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.
Anthony RussoOct 04,2019,21:40

9F Inc. (Nasdaq: JFU) expects to rebound next quarter, after posting declines in income and revenue, despite regulations that have challenged Peer-To-Peer lenders.

The digital financial account platform, reported last week, loan origination volume was down 41 percent year-over-year, attributing towards its dropped revenue and profit.

“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 Total lending platform to better connect to and synchronize with our institutional funding partners systems,” 9F told Capital Watch, following its second quarter earnings report.

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

Although 9F expects a better results next quarter, it faces regulatory challenges operating in the Chinese P2P industry.

Ponzi Schemes and frauds have caused Chinese regulators tightening up, most notably, the scheme involving Ezubao, which took $7.6 billion from around 900,000 investors.

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

The decline could turn out worse, as the South China Morning Post reported earlier this year China would start a trial registration process. Hongyan Xue, the director of internet finance research Centre at the Sunning Institute of finance, indicated 100 P2P platforms would survive under the new regulations, the report from SCMP said.

“Cleaning up and exiting will be the theme [of the registration programme],” Xue said. “Nearly 90 percent of all remaining platforms will not qualify for a license.”

 While 9F doesn’t have any plans to consolidate other P2P businesses, it isn’t concerned with the recent plummet effecting lending platforms in China.

“We think regulations will benefit the health development of the Internet finance sector, especially the top players like us,”  9F told Capital Watch.

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

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

9F’s stock traded down 1 percent, at $11.71 per share on Friday afternoon.