Qudian’s Third-Quarter Net Profit More Than Quadruples as Microlending Surges

Qudian Inc., a leading Chinese microlender, reported Monday that its third-quarter net profit more than quadrupled on strong growth in borrowers seeking short-term loans to buy items as diverse as brand-name sneakers and concert tickets.

For the three months ended Sept. 30, the company posted net income of $97.8 million, up 322% from the third quarter a year ago. It reported revenue of $218.1 million in the same period, up 308% from a year earlier.

During the third quarter, the company had 7.5 million active borrowers, up 175% from the same period last year. The total value of transactions reached $3.8 billion, up 219% from the quarter a year earlier.

Qudian, whose name translates to “Fun Shop,” raised $900 million in its initial public offering (IPO) on the New York Stock Exchange last month, making it the fourth-largest IPO in the U.S. this year. Qudian’s American Depositary Shares dropped 1% to $27.23 on Monday, still up about 13% from its IPO price of $24.

The company lends cash and advances credit to China’s young, cellphone-savvy consumers who are underserved by traditional banks because of the borrowers’ lack of an adequate credit history.

Qudian started in 2014 by offering small loans online to college students. Now the company has shifted to lending mostly to white-collar workers after China banned online loans to students following several financial scams.

Users on average borrowed $139 per transaction for cash credit and $209 for merchandise credit, according to the company’s earnings release.

Qudian uses data provided by Alibaba affiliate Ant Financial Services Group, a minority investor, to analyze a borrower’s creditworthiness based on the user’s online shopping history and borrowing behavior. Qudian said its rate of loan delinquencies, or those more than 30 days past due, remained at less than 0.5% through Sept. 30.

Qudian disclosed in its IPO prospectus that the annual interest rate it charged in 2016 was 59.5%, above the legal ceiling of 36%.

Qudian Chief Financial Officer Carl Yeung said in the earnings release that the company has been adjusting interest rates for all its products since April and now caps them at 36%.