Business context and reporting period
LexinFintech Holdings Ltd. filed this annual report on Form 20-F for the fiscal year ended December 31, 2023; it is not a standalone 2023 fourth-quarter report. The company operates China-focused consumer finance, technology services and installment e-commerce businesses through PRC subsidiaries and contractual arrangements with variable interest entities (VIEs). Financial figures below are in RMB unless stated otherwise; the audited consolidated financial statements are prepared under U.S. GAAP.
Key financial and operating metrics
| Metric | 2023 | 2022 |
|---|---|---|
| Operating revenue | RMB 13.06bn | RMB 9.87bn |
| Gross profit / margin | RMB 4.51bn / 34.6% | RMB 3.03bn / 30.8% |
| Net income / margin | RMB 1.07bn / 8.2% | RMB 826m / 8.4% |
| Operating cash flow | RMB 2.79bn | RMB 99m |
| Investing cash flow | RMB 2.33bn | (RMB 2.41bn) |
| Financing cash flow | (RMB 3.85bn) | RMB 1.11bn |
| Cash and cash equivalents at year-end | RMB 2.62bn | RMB 1.49bn |
Revenue grew 32.3% year over year. Credit facilitation income rose 62.1% to RMB 9.67bn and represented 74.0% of revenue. Tech-empowerment income fell 11.1% to RMB 1.64bn; installment e-commerce income fell 14.9% to RMB 1.75bn. Net income increased 29.1%, while net margin edged down from 8.4% to 8.2%.
Loan originations rose to RMB 249.5bn from RMB 204.6bn; outstanding loan principal reached RMB 124.0bn from RMB 99.6bn. Active users of loan products fell to 8.53m from 9.69m. The 90-day-plus delinquency ratio increased to 2.90% from 2.53%, and the 30-day-plus ratio rose to 5.59% from 4.62%.
At year-end, total assets were RMB 23.14bn, total liabilities RMB 13.43bn and equity RMB 9.71bn. Cash plus restricted cash was RMB 4.20bn, of which RMB 1.58bn was restricted and not generally available for liquidity needs. Funding debts totaled RMB 3.94bn; borrowings totaled RMB 1.03bn; and convertible notes had a carrying value of RMB 505m. The notes were paid in full by April 2024.
Material changes versus the prior year
- Gross profit increased 48.7%, with gross margin improving to 34.6%, as credit facilitation revenue expanded and e-commerce cost of sales declined.
- Credit-loss-related costs rose substantially: provision for contingent guarantee liabilities increased to RMB 3.20bn from RMB 1.47bn; provisions for financing receivables and contract assets also increased.
- Combined fair-value changes in guarantee derivatives and loans at fair value were a net loss of approximately RMB 206m, versus a net gain of approximately RMB 722m in 2022.
- Investment loss increased to RMB 303m, primarily reflecting impairment related to an investment and prepayment for equity in a domestic private bank.
- Operating cash flow rebounded from RMB 99m to RMB 2.79bn, while financing cash flow turned to a RMB 3.85bn outflow, including repayment of funding debts and convertible notes.
Outlook, management commentary, risks and unusual items
Management said cash, operating cash flows and available financing are expected to meet working-capital, capital-expenditure and debt-repayment needs for at least 12 months from the report date, while noting that additional capital may be needed. Planned 2024 capital expenditure was approximately RMB 280m, including RMB 221m for the Shenzhen headquarters project. The filing provides no numerical revenue or earnings guidance.
The company introduced a semi-annual dividend policy in 2023, generally targeting 15%–30% of net profit for the prior six-month period, subject to board discretion and financial conditions. Dividends approved were US$0.058 per ordinary share for the six months ended June 30, 2023 and US$0.033 per share for the six months ended December 31, 2023; the latter was approved in March 2024.
- Credit and guarantee exposure: The larger off-balance-sheet loan book and weaker loan performance drove increased guarantee provisions. Guarantee liabilities were RMB 1.81bn at year-end, versus RMB 882m a year earlier. Management cited weaker economic conditions and collection challenges among factors affecting delinquency and charge-offs.
- VIE and China regulatory risk: The Cayman Islands holding company has no equity ownership in the VIEs; VIEs generated 86.3% of 2023 revenue. Control depends on contractual arrangements whose enforceability has not been tested in a Chinese court. PRC regulation of consumer lending, guarantees, data and overseas listings continues to evolve.
- Liquidity and cash mobility: Cash is concentrated in China, and PRC rules restrict transfers and distributions. At year-end, restricted net assets of PRC subsidiaries and VIEs totaled RMB 5.05bn. Management’s liquidity assessment should be considered alongside those restrictions and guarantee-related funding needs.
- Other risks and items: Two funding partners represented 70.2% of funding debts at year-end, according to the filing’s concentration disclosure. The company believed it was a passive foreign investment company (PFIC) for U.S. tax purposes in 2023. Its auditor issued unqualified opinions on the financial statements and internal controls; management also concluded controls were effective.
Important facts for investors to verify
- Whether rising delinquency, charge-offs and guarantee provisions continue to pressure margins, cash and funding-partner confidence.
- The recoverability and cash-conversion timing of contract assets and receivables, which increased to RMB 6.71bn, and deposits to guarantee and insurance companies, which rose to RMB 2.61bn.
- The nature, terms and subsequent recovery prospects of the RMB 303m investment loss and the impaired private-bank-related prepayment.
- Renewal and continued validity of relevant PRC operating licenses, and the effect of new or changing consumer-finance, guarantee, data and CSRC filing requirements.
- Whether cash can be transferred from PRC entities to the holding company to support debt service and dividends, and the actual completion and funding of approved dividends.
- Funding-partner concentration, debt maturities, commitments to purchase delinquent loans (RMB 772m at year-end), and the status of the convertible-note repayment completed by April 2024.