Detailed narrative
Industry Headwinds and Proactive Measures
The second quarter saw significant industry headwinds🌐, including risk events among peers that led to widespread tightening of funding supply. LexinFintech's loan facilitation operations were materially affected. In response, the company swiftly implemented cost efficiency measures, tightened risk controls by scaling back loan volume, strengthened financial discipline by prioritizing receivables recovery, and advanced its diversification strategy towards a tech-empowered model.
Q2 Business Performance Overview
LexinFintech reported a loan volume of CNY 55.43 billion, revenue of CNY 3.19 billion, and net profit of CNY 101 million for Q2 FY26. While day 1 delinquency ratio increased by approximately 9.5% QoQ due to broader industry issues, the 30-day collection rate showed improvement. The company remains confident in its long-term prospects despite current volatility.
Strategic Pillars for Future Growth
The company highlighted three key areas for future growth: deep integration with consumption scenarios for its e-commerce business, rapid growth and profitability of its FinTech empowerment business serving corporate clients, and tangible cost savings from AI adoption across operations. AI agents are deployed in over 100 operational scenarios, contributing to a 17.6% QoQ decrease in operating expenses.
Risk Management and Outlook
The CRO noted a 9.5% QoQ rise in day 1 delinquency ratio and a 90-day plus delinquency ratio increase from 3.5% to 3.6%. For Q3, further tightening of funding supply and shrinking loan balance are expected to drive the 90-day plus delinquency ratio higher. The company is strengthening early-stage collections and maintaining tight underwriting standards for new loans, limiting the FPD 30 uptick to 4.6% QoQ for new loans.
Financial Performance and Diversification
Total loan origination volume decreased 4.3% sequentially to CNY 55 billion. Net revenue from the credit business (credit facilitation and tech empowerment) decreased 32.5% QoQ to CNY 981 million. The FinTech empowerment business, however, grew 8%, with its loan volume contribution (combined with e-commerce) reaching 45% of total. Installment e-commerce gross profit reached CNY 329 million, a 58.7% increase, with gross profit margin expanding to 14.1%.
Prudent Provisioning and Expense Management
LexinFintech adopted a more conservative provisioning approach, increasing overall credit cost by 9.6% sequentially to CNY 1.4 billion. The gross provision ratio for new capital-heavy loans was 7.8%. Total operating expenses decreased by 17.6% to CNY 1.1 billion, mainly due to reduced sales and marketing expenses and one-time📎 G&A savings from organizational optimization. However, one-time📎 severance costs are expected in Q3.
Shareholder Value and Capital Allocation
The Board adjusted the dividend policy from semiannual to annual to optimize liquidity and provide a financial buffer for business transformation. Any potential FY26 dividends will be assessed in early 2027. Management emphasized that delivering shareholder value remains a top priority, and they will explore various return options, including share buybacks, as market visibility improves.