Company Presentation
May 2015 China: Financial Services Being Transformed by the Internet
Portal Online E-Commerce Social Media Financial Services Games
2 Huge Market Opportunity: Multi-trillion Dollar Addressable Market
$ Tn $18Bn $25Bn 2 $20Tn China’s Online China’s Online China’s Online China’s Non-standard Game Market Ad Market Shopping Market Financial Assets
Source: iResearch, Oliver Wyman Research
3 Most Prominent and Recognized China Internet Finance Platform
Lufax Has Won Multiple Awards Lufax Has Won National Recognition
“The Most Popular Internet Finance Platform”, Caijing China Annual Conference 2015.1
"Innovative Internet Investing and Financing Platform of the Year“, Shanghai Municipal 2014.11 Government
“Most Influential Brand" and “Most Innovative P2P Product“, Shanghai Internet Finance 2014.6 Exposition “We encourage Mr. Gibb to bring further innovative ideas and "Best Risk Management“, Shanghai contributions to Internet finance in Securities Journal China” 2014.6
——Xi JinPing, PRC President "The Most Important P2P Company in China", “Global Top 3 P2P Online Trading 2014.5 Services”, Lend Academy
4 Huge P2P Market Opportunity
China U.S.
$40Bn 2014 $5.5Bn 2014
$565Bn 2018E $60Bn 2018E
Source: Wangdaizhijia, iResearch Source: Liberum Research
Notes 1. Data represents annual transaction volume 5 Distinctive Driving Forces for China P2P
China U.S.
Consumer Auto Micro Finance Loan Incumbents Banks Banks Finance Finance Companies Associates Providers Providers
Typical Borrowing Home Remodelling Wedding Travel Purposes $ Debt Consolidation SME Financing
Continuing Education Durable Goods SME Financing
Consumer Loan Penetration (1) 23% 83%
Direct Financing Penetration (2) 17% 70%
• Lack of a nationwide consumer credit database and credit scores • Well-established nationwide credit information system Credit System
• Generally supportive of a sector in the early stage • Established and clear framework Regulatory • P2P platforms seen as a real economy tool, addressing unmet • P2P platforms viewed as people helping other peers Environment consumer / SME financing needs across China
Investors • Principally retail investors • Retail and institutional investors
Notes 1. Consumer loans as % of GDP 2. Direct financing as % of total financing 6 P2P Market Leadership
Borrowers as individuals Borrowers as individuals and enterprises Ranking by Loan Balance Ranking by Number of Borrowers
In RMB Bn Unsecured P2P Secured P2P B2C In 000s
14 100
6 80
6 73
5 73
5 69
5 65
4 49
4 45
4 29
Source: Wangdaizhijia, as of May 2015
7 Lufax – The New Online Financial Services Powerhouse
Bank P2P
Trust Real Gold Estate / Public Government / Fund Large Private Insurance Enterprises Equity I need Securities What choice money! do I have?
What will it Borrowers / Can I assess cost me? Investors risk easily? Asset Providers
When could I Can I sell if I get it? #1 China P2P Platform have to? #1 China Securitization Platform
8 Formula for Success in Mainland China
Lufax: Diversified Asset Sources Lufax: Massive Base & Engagement • Access to assets from the full • ~10M Registered Users financial services spectrum • Growing average investment • Optimized sourcing costs / speed • Strong relationships across China • Increasing conversion rate Asset User Sourcing Traffic
Risk Management
Lufax: Data-Driven Risk Management
• Big data analytics • Unique data sources, e.g. credit bureau, insurance data • Full disclosure
9 Leading Open Market for Non-Standard Assets in China and Globally
Equity Positioning
Leading Open Market for Non-Standard Assets in China and Globally
Bond
Customer Product Service
Online wealth Provides the most Provides the lowest Five Core management and extensive products, cost, the highest Markets in Interbank Market trading platform for including cash transparency and high-end individuals management, fixed the best liquidity China and institutions income, variable through account income, equity- integration linked products and commodities Gold / Foreign Exchange
Supporting Mechanism Non-Standard Assets Risk control Standards Systems
10 Future Development Strategy of Lufax: Open Platform of 9158
9 Funnels 1 Platform 5 Markets
B end
1: B2B 1 Bank 5 Securities Risk Control Primary Market Lfex B End 2 Trust 6 Insurance 2: B2B Products Secondary Real Market 3 Public Fund 7 Estate/Government /Large Enterprises B System Private 4 8 Gold 3: P2P Equity Marketing
9 P2P Lufax Shared C End 4: B2C Micro-lending Companies Resources
Small & Medium Individuals Companies 5: C2C P2P Companies 8 Keys Model Product Risk Control Account Customer System Marketing Operations Experience
11 Recent Development: Creation of Inclusive Finance Business Group
• One of China’s largest • One of the largest offline consumer loan consumer loan provider telemarketing teams in China • 500+ stores in 100+ cities • 2000+ sales representatives • 1.7M borrowers Xinbao Telesales • Contributed ~10% of loan • US$5Bn Xinbao and ~50% of outstanding Lufax P2P borrowers
Better Resource Dedicated Combination of Online Economies of Scale Enhanced Valuation Coordination Management and Offline Strengths
China’s Leading Provider of Consumer Financial Services
12 Exponential User Base Growth
Cumulative Registered Users Cumulative Retail Investors
MM ‘000
+30x +140x
Growth Growth
1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15
13 Retail Investors Keep Adding to Their Accounts
Monthly Cumulative Investment per Investor US$000
Jan 2013 Apr 2013 Jul 2013 Oct 2013 Jan 2014 Apr 2014 Jul 2014 Oct 2014 Feb 2015
14 Lufax vs. LendingClub – P2P Platform Comparison
Key Data Online Market Position • #1 in China • #1 in US 2014 vs. 2013 P2P Growth • 5x • 1x Market Environment • Fast-growing middle-class • Leveraged consumers seeking refinancing Key Growth Drivers • Large, aspirational financing needs • Traditional banks underprice consumer credit • Traditional banks reticent to consumer credit
Marketplace Participants
Borrowers • Mostly individuals • Mostly individuals
• Retail (~55%) Investors • Retail (~100%) • Institutionals (~45%)
Product Characteristics • Unsecured Product Types • Unsecured only • Secured • New loans only % 2ary Trading • ~20% • Some trading via 3rd-party platforms
• Some with guarantee, increasing number of loans Risk Exposure • Not guaranteed without guarantee
15 Strong Business Volume Growth
Business Volume Including Institution & Individual Quarterly Retail Volume Transaction
RMB Bn RMB Bn
C2C
P2P +350x +150x
F2F/ Growth B2B Growth
B2C
C2C P2P
B2C
1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 B2C P2P C2C B2B/F2F 16 Risk Control through Multiple Approaches
Asset-end Fund-end
Comprehensive Risk Prudent Account Opening Retail / SME Rating System Authentication System Retail Funding Investors Needs Asset Security Guarantee Plan Scientific Model for Financial Investor Admittance Institutions Whole Process Risk Control System for Asset Financial Admittance Institutions Customer Risk Type and Corporates Product Matching Model Leading Risk Model
Clear Contract Comprehensive Ping An Relationship Information Disclosure Corporates
Big Data Analytics Significant Input in Integrated System of Model System Security Three Defense Lines
17 Various Products Based on Different Customer Risk Preference
Customer Acquisition Customer Identification Product Matching
Product Product Product Product Product Risk Risk Risk Risk Risk Level 1 Level 2 Level 3 Level 4 Level 5
Conservative
Robust
Customer Risk Balanced Preference
Growth
Aggressive
18 Full Information Disclosure and Well-Established Risk Rating
Full Information Disclosure Well-Established Risk Rating
Product Information Disclosure Risk Profile • Product: Rainbow– Henghanxi No.03C • Expected Ann. Yield: 7.70% • Project name: Rainbow-Henghanxi No. 03C • External rating: N/A • External Rating Agency: N/A
• Term: 146 days • Internal Rating: A-1 • Threshold: RMB300,000.00 Rating Level Disclosure • Remaining Investable Amount: Rating Definition Disclosure RMB1,449,200.00 Short-Term Debt Rating (Within 1 Year) • Status: 92%
Project Introduction • Interest Period: 17/04/2015~10/09/2015 • Receipt: 15/09/2015 • Term: 146 days • Payment: One-off Payment; Zero Coupon • Transferor: Shenzhen Ping An Huifu Asset Management
Borrower Information Disclosure Medium- to Long-Term Debt Rating (Over 1 Year)
Transferor Information Disclosure
Transaction Document
19 Sponsored by Ping An – China’s #1 Non-SOE Financial Institution
Largest Non-SOE Financial Institution Insurance Banking
80M+ Customers
US$646Bn Total Assets
Internet Investment Finance US$110Bn Market Cap
20 Unique Access to Ping An and Financial Resources
Access to 21 Licenses Asset Sourcing Life Insurance • Access to assets from the full financial services spectrum: bank, insurance, trust, Motor Insurance fund, securities, etc. • Optimized sourcing costs and easiness Trust Packaging & Distribution Fund Sales Largest License Set in China Finance by • Certain licenses (e.g. trust) can be used to Securities package assets into investable products Both Number and • Flexibility to adapt packaging format to Bank Breadth each product
Asset Management Product Innovation … • Develop products combining the various licenses across sectors Exchange • E.g. secured P2P loans backed by insurance policies
21 Clear Growth Strategy
More Investors More Products
• Provide more products with • Build strong brand awareness via innovative structure social media marketing • Vary investment thresholds and terms to attract investors • Diverse avenues – online and offline • Maintain strict asset quality and risk integration, Ping An, user referrer criteria programs • Increasing integration with Ping An resources
More Open Marketplace
• Continue to grow our current nine product flows • Work with more external partners (e.g. TrustCos, FMCs) • Increase secondary trading volume
22 Lufax’s Powerful Network Effects
More Data More Transactions
Better Pricing
More Customers More Innovative and Tailored Better Customer Products Experience
Significant First Mover Advantage and High Entry Barrier
23 Disclaimer
This Presentation is for informational purposes only and is not a solicitation of any bid from any investor. Nothing in this presentation shall constitute and/or deem to constitute an offer or invitation to purchase or subscribe for any securities in any jurisdiction, including the United States. No part of it should form the basis of or be relied upon in connection with any investment decision or any contract or commitment to purchase or subscribe for any securities. This Presentation is being furnished to you solely for your information and was prepared without considering your individual objectives, financial situation or needs. This Presentation is strictly confidential and is solely for your own use and that of your professional advisers. It may not be reproduced, redistributed or published, directly or indirectly, in whole or in part, to any other person. By attending the meeting where this Presentation is made, or by reading the presentation slides, you agree to be bound by the limitations stated below.
This document contains certain forward-looking statements relating to the business, financial performance, strategy and results of the Company and/or the industry in which it operates. Forward-looking statements are statements concerning future circumstances and results, and any other statements that are not historical facts, sometimes identified by the words "believes", "expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. The forward-looking statements, including those cited from third party sources, contained in this Presentation are based on numerous assumptions and are uncertain and subject to risks. A multitude of factors including, but not limited to, changes in demand and competition, can cause actual events, performance or results to differ significantly from any anticipated development. Neither the Company nor any of its officers or employees guarantees that the assumptions underlying such forward-looking statements are free from errors nor does either accept any responsibility for the future accuracy of the forward-looking statements contained in this Presentation or the actual occurrence of the forecasted developments. Forward-looking statements speak only as of the date of this presentation. As a result, the Company expressly disclaims any obligation or undertaking to release any update or revisions to any forward-looking statements in this presentation as a result of any change in expectations or any change in events, conditions, assumptions or circumstances on which these forward-looking statements are based.
No representation or warranty (express or implied) is made as to, and no reliance should be placed on, the accuracy, completeness or correctness of any information, including any projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein and, accordingly, none of the Company or its officers or employees accept any liability (in negligence or otherwise) whatsoever arising directly or indirectly from the use of this Presentation.
By attending this Presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you should conduct your own independent review, investigations, verification and analysis of the information contained or referred to in this Presentation. You will be solely responsible for forming your own view of the potential future performance of the Company's business. Statements in this Presentation are made only as of the date of this Presentation unless otherwise stated and solely for the purposes for which they are expresses to be prepared (or for general information purposes only if no purpose is specified). Neither the delivery of this Presentation nor any further discussions of the Company with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since such date.
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