"Big Banks" Citigroup: QFIN's quarterly results meet expectations, first quarter guidance under pressure

Citi published a research report indicating that QFIN Technology (03660.HK) had a non-GAAP net profit of 1.1 billion RMB in the fourth quarter of last year, down 29% quarter-on-quarter and down 46% year-on-year, which is roughly in line with expectations. Positive factors include one-time gains from the redemption of convertible bonds (2.7 billion in the fourth quarter) and loan volumes exceeding expectations, offsetting the negative impact of a quarter-on-quarter decline in annualized interest rates. Excluding the gains from the redemption of convertible bonds, the bank estimates that QFIN's non-GAAP net profit in the fourth quarter was approximately 840 million RMB, down 45% quarter-on-quarter and down 58% year-on-year.

Management expects that the non-GAAP net profit for the first quarter of 2026 will decline to between 900 million and 950 million RMB, representing a quarter-on-quarter decrease of 12% to 16%. The bank believes this is mainly driven by a quarter-on-quarter decline in loan volumes, a slowdown in annualized interest rates under tightened risk appetite, and a reduction in one-time gains from the redemption of convertible bonds. QFIN's dividend for the second half of the year is 0.78 USD per American Depositary Share, implying a dividend yield of 5.4%.

Citi maintains a "Buy/High Risk" rating on QFIN Technology (QFIN.US) with a target price lowered from 33 USD to 32 USD