What happened
LexinFintech Holdings (LX 1.85%), a Chinese company that specializes in loan services targeted at the country's bourgeoning class of young professionals, rose by almost 9% on Monday. The catalyst was a business update indicating robust growth in the very near future.
So what
In the update, based on a preliminary assessment of its performance, LexinFintech said its loan originations hit 176.5 billion yuan ($27.24 billion) in 2020, matching the company's guidance.
For this year, the financial services company is forecasting that originations will amount to 220 billion yuan to 230 billion yuan. If accurate, this would mean year-over-year growth of at least 25%.
Image source: Getty Images.
LexinFintech's obvious confidence is based on its plans to "improve our 'To Bank' technology services, and expand our customer acquisition, systems construction, operations management and other related initiatives, to enable a more open and constructive environment to create value for our financial institution partners," the company quoted its CEO, Jay Wenjie Xiao, as saying.
Now what
For any lender (or loan broker, since this is basically LexinFintech's role), originations are only part of the story. Credit quality also matters greatly.
Thankfully for investors, the company has been making notable improvements in this area. In its update, the company said that first payment defaults have dropped below 1% over the past five months, a comfortably thin number given that quite a few users of its lending platform are inexperienced borrowers.
