X Financial NYSE: XYF reported lower second-quarter revenue and loan origination volumes as it maintained a conservative operating approach focused on credit quality, liquidity and balance-sheet strength. Management said tighter underwriting and expanded collections efforts contributed to sequential improvement in delinquency measures, though credit metrics remained substantially weaker than a year earlier.
The company facilitated and originated RMB 11.63 billion in loans during the quarter ended June 30, down 70.2% from a year earlier and 20.5% from the first quarter. President Kent Li said the pace of contraction moderated from the prior quarter as the company concentrated originations in internally operated channels with stronger borrower quality and unit economics.
“Conditions remain challenging, and we continue to place credit quality, liquidity, and the balance sheet strength ahead of near-term origination volume,” Li said.
Loan Volumes Decline as Company Tightens Underwriting
X Financial served about 720,258 active borrowers and facilitated approximately 0.91 million loans during the quarter. Active borrowers declined 74.8% year over year and 24.7% sequentially. Outstanding loan balance fell to RMB 24.97 billion at quarter-end, down 61.5% from the comparable 2025 period and 29.2% from the end of the first quarter.
Average loan amount per transaction rose to RMB 12,712, up 8.3% sequentially and 21.3% from a year earlier. Li attributed the increase to a change in transaction mix toward higher-quality borrowers.
The company said it further refined underwriting criteria for newer loan vintages, expanded automation in servicing and collections, and kept discretionary expenses under tight control.
Credit Metrics Improve Sequentially, Remain Elevated Year Over Year
The company’s 31-60 day delinquency rate was 1.73% as of June 30, improving from 2.61% at the end of the first quarter but remaining above 1.16% a year earlier. Its 91-180 day delinquency rate improved to 9.09% from 9.95% at the end of the first quarter, compared with 2.91% in the prior-year period.
Li said the sequential improvement was the first recorded in several quarters and reflected tighter standards for recent loan vintages and additional collections resources. He cautioned that the company was not yet declaring a turnaround in credit performance, particularly as older delinquent balances continued to season through the portfolio.
Chief Financial Strategy Officer Noah Kauffman said in response to an analyst question that the elevated delinquencies were concentrated in older loans, while newer vintages originated under stricter standards were performing better.
Revenue, Profit Decline From Prior Year but Improve Sequentially
Total net revenue was RMB 993.6 million, or $146.4 million, down 56.3% from a year earlier and 15.5% from the first quarter. Kauffman said lower loan facilitation volumes were partly offset by higher guarantee income.
Loan facilitation service fees declined 85.5% year over year to RMB 199 million. Post-origination service fees rose 41.2% to RMB 160 million, while guarantee income more than doubled to RMB 225 million. Finance income fell 13.2% to RMB 278 million.
Total operating costs and expenses declined 50% year over year and 22.9% sequentially to RMB 798.6 million. Borrower acquisition and marketing expense was RMB 149.5 million, down from RMB 219.8 million in the first quarter and RMB 556.3 million a year earlier.
Aggregate credit-related provisions fell 35.3% sequentially to RMB 183.1 million. The provision for contingent guarantee liabilities declined to RMB 57.6 million, which management said reflected a reduction in the estimated loss rate for the guaranteed loan portfolio and reversals of provisions recognized in earlier periods.
However, provisions for credit losses on deposits and other financial assets increased to RMB 95.3 million. Chief Financial Officer Frank Fuya Zheng said the charge related to guarantee money associated with one funding institution whose business relationship with the company had ended. Zheng said the funds had not yet been returned and that the company took an accounting precaution to write them off, though he said this did not necessarily mean the funds would not ultimately be recovered.
Income from operations rose 38.6% from the first quarter to RMB 194.9 million, though it was down 71.1% from a year earlier. Operating margin improved to 19.6% from 12% in the first quarter, compared with 29.7% in the prior-year period.
Net income was RMB 47 million, or $6.9 million, compared with RMB 37.9 million in the first quarter and RMB 528 million a year earlier. Non-GAAP adjusted net income was RMB 166 million, up 104.3% sequentially and down 72% year over year. Basic earnings per ADS were RMB 1.26, or $0.19, while non-GAAP adjusted basic earnings per ADS were RMB 4.44, or $0.65.
Capital Returns and Outlook
At quarter-end, X Financial reported approximately RMB 12.1 billion in total assets, RMB 7.8 billion in shareholders’ equity and approximately RMB 2 billion in cash, including restricted cash. Zheng said liquidity remained ample for the current environment.
From Jan. 1 through Aug. 14, the company repurchased about 2.63 million ADSs for approximately $12.49 million. About $35.5 million remained under its existing $100 million repurchase program, which expires Nov. 30, 2026.
The board also approved a cash dividend of $0.28 per ADS, equivalent to about $0.0467 per ordinary share. Shareholders of record on Sept. 10, 2026, are expected to receive the dividend on or around Sept. 28.
Management did not provide quantitative guidance for the third quarter, citing material uncertainty in the operating environment. Zheng said the company’s priorities remain capital preservation, disciplined origination, rigorous cost control and protecting the balance sheet.
In response to questions about additional capital returns and a potential privatization, Zheng said the company had no particular buyback expansion or privatization plan at this time. He said management was pursuing share repurchases within normal market rules while preserving capital to explore potential new business opportunities.
About X Financial (NYSE:XYF)
X Financial NYSE: XYF is a Beijing-based online credit marketplace focused on providing diversified financing solutions to individuals and small- and medium-sized enterprises (SMEs) in China. The company was established in 2014 and completed its initial public offering on the New York Stock Exchange in 2016. Since inception, X Financial has built a technology-driven platform that connects borrowers with a network of institutional investors, banks and other funding sources, aiming to streamline access to credit and improve lending efficiency.
The company's core offerings include consumer loans, SME loans, real estate-secured financing and wealth management products.
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