LU - U.S.-listed shares of Lufax rise despite weak Q4 results Citi rating downgrade

2023-03-13 14:18:39 ET

U.S.-listed shares of Lufax ( NYSE: LU ) on Monday were holding onto slight gains, having largely mirrored the movement of the broader market through the day.

The company earlier in the day reported a more than 20% Y/Y fall in Q4 total income and a GAAP loss per American depositary share of $0.05, compared to earnings a year ago.

LU stock initially opened flat and then fell as much as 7.4%. It reversed course soon after and pushed up as much as 8.9%. It then pared most of that advance through the day but has stayed in positive territory. Its U.S-listed shares were last up 2.4% to $1.95.

China-based Lufax ( LU ) provides financing products to small business owners and borrowers. According to the company, it has established relationships with over 550 financial institutions in the Asian country.

In reaction to the company's results, Citi research analyst Judy Zhang downgraded the stock's rating to neutral from buy, citing LU's "unfavorable" business model change.

"Lufax updated its ECL calculation methodology in 4Q22 to use last 12 months moving C-M3 flow rate (vs. previously 3-5 years long-term historical averageC-M3 flow rate) to set PD parameter. This led to Lufax’s provision policy becoming more sensitive to asset quality cycle, amplifying the 4Q22 credit impairment loss," Zhang said in a research note.

LU said its DPD 90+ delinquency rate for total loans enabled as of Dec. 31, 2022 was 2.6%, a rise from the 2.1% reported as of Sept. 30, 2022. DPD 90+ delinquency rate for general unsecured loans rose to 3.0%, as of 2.4% the prior quarter.

"Asset quality pressure intensified in 4Q22, hit by COVID lockdown in Oct/Nov-22 and surge in infections in Dec-22 after full reopening," Zhang said.

For further details see: