Lufax (NYSE:LU) reported a wider third-quarter net loss as higher credit impairment charges and tax expenses outweighed growth in net interest income, while management said it remained cautious amid weak financing demand, tighter industry liquidity and heightened scrutiny of debt-collection practices.
The company recorded a net loss of CNY1.494 billion for the third quarter of 2026, compared with a CNY380 million net loss a year earlier. CFO Jia Liu, who joined Lufax in October, said the result included a CNY721 million loss before income tax and CNY773 million in income tax expenses.
Liu said elevated credit impairment losses were the principal driver of the pre-tax loss. The tax expense included a non-cash charge related to a reduction in deferred tax assets at the company’s financing guarantee subsidiary, based on its assessment of that unit’s business performance and outlook. The company also recognized additional withholding tax tied to expected dividend distributions from domestic subsidiaries to overseas subsidiaries under an updated offshore funding plan.
Revenue Declines as Credit Costs Rise
Total income fell 4.6% year over year to CNY6.180 billion. Technology platform-based income declined 24.1% to CNY1.055 billion, which Liu attributed to lower retail credit and enablement services associated with declines in off-balance-sheet loan sales and balances.
Guarantee income declined 24.6% to CNY1.020 billion, reflecting a lower average balance of off-balance-sheet loans and lower average fee rates. Other income decreased 37.7% to CNY167 million, primarily because of lower account management fees resulting from reduced collections.
Net interest income rose 10.3% to CNY3.677 billion, driven mainly by expansion in the company’s consumer finance and micro-lending businesses. Investment income increased to CNY261 million from CNY134 million a year earlier, primarily due to changes in the valuations of financial assets held with the company’s own funds.
Total expenses increased 1.7% to CNY6.9 billion. Credit impairment losses rose 10.3% to CNY4.511 billion, reflecting higher actual losses and provisions for loans and receivables. Meanwhile, sales and marketing expenses declined 13.7% to CNY842 million, while general and administrative expenses fell 12.1% to CNY420 million. Operations and servicing expenses decreased 16.1% to CNY774 million, and technology and analytics expenses declined 4.2% to CNY226 million.
Consumer Finance Drives New Loan Sales
Director and CEO Xiang Ji said total new loan sales reached CNY58.3 billion in the third quarter, up 2.5% from a year earlier and 14.1% from the second quarter. Consumer finance new loan sales increased 25.2% year over year to CNY39.7 billion, accounting for 68.1% of total new loan sales.
Total outstanding loan balance was CNY167.1 billion at the end of September, broadly stable from the prior quarter but down 11.9% from a year earlier. Consumer finance loan balance rose 19.8% year over year to CNY70.5 billion.
Ji said consumer products with smaller ticket sizes and shorter tenures carried lower risk in the current environment. He added that Lufax sees longer-term growth potential in consumer finance, supported by policies aimed at expanding domestic demand and consumption.
The company said the environment for small and micro business owners remained challenging, with financing demand weak. Consumer finance demand was also subdued, according to management, which cited a 3.6% year-over-year decline in household consumer loans as of the end of September.
Collection Scrutiny Pressures Asset Quality
Lufax said risk performance was affected by macroeconomic conditions and intensified enforcement actions targeting the debt-collection industry. The company’s C-M3 flow rate for total loans increased to 1.2% in the third quarter from 1.0% in the second quarter. The flow rates for unsecured and secured loans were 1.2% and 1.1%, respectively, compared with 1.0% and 0.9% in the previous quarter.
At the same time, the DPD 30+ delinquency rate for total loans enabled, excluding consumer finance subsidiaries, declined to 5.5% from 5.8% in the second quarter. The DPD 90+ delinquency rate fell to 3.2% from 3.7%. The nonperforming loan ratio for consumer finance loans was unchanged sequentially at 1.3%.
Ji said the company had reduced or exited certain higher-risk customer segments and adopted a more cautious approach in other segments. Lufax is also relying more heavily on its in-house collection team, judicial recovery channels, models that identify higher-quality accounts and AI-driven collection tools.
Management said it expects the risk volatility associated with enforcement actions to be temporary, though the macroeconomic and regulatory effects could continue for several months toward year-end. Ji said credit impairment losses in the quarter were primarily related to certain existing loan assets whose performance was below expectations, while the performance of loans originated in 2026 was within expectations and better than prior vintages.
Funding Costs Continue to Fall
Lufax said its funding supply remained largely sufficient despite pressure across the loan-facilitation industry. Ji said major partner banks’ willingness to lend and credit facility quotas remained stable.
The company’s cost of funds by balance, excluding consumer finance, declined to 3.6% in the third quarter, down 20 basis points sequentially and 80 basis points from a year earlier. Ji said consumer finance funding costs were stable and lower than the funding cost for Rongyi loans.
As of Sept. 30, Lufax had approximately CNY21.2 billion in cash at bank, compared with CNY22.1 billion at the end of 2025. Net assets were approximately CNY80 billion, down from CNY82 billion at the end of 2025.
Management said the industry’s move toward greater standardization would create near-term pressure on growth and profitability but could support more disciplined competition over the long run. Ji said Lufax intends to focus on “high-quality growth” rather than growth driven solely by scale.
About Lufax (NYSE:LU)
Lufax Holding Ltd. (NYSE: LU) is a China-based financial services technology company that operates digital platforms for retail and small-business finance. The company connects consumers and small-business owners with financial products and services through online channels and technology-enabled processes.
Lufax’s business has historically included retail lending, wealth management and related financial services. Its platforms have provided access to consumer and small-business loans, investment products and other services offered in cooperation with financial institutions.
