Why LexinFintech Holdings crashed the market on Monday

What happened

Lexin Fintech Holdings (LX -0.41% ), a Chinese company that specializes in lending services to the country’s burgeoning class of young professionals, rose nearly 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 loans reached 176.5 billion yuan ($27.24 billion) in 2020, in line with the company’s forecast.

For this year, the financial services The company expects issuance will amount to 220 billion yuan to 230 billion yuan. If true, that 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, system building, operations management and other related initiatives, in order to to enable a more open and constructive environment to create value for our financial institution”. partners,” the company said, citing its CEO, Jay Wenjie Xiao.

Now what

For any lender (or loan broker, since that’s essentially LexinFintech’s role), originations are only part of the story. Credit quality also matters a lot.

Luckily for investors, the company has made notable improvements in this area. In its update, the company said the first payment default values have fallen below 1% in the past five months, a comfortably slim number given that many of its lending platform users are inexperienced borrowers.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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