Qfin Q2 Earnings Call Highlights

Key Points

• Second-quarter results weakened sharply: Revenue fell to RMB 3.57 billion and non-GAAP net profit dropped to RMB 455 million, pressured by lower loan balances, pricing and a one-time RMB 500 million tax expense.
• Industry conditions remain challenging: Tighter regulation and liquidity constraints led Qfin to reduce loan growth and strengthen underwriting, while early August indicators pointed to a renewed increase in credit risk despite improved second-quarter delinquency metrics.
• Management expects continued pressure: Third-quarter non-GAAP net income is forecast at RMB 400 million to RMB 500 million, with loan volume expected to decline meaningfully; Qfin is focusing on cost control, diversified funding and expanding its technology-solutions business.

Qfin NASDAQ: QFIN reported lower second-quarter revenue and profit as China’s consumer finance sector faced tighter regulation, reduced liquidity and heightened credit-risk concerns. Management said it is prioritizing risk controls, cost reductions and operational resilience over near-term loan growth.

CEO Haisheng Wu said China’s consumer finance market remained under pressure through the first half of 2026. He cited a decline of more than RMB 660 billion in outstanding short-term household consumer loans from the beginning of the year through the end of the second quarter, according to the People’s Bank of China. Regulatory measures targeting loan pricing, marketing, funding, collections and payments also became more stringent, he said.

In late June, an industry event triggered a crisis of confidence in the loan-facilitation sector and sharply tightened market liquidity, according to management. Wu said Qfin’s diversified funding sources, risk performance and pricing aligned with regulatory guidance helped its funding supply hold up better than that of many peers, though the company expects conditions to remain tight during the second half.

Second-Quarter Financial Results

CFO Alex Xu said second-quarter total net revenue was RMB 3.57 billion, down from RMB 3.91 billion in the first quarter and RMB 5.22 billion a year earlier. Revenue from credit-driven, capital-heavy services fell to RMB 2.60 billion from RMB 2.96 billion in the prior quarter, which Xu attributed to lower risk-bearing loan balances and lower average loan pricing.

Platform-service, capital-light revenue was RMB 969.8 million, compared with RMB 951.9 million in the first quarter and RMB 1.65 billion a year earlier. Xu said the year-over-year decline reflected a substantially lower contribution from the company’s ICE business amid changing market conditions.

• Total loan facilitation and origination volume reached approximately RMB 63.4 billion, down 2.5% sequentially.
• Average annualized loan pricing, or IRR, declined to 18.2% from 18.7% in the first quarter.
• Sales and marketing expense fell 13% sequentially and 40% year over year.
• Qfin added about 830,000 new credit-line users, compared with 1.19 million in the prior quarter.
• Non-GAAP net profit was RMB 455 million, versus RMB 946 million in the first quarter and RMB 1.85 billion a year earlier.

The company generated RMB 1.09 billion in operating cash flow during the quarter, down from RMB 2.1 billion in the first quarter. Cash, cash equivalents and short-term investments totaled RMB 10.63 billion at quarter-end, compared with RMB 10.79 billion three months earlier.

Xu also said Qfin recorded approximately RMB 500 million in one-time tax-related expense following an updated interpretation of tax regulations by authorities. The expense drove the quarterly effective tax rate to 60.3%. Based on guidance from tax authorities, the company expects its effective tax rate to be about 20% going forward.

Risk Trends and Funding Conditions

Qfin reported improving credit metrics during the second quarter, although management warned that conditions worsened in August. The 90-day delinquency rate declined to 2.83% from 3.5% in the first quarter, while the 30-day collection rate increased to 88.1% from 85.8%.

The company’s C-M2 ratio, which represents outstanding delinquency following the 30-day collection period, declined to 0.66% from 0.8% sequentially. However, Chief Risk Officer Yan Zheng said early-stage August indicators, including FPD3 and FPD7, rose about 20% month over month. Management expects the August C-M2 ratio to increase by roughly 25% sequentially.

Zheng said the risk deterioration followed tighter funding across the industry and a nationwide regulatory campaign affecting the collections sector, which has reduced collection capacity and pressured recovery efficiency. Qfin has responded by tightening underwriting, reducing credit limits, increasing risk-model update frequency and adjusting asset distribution controls, management said.

New provisions for risk-bearing loans were RMB 1.72 billion, compared with RMB 1.68 billion in the first quarter. The new-provision booking ratio reached a historical high of 5.36% of quarterly risk-bearing loan volume. Xu said the company believes its provision levels are sufficient even under severe industry stress scenarios.

Strategy, Technology and Outlook

Wu said Qfin continued to adjust its customer and channel mix during the quarter. Customer-acquisition expenses fell about 13% sequentially, while the share of new credit-line users coming through API channels declined by 11 percentage points. API channels’ contribution to new loan originations decreased by 3 percentage points, and their return on assets improved by about 1.87 percentage points, according to the company.

Qfin also increased asset-backed securities issuance by 90% sequentially to RMB 5.5 billion, while ABS issuance costs fell by about 20 basis points. Overall funding costs declined about 10 basis points in the second quarter, though Xu said external funding costs rose about 25 basis points during July and August and could continue trending higher in the second half.

Beyond its domestic credit business, Qfin said loan volume enabled by its technology-solutions segment reached RMB 10.5 billion, up approximately 515% year over year. Outstanding loans enabled by that business totaled about RMB 16.1 billion at quarter-end, up 313%. The company also said it secured two bank AI-agent development projects focused on marketing growth and credit-risk management.

For the third quarter, Qfin expects non-GAAP net income of RMB 400 million to RMB 500 million, representing a year-over-year decline of 67% to 73%. Management expects loan volume to decline meaningfully from second-quarter levels as the company maintains a conservative risk posture.

The board approved a first-half dividend of $0.23 per Class A ordinary share, or $0.46 per ADS, with a payout ratio of approximately 30%. Qfin repurchased about 463,000 ADSs for roughly $7 million during the quarter before suspending repurchases in late June amid the industry liquidity squeeze.

About Qfin (NASDAQ:QFIN)

360 DigiTech, Inc NASDAQ: QFIN is a China‐based fintech company that specializes in providing digital lending solutions to underserved consumer and small business markets. Leveraging proprietary credit assessment technologies and big data analytics, the company connects borrowers with a network of financial institutions and investors through its online platform. Its services encompass unsecured consumer loans, installment credit products, and working capital financing for micro and small enterprises.

The company's flagship platform offers an end‐to‐end digital lending experience, from application and credit evaluation to disbursement and repayment.

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