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Lufax Holding Ltd IPO Summary

Core Content

Lufax Holding Ltd is a leading technology-empowered personal financial services platform in China, offering retail credit facilitation and wealth management services. The company is conducting its initial public offering (IPO) of American Depositary Shares (ADSs), which represent its ordinary shares. The ADSs will be listed on the New York Stock Exchange (NYSE) under the symbol "LU."

Main Points

• Business Model: Lufax operates a unique, capital-light, hub-and-spoke business model, connecting financial institutions (spokes) through its platform (hubs). This model enables personalized and efficient financial services.
• Retail Credit Facilitation:
  • As of June 30, 2020, Lufax facilitated retail credit with a total balance of RMB519.4 billion (US$73.5 billion).
  • The company serves a large, underserved market of small business owners and salaried workers, who require larger loan sizes and longer terms.
  • Lufax's technology and data-driven approach allows for effective risk assessment and management, distinguishing it from traditional banks and online-only TechFin platforms.
  • The company has a low delinquency rate (DPD 30+), with secured loans at less than 0.7% and general unsecured loans at less than 1.9% as of December 31, 2019.
  • During the early stages of the pandemic, Lufax demonstrated resilience by leveraging AI and online capabilities, leading to a recovery in delinquency indicators by mid-2020.
• Wealth Management:
  • As of June 30, 2020, Lufax managed RMB374.7 billion (US$53.0 billion) in client assets.
  • The company offers tailored investment products and one-click portfolio solutions for middle class and affluent investors.
  • It has partnerships with 429 financial institutions, enabling the offering of approximately 8,600 wealth management products.
  • Lufax's integrated account system and AI-driven tools support real-time risk assessment and personalized services.
  • The average wealth management client assets were RMB29,330 (US$4,151), significantly higher than the industry average.
• Market Position:
  • Lufax is ranked second in retail credit facilitation and third in wealth management among non-traditional financial service providers in China.
  • The company's business model and technology enable it to capture a significant share of the large, unmet financing and wealth management markets.
• Key Partnerships:
  • Lufax collaborates with the Ping An ecosystem, gaining access to its extensive financial services network, including 8 research institutes and over 21,000 patents.
  • This partnership enhances Lufax's ability to innovate and deliver sophisticated financial services.
• Growth and Performance:
  • From 2017 to 2019, Lufax's total loan balance grew at a CAGR of 26.6%, and wealth management client assets (excluding legacy) grew at a CAGR of 39.4%.
  • The company's strong performance through credit cycles highlights its financial DNA and experienced management team.
• Risk Management:
  • Lufax has a proven track record of managing risk effectively, with a low credit risk exposure (2.8% of total loan balance).
  • The company has implemented advanced AI and blockchain technologies to support risk assessment, customer service, and compliance.

Key Information

• IPO Details:
  • The offering includes ADSs, each representing one ordinary share with a par value of US$0.00001.
  • The underwriters include Goldman Sachs (Asia) L.L.C., BofA Securities, UBS Investment Bank, HSBC, China PA Securities (Hong Kong), and Morgan Stanley.
• Regulatory and Compliance:
  • The company is subject to Chinese and U.S. regulations.
  • The prospectus contains information from independent industry research by Oliver Wyman.
• Market Opportunities:
  • China's retail credit market has an unmet demand of RMB47 trillion (US$7 trillion) as of December 31, 2019.
  • The wealth management market is expected to grow to RMB118 trillion by 2024, representing a CAGR of 19%.
• Financial Highlights:
  • Total income increased from RMB27.8 billion to RMB47.8 billion (US$6.8 billion) from 2017 to 2019.
  • Net profit increased from RMB6.0 billion to RMB13.3 billion (US$1.9 billion) during the same period.
• Customer Base:
  • As of June 30, 2020, Lufax had 44.7 million registered users and 12.8 million active investors.
  • Approximately 75.4% of total client assets were contributed by higher value investors with assets above RMB300,000 (US$42,462).
• Technology and Innovation:
  • Lufax utilizes AI, machine learning, and blockchain to enhance its services.
  • The company has developed cutting-edge capabilities in KYP, KYB, and KYC.
• Strategic Position:
  • Lufax is well-positioned to benefit from the growing demand for personalized financial services in China.
  • Its unique business model and technology-driven approach provide a competitive edge over both traditional financial institutions and online-only platforms.