Detailed narrative
Return to Normal Reporting & Governance
Lufax has completed the reaudit of its 2022 and 2023 financial statements and audits for 2024 and 2025, bringing SEC periodical filings current and regaining compliance with NYSE listing standards. The company engaged Deloitte Consulting Shanghai for a comprehensive review of internal controls, implementing remedial measures. Corporate governance was strengthened through Board restructuring, with independent non-executive directors now forming a majority, and the establishment of a Chief Compliance Officer position.
Challenging Macro & Regulatory Environment
China's GDP grew 4.3% year-over-year in Q2, with a difficult operating environment for small and micro enterprises and weak financing demand, reflected by a 1.7% year-over-year decline in household consumer loan balances. Regulatory oversight has tightened across the full value chain, covering pricing, customer acquisition, risk management, post-loan operations, and data governance. This has led to narrowing industry margins and near-term pressure📎 on growth and profitability, as the previous high-risk/high-fee business model is no longer sustainable.
Strategic Shift to Selective Customers & AI
The company is implementing a prudent strategy focused on shifting its customer mix towards lower-risk borrowers, targeting small business owners, individually owned businesses, and salaried employees. Lufax launched its 'Industry+' product, which deploys differentiated product and operational priorities tailored to local industries and regions. Furthermore, AI-powered digital twin technology is being used to improve operational efficiency across direct sales for acquisition, product recommendation, post-loan management, and customer engagement.
Consumer Finance as a Growth Driver
Total new loan sales in Q2 were RMB 51.1 billion, representing a 4.6% year-over-year increase and a 4.8% sequential increase. This growth was primarily driven by the consumer finance segment, where new loan sales grew 27.6% year-over-year to RMB 36.9 billion. The company views consumer finance as a new, sustainable growth engine and is actively testing new customer acquisition models and product combinations to serve higher-quality customers.
Asset Quality Improvement
Lufax reported sequential improvements in asset quality, attributing this to upgraded risk control measures, optimized risk strategy, and enhanced risk models. The C-M3 flow rate improved to 1.0% in Q2 from 1.2% in Q1. The DPD 30+ delinquency rate, excluding the consumer finance subsidiary, decreased to 5.8% from 6.1% sequentially. The NPL ratio for consumer finance loans also improved to 1.3% from 1.4% as of March 31, 2026.
Pricing & Funding Cost Optimization
The average pricing for LONGi loans (formerly Puhui loans) was 20.4% in Q2, flat sequentially and slightly up year-over-year. Consumer finance loans had an average pricing of 19%. The cost of funding for loans under the guaranteed model, excluding consumer finance, was 3.8% in Q2, down approximately 90 basis points year-over-year, due to leveraging long-term banking relationships. Consumer finance loans continue to access low-cost funding in the interbank market.
Hong Kong Trading Suspension Update
Lufax's ordinary shares remain suspended from trading on the Hong Kong Stock Exchange. The company has completed the restatement of 2022-2023 financial statements, audits for 2024-2025, and an internal control review. Lufax is currently responding to outstanding questions and comments from the Hong Kong Stock Exchange regarding these findings and has committed to keeping investors updated on developments.