X Financial (NYSE: XYF) stock surged 16.82% on January 10th, 2019 (Source: Google finance) after the company announced that it has engaged Citic AIBank Corp. (“AIBank”) as its custodian bank, a significant step in X Financial’s strategy to strengthen trust and security in its platform. AIBank’s custodian services are now fully integrated within Xiaoying Wealth Management’s systems following two months of stringent testing which involved more than 30 teams of over 270 engineers. The stock slightly corrected over 4.8% on January 11th, 2019 (as of 10:56 am GMT-5; Source: Google finance)
AIBank will provide fund custodian services including settlement, accounting, clearing services and safeguarding online lending capital to Xiaoying Wealth Management. To ensure security and remain compliant with recent regulations, all borrower and investor funds will be managed independently by AIBank once the transfer of all custodian funds has been complete and IT systems have been linked. Going forward, each investor and borrower must create a separate custody account with AIBank to ensure that their capital, repayments and interest are managed independently from X Financial.
AIBank was founded as a direct banking joint venture in 2017 by China Citic Bank Corp and Baidu Inc. that leverages big data and artificial intelligence to offer services over the internet instead of through physical branches. AIBank was one of the first 25 banks to receive approval and be whitelisted by the National Internet Finance Association as part of the regulatory compliance inspection campaign launched by the government in August 2018
Meanwhile, X Financial currently expects total loan facilitation amount for the fourth quarter of 2018 and the full year 2018 to be in the range of RMB8,000 million to RMB8,500 million, and RMB35,400 million to RMB35,900 million, respectively
Moreover, net revenues in the third quarter of 2018 increased by 83% to RMB829.5 million (US$120.8 million) from RMB452.8 million in the same period of 2017, primarily due to a change in product mix resulting from a significant increase in the proportion of the revenue generated by Xiaoying Card Loan, which carries a higher service fee rate compared to the Company’s other products. Net income attributable to the Company in the third quarter of 2018 was RMB197.9 million (US$28.8 million), compared to RMB100.3 million in the same period of 2017. Non-GAAP net income in the third quarter of 2018 was RMB248.5 million (US$36.2 million), compared to RMB113.2 million in the same period of 2017. Non-GAAP basic and diluted earnings per ADS in the third quarter of 2018 were RMB1.76 (US$0.26) and RMB1.64 (US$0.24), respectively, compared to RMB0.82 and RMB0.76, respectively, in the same period of 2017. Cash and cash equivalents as of September 30, 2018 was RMB1,464.2 million (US$213.2 million), compared with RMB622.9 million as of June 30, 2018.