LexinFintech Q2 net profit plunges 80% to RMB101 million
- LexinFintech Q2 net income fell 80.2% YoY to RMB101 million
- Adjusted EPS dropped to $0.11 from $0.42 in the prior year period
- Total revenue declined 11.2% to RMB3,187 million (sales $469.7 million)
- Gross profit plunged 61% due to rising credit provisions
- Loan originations grew 4.8% but outstanding balance fell 11.4%
*this image is generated using AI for illustrative purposes only.
LexinFintech Holdings Ltd. (NASDAQ: LX) reported an 80.2% year-on-year decline in second-quarter FY26 net income, posting RMB101 million against RMB511 million in the prior year period. Adjusted earnings per share fell to $0.11 from $0.42 a year ago.
The Chinese fintech lender attributed the sharp contraction to sector-wide funding tightening and a strategic decision to scale back loan volumes to safeguard asset quality. Total sales for the quarter were $469.707 million, down 6.21% from $500.784 million in Q2FY25.
Financial Performance
Total operating revenue fell 11.2% YoY to RMB3,187 million. The decline was driven by a 15.0% drop in credit facilitation service income and a 43.0% plunge in tech-empowerment service income.
Despite the overall revenue contraction, installment e-commerce platform service income surged 60.8% to RMB784 million, reflecting growth in transaction volume within that segment.
| Metric | Q2FY26 | Q2FY25 | Change |
|---|---|---|---|
| Total Revenue | RMB3,187 million | RMB3,587 million | -11.2% |
| Net Income | RMB101 million | RMB511 million | -80.2% |
| Gross Profit | RMB496 million | RMB1,273 million | -61.0% |
| Adjusted EPS | $0.11 | $0.42 | -73.8% |
What the Numbers Show
The divergence between revenue decline and profit collapse highlights intensifying credit costs. While total operating revenue decreased by only 11.2%, gross profit plummeted 61.0% from RMB1,273 million to RMB496 million. This compression was primarily driven by a 31.2% increase in provisions for contingent guarantee liabilities to RMB1,052 million and a 60% rise in financing receivable provisions to RMB410 million, signaling deteriorating asset quality despite lower origination volumes.
Operational Metrics
Loan originations grew modestly by 4.8% YoY to RMB55.4 billion, but the total outstanding principal balance contracted 11.4% to RMB93.7 billion as of June 30, 2026. This reduction in the loan book aligns with management's stated strategy of prioritizing liquidity and asset quality over volume expansion.
Credit performance metrics showed slight deterioration, with the 90-day+ delinquency ratio ticking up to 3.6% from 3.5% at the end of the first quarter. However, first payment default rates for new loans remained below 1%, indicating stable underwriting standards for fresh originations.
Strategic Shifts
In response to ongoing industry uncertainties, the Board adjusted its dividend policy to an annual evaluation cycle, distributing 30% of total net income as cash dividends starting fiscal year 2026. This replaces the previous semi-annual distribution model.
Additionally, the company repurchased approximately 9.6 million ADSs for US$39 million during the quarter, bringing total buybacks under the current program to 5.8% of outstanding ordinary shares.
Looking ahead, management anticipates a significant quarter-over-quarter decrease in loan originations for Q3FY26 and warned that the company may incur a net loss for the upcoming quarter.
How might the anticipated net loss in Q3FY26 impact LexinFintech's stock valuation and investor sentiment given the recent 80% drop in net income?
What specific measures is management implementing to reverse the 31.2% increase in provisions for contingent guarantee liabilities?
Will the shift to an annual dividend evaluation cycle deter long-term institutional investors who previously relied on semi-annual payouts?
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