9F Expects Rebound After Shaky Quarter on Shift Away From P2P Lending

The digital financial account platform has been focused on diversifying its portfolio of services, as well as transitioning to institutionally-funded loans.

Author: Anthony Russo   

9F Inc. (Nasdaq: JFU) said it expects to rebound this quarter as it continues to shift away from peer-to-peer lending amid Beijing's crackdown on the industry.

The digital financial account platform reported last week that its loan origination volume in the second quarter was down 41 percent year-over-year to 9.8. million yuan, weighing heavily on its revenue and profit. The company told CapitalWatch, however, that it expects a turnaround in the third trimester.

"Net revenue declined 58.0% to RMB1 billion during the quarter primarily due to a decrease in loan origination volume as we fine-tuned our lending platform to better connect to and synchronize with our institutional funding partner's systems," 9F said in a statement to CapitalWatch following the release of its first earnings report since it became publicly traded in August.

9F added, "We expect loan origination volume to rebound in the third quarter, so will the revenue and net income."

The company has been focused on diversifying its portfolio of services, as well as transitioning to institutionally-funded loans, it said.

Uncovered Ponzi schemes and a flood of fraudulent deals have led China regulators to tighten the oversight of the lending industry over the past few years. One of the massive deals surfaced in early 2016 was at Ezubao, once China's biggest P2P lending platform, which took in $7.6 billion from 900,000 investors.

Reuters cited a report last month from Waidaizhijia, the P2P-tracking portal, that 708 P2P platforms operated in China in August compared with 6,000 in 2015.

The decline is expected to continue, as the South China Morning Post reported earlier this year when the registration process was launched. The news agency cited Hongyan Xue, director of internet finance research center at the Suning Institute of Finance, estimating that 100 P2P platforms would survive the process.

"Cleaning up and exiting will be the theme [of the registration program]. Nearly 90 percent of all remaining platforms will not qualify for a license," Xue said, as reported by the SCMP.

9F said the increased scrutiny will have a positive effect on the industry and has no plans to further explore the P2P sector.

"We think regulations will benefit the healthy development of the Internet finance sector, especially the top players like us,"  9F told Capital Watch, though it added that it will not rule out any possibilities.

A new rule was imposed last month that required P2P lenders to report operations data to credit reference agencies controlled by the People's Bank of China.

9F expects loan origination volume in the range of $2.8 billion to $2.9 billion, it said in its second quarter report.

On Friday, 9F's stock closed up 2 percent, at $12.10 per American depositary share.