 billion yuan and 82.4 billion yuan, respectively. In addition, the number of active users in the quarter – customers who used LexinFintech’s lending products during the quarter – rose 29% to a record 8.24 million.
It is important to note that credit quality continued to improve. The over 90 days overdue ratio, which tracks borrowers who are at least 90 days overdue in payments, fell to 1.84% from 1.95% in the fourth quarter of 2020.
Revenues from non-lending platforms grew rapidly
Until 2020, LexinFintech acted primarily as a lending facilitation platform – matching borrowers and lenders (like banks) for a fee. As part of the guarantee provided to its credit partners, LexinFintech provides from 5% to 10% of the issued loan. These funds cover the loss of interest and capital by the lenders.
But from the second half of 2020, LexinFintech began to shift to the side. overhaul-light business model it does not require him to guarantee any loans. Under this model, LexinFintech acts primarily as a technology partner for lenders, expanding their capabilities in areas such as customer acquisition and risk management. In return, LexinFintech receives payments for purely technological services, and lenders bear all the financial risks.
In the last quarter, revenue from this business grew 122% to 636 million yuan. As LexinFintech makes more and more loans using this model, its income should become more stable and predictable. In other words, investors can reasonably expect LexinFintech to improve its quality of earnings.
LexinFintech’s BNPL bet picks up steam
In February, LexinFintech introduced Maiya, one of China’s first buy-now-pay-later service providers, under new growth initiatives… With Maiya, users don’t have to pay interest when splitting their purchases into installments. Instead, LexinFintech charges merchants a commission for every transaction made through Maiya.
Although Maiya is still a new product, it is already enjoying success with Chinese consumers. In the first quarter of 2021, there were 200,000 registered users and 300 merchants. Maiya’s gross commodity value reached 60 million yuan in the quarter, indicating strong market demand.
In fact, LexinFintech expects Maiya to hit a record GMV level of RMB 300 million in the second quarter. At this level, LexinFintech expects Maiya to reach an annual GMV of RMB 1.2 billion. run course by the end of the next quarter. This is impressive considering the service is only four months old. But it also says a lot about the potential growth this product could open up for LexinFintech. If LexinFintech can continue to grow its business, Maya has a chance to become Afterpay China – creating tremendous value for its shareholders.
What’s next for LexinFintech
In the first quarter of 2021, LexinFintech delivered solid revenue growth, improved credit quality and successfully launched a promising new business in Maya. The company is confident that it is on track to meet its 2021 lending target of RMB 240 billion to RMB 250 billion. In other words, investors can expect even better financial performance from the company before the end of the year.
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