X Financial Down 3% on Poor Q4 Results

Things are expected to get worse for the personal finance company going forward.

Author: Anthony Russo   

The stock in X Financial (NYSE: XYF) fell 3% to 90 cents per American depositary share in early trading Tuesday on reporting weak fourth-quarter revenue.
The Shenzhen-based personal finance company said in a statement today that in the three months through December its revenue was $95.5 million, down 23% year-over-year. Net income dropped to $11.45 million, or 7 cents per share compared with 34.19 million, or 21 cents per share in the same period in 2018.
X Financial attributed its revenue decline to a decrease in transaction volumes. Also, because of a tightly regulated fintech sector in China, the company facilitated just 457,576 loans, representing a tumble of 57% year-over-year.
"We rapidly made necessary adjustments to our operations and loan product portfolio during the quarter to comply with recent regulations governing the maximum interest rate lenders can charge," Justin Tang, the founder, chief executive officer and chairman of X Financial, said in a statement today.
He added, "As a result of the new regulations and adjustments made to our loan product portfolio, total loans facilitated declined on a sequential basis during the quarter."
In addition, The Bank of China said it would expand its fintech innovation regulatory pilot projects in six more cities and districts on Monday. The BOC aims to help small and micro private enterprises dealing with financial woes while protecting the rights of consumers.
It was already a struggle for X Financial in a tightly regulated environment, now it also deals with the challenge of the Covid-19 crisis. In the stock market, X Financial has not traded above $1 per share since Mar. 31, leaving the company in danger of receiving a warning from the NYSE for not complying with its minimum bid price. Shares in X Financial are down 96% year-to-date.
Established in 2014, X Financial builds risk profiles of prospective borrowers using data-driven credit methods to determine areas such as value, payment capability, and overall creditworthiness. It mainly focuses on credit demands from individuals to small-to-medium-sized enterprise owners.
With the impact of the Covid-19, X Financial's numbers for the first quarter are expected to be worse. It expects total loan facilitation amount to be "negatively impacted" in the quarter, as well as a "loss" and a decline in revenue.
"It is our mission to create more value for our customers and shareholders as we recover from the highs and lows of 2019 and navigate the challenging market in 2020, Kevin Zhang, the chief financial officer of X Financial, said in a statement today.
He concluded, "We remain in full compliance with current regulations, are confident in our ability to stand out amongst our peers and take advantage of market consolidation, and will reduce costs further by improving operational efficiency."