On Thursday, Citi adjusted its outlook on LexinFintech Holdings, a NASDAQ-listed company, by lowering the price target to $2.03 from the previous $2.12, while maintaining a Neutral rating on the stock. The downward revision follows LexinFintech's announcement of a significant drop in its fourth-quarter GAAP net profit after tax (NPAT) for the period ending in December 2023.
LexinFintech reported a GAAP NPAT of RMB 12 million, marking a 97% decrease from the previous quarter and a 96% fall year-over-year, reaching a three-year low.
This decline was largely attributed to an impairment loss of RMB 302 million on a long-term investment in a domestic bank. However, when excluding the impairment loss, the non-GAAP NPAT for the fourth quarter stood at RMB 284 million, a 33% quarter-over-quarter and a 27% year-over-year decrease.
The company's net revenue after provisions was RMB 1.53 billion in the fourth quarter, a slight decline of 2.1% from the previous quarter and 1.2% from the same quarter the previous year. The decrease in revenue was impacted by a rise in provision expenses, which went up by 7% quarter-over-quarter and 122% year-over-year.
LexinFintech's operating profit also experienced a downturn, falling 31% quarter-over-quarter and 20% year-over-year to RMB 337 million in the fourth quarter. The operating profit margin decreased significantly, by 9.3 percentage points quarter-over-quarter and 5.2 percentage points year-over-year, to 22.1%.
This was due to an increase in processing and servicing expenses as a percentage of net revenue, which jumped by 5.1 percentage points quarter-over-quarter and 3.5 percentage points year-over-year to 33.7% in the fourth quarter, driven by heightened risk management initiatives and projects.
Despite the lower profitability, LexinFintech declared a semi-annual dividend of $0.066 per American Depositary Share (ADS) for the second half of 2023, which represents approximately 20% of its second-half GAAP NPAT. Looking ahead to 2024, management has indicated plans to either maintain or increase the 20% dividend payout ratio.
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