occurrences

Qifu Technology's 24Q2 revenue was +6.3% year-on-year to 4.16 billion yuan, and net profit was +23.3% year-on-year to 1.413 billion yuan. The contribution to revenue from heavy capital businesses was 70%, declining both month-on-month and year-over-year. The year-on-year increase in revenue was mainly due to an increase in in-statement loans and other value-added services, which was partially offset by a decrease in off-balance sheet loans. The ROE for 24Q2 was 25.4%, up about 3 pcts year over year. 24H1's cumulative dividend per share is RMB 0.6. Net rate of return (net take rate) was 4.4%, +0.9 pct month-on-month and +1.1 pct year-on-year. The average IRR for 24Q2 was 21.6%, up 0.1 pct from month to month. The company proposed on March 12, 2024 that 12 months would be enough for no more than $0.35 billion in ADs. As of August 13, the company has repurchased 10.7 million ADS shares (corresponding amount is about 0.211 billion US dollars, including commission), and has completed more than 60% of the target repurchase amount. The average repurchase price is $19.7/ADS, and the repurchase speed is relatively fast.

reviews

The cumulative number of users who have received credit approval credits in 24Q2 increased 1.3 million month-on-month to 53.6 million, +13.1% year-on-month, and +2.5% month-on-month. The year-on-year and month-on-month growth rates both slowed from 24Q1. The company added 7 new financial institutions as partners.

71% of users are under 40, and about 81% of customers are from Tier 3-4 cities. The proportion of repeat borrowers accounts for 93%, the per capita loan amount is about 7,500 yuan, and the weighted average loan period is about 10 months.

New loans issued in 24Q2 were RMB 95.4 billion, -23.2% YoY and -3.8% YoY; of these, the platform service contribution rate was 64.9%. More than 28% of newly issued loans stemmed from the statement. The 24Q2 loan balance was 157.8 billion yuan, -14.5% year-on-year and -7.1% month-on-month, of which the platform service contribution rate was 65.8%. 24H1's ABS distribution was +30% year-on-year. 24Q2 capital costs continued to decline by 56 bps month-on-month, and 24H1 decreased by a cumulative total of 132 bps.

The 24Q2 accrued 1.31 billion yuan. The month-on-month decline was due to a decrease in the volume of off-balance sheet heavy capital loans. The accrual ratio increased month-on-month, and the refund amount was about 0.48 billion yuan.

The 90-day overdue rate was 3.4%, and the 30-day recovery rate increased 1.2 pct to 86.3% month-on-month, and has maintained an upward trend since the end of 2023. The one-day overdue rate decreased by 0.1 pct to 4.8% month-on-month, and has maintained a downward trend since the end of 2023. The company says it has been actively tightening credit standards over the past 3 quarters.

Provisioned/overdue 90-180 day heavy asset loans were 421%, an increase of 7 pcts over the previous month.

24Q2 marketing expenses were -12% month-on-month and -16% year-over-year. The company intends to control the speed of customer acquisition in an uncertain environment. The cost of customer acquisition per capita was RMB 286, or RMB -10, which remained stable from month to month. Among the new customers, the share of high-value customers increased by 6.8 pcts month-on-month.

prospect

The company anticipates

Q3 net profit was 1.55-1.65 billion yuan, +31%-40% YoY.

The loan IRR fluctuated around 21.6%.

The cost of capital remains generally stable in 24H2, and is likely to drop slightly.

Asset quality metrics are likely to continue to improve in Q3, and there will be additional rebates.

risks

Demand for loans fell short of expectations, market liquidity declined, and asset quality fell short of expectations.