LexinFintech Q2 Earnings Call Highlights

Key Points

• Funding constraints sharply pressured operations: LexinFintech’s Q2 loan volume fell 4.3% sequentially, revenue declined 21.1% to CNY1.3 billion, and net income dropped 49.7% to CNY101 million as industry risk events led funding providers to tighten supply.
• Credit risks are worsening: Credit costs rose 9.6% to CNY1.4 billion, while delinquency metrics increased. Management expects risk indicators and costs to rise further in Q3 and anticipates a net loss, partly due to restructuring expenses.
• Lexin is shifting toward technology and preserving liquidity: Fintech empowerment and e-commerce accounted for 45% of loan volume, with installment e-commerce gross profit rising 58.7% sequentially. The company is cutting costs, expanding AI use and moving to annual rather than semiannual dividend assessments to maintain financial flexibility.

LexinFintech NASDAQ: LX reported second-quarter net income of CNY101 million as tighter funding conditions and broader industry risk concerns pressured its loan facilitation operations. Management said recent risk events involving certain industry peers prompted funding providers to tighten or suspend supply across the sector, affecting new loan originations and increasing uncertainty around asset quality.

Chairman and CEO Jay Wenjie Xiao said Lexin generated CNY55.43 billion in loan volume and CNY3.19 billion in revenue during the quarter. The company’s loan origination volume was down 4.3% sequentially, while net income declined 49.7%, or about CNY100 million, from the prior quarter, according to CFO James Zheng.

Funding Tightening Pressures Loan Facilitation

Xiao said the industry environment deteriorated in late June after risk events at certain peers undermined market confidence. He said the developments led to broad-based funding tightening, affecting both online consumer finance and offline inclusive-finance loan facilitation.

“We have always operated strictly in compliance with regulations, and we do not have any of the issues seen at these institutions,” Xiao said in response to an analyst question. Still, he said Lexin was not immune to the broader sector trend, with its loan facilitation business taking a meaningful hit in July as new originations contracted.

Zheng said the company had CNY2.5 billion in cash, including cash equivalents and restricted cash, as of June 30, and approximately CNY12 billion in shareholders’ equity. He said the cash balance provides a financial buffer as the company navigates market volatility.

Management said it is maintaining discussions with funding partners and remains on the white list of major funding providers. Xiao said this position should allow the company to resume loan origination when market conditions permit, though executives said they had limited visibility into the timing of a broader funding recovery.

Revenue Declines as Credit Costs Rise

Zheng said total net revenue, combining credit business and installment e-commerce operations, was CNY1.3 billion, down 21.1% sequentially. Net revenue from the credit business was CNY981 million, down 32.5%, reflecting declines in both credit facilitation service income and technology empowerment service income.

• Credit facilitation service income, representing Lexin’s capital-heavy business, fell 43.6% to CNY508 million.
• Technology empowerment service income, representing its capital-light business, declined 14.4% to CNY473 million.
• Overall credit costs rose 9.6% sequentially to CNY1.4 billion as the company adopted a more conservative provisioning approach.
• The provision coverage ratio stood at 230%, while the gross provision ratio for new capital-heavy loans was 7.8%, Zheng said.

The company said operating expenses fell 17.6% sequentially, supported by lower sales and marketing costs and organizational optimization. Xiao said Lexin has streamlined its organizational structure, optimized headcount and expanded artificial intelligence deployment. He said the company expects management costs to decline by 30% to 40% as a result of its efficiency efforts.

Lexin has deployed more than 100 AI agent roles across operational areas including strategy generation, compliance checks, post-loan management and customer service, according to Xiao. Chief Risk Officer Arvin Zhanwen Qiao said AI tools are also being applied to credit approval and risk management, with the company seeking to standardize more of its internal risk-management tasks.

E-Commerce and Technology Services Support Diversification

Management highlighted growth in the company’s fintech empowerment and installment e-commerce operations as it shifts away from guarantee-backed loan facilitation toward a more technology-enabled model.

Zheng said fintech empowerment service loan volume grew 8% during the second quarter. The contribution from fintech empowerment and e-commerce businesses reached 45% of loan volume, he said.

Installment e-commerce loan volume was stable at CNY2.3 billion. The segment’s gross profit reached CNY329 million, up 58.7% sequentially, while gross margin expanded to 14.1% from 9.4% in the previous quarter, according to Zheng.

Xiao said the company intends to continue investing in technology empowerment services for institutional clients, supported by its traffic acquisition, risk management, AI and operating capabilities. He also said management expects the e-commerce business to continue growing steadily and contributing profit.

Risk Metrics Expected to Worsen in Third Quarter

Qiao said funding constraints across the industry contributed to a roughly 9.5% sequential increase in Lexin’s day-one delinquency ratio across total assets. The 90-day-plus delinquency ratio rose to 3.6% from 3.5%, he said.

The company expects risk indicators for its outstanding portfolio to continue increasing sequentially in the third quarter as funding supply tightens and new loan originations decline sharply. Qiao said the contraction in loan balances is also expected to push the 90-day-plus delinquency ratio higher.

Lexin said it is tightening underwriting standards, increasing scrutiny of borrowers with cross-platform debt, strengthening early-stage collections and using differentiated repayment reminders. The company is also increasing provisioning and preparing for an orderly runoff of existing assets.

“Our goal is to keep any risk fluctuation within our risk appetite,” Qiao said.

Company Expects Third-Quarter Net Loss, Changes Dividend Schedule

Zheng said Lexin expects revenue to decline further and credit risks and costs to increase in the third quarter. The company also expects one-time expenses from organizational restructuring, including severance-related costs, to be recognized primarily in the period.

“If I factor in all of this, we expect the company to record a net loss in the third quarter,” Zheng said. The company did not provide specific financial guidance for the second half, citing uncertainty over regulation and funding availability.

Lexin’s board also changed its dividend policy from semiannual distributions to an annual schedule. Any potential dividend declaration for 2026 will be assessed when the company reports fourth-quarter results in early 2027.

Xiao said the decision is intended to preserve liquidity, capital resources and financial flexibility during the industry adjustment. He added that the board may evaluate shareholder-return measures, including share repurchases, if industry conditions and business performance improve.

About LexinFintech (NASDAQ:LX)

LexinFintech Holdings Ltd. NASDAQ: LX is a China-based consumer finance and digital banking platform primarily serving young, underbanked consumers. The company's core offering is point-of-sale installment financing, enabling eligible customers to split purchases into fixed monthly payments with transparent fees. Leveraging proprietary data analytics and credit scoring models, LexinFintech underwrites consumer loans for online purchases and provides credit lines that support a variety of retail and e-commerce transactions.

In addition to its flagship installment loan service, LexinFintech has developed wealth management and fintech-as-a-service products.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.

Continue following MarketBeat

Add MarketBeat as your preferred source on Google to see our latest stories in your feed.

Add As Preferred Source