Audit controversy settled, Land Control explains the healthy core of financial enterprises

Source | Zero One Think Tank

On the evening of February 15, Lu Jinshuo Holdings (6623.HK, NYSE: LU, hereinafter referred to as “Lu Holdings”) released multiple announcements, including the formal issuance of the 2024 financial report by the new auditor Ernst & Young.

As an ordinary investor who has long been paying attention to the financial industry and Lu Holdings’ development, with the official release of this financial report, many previous market speculations regarding the company’s financial condition and rectification progress finally have clear and definitive answers.

For ordinary investors lacking professional financial analysis skills, reading financial reports focuses more on core information and the company’s attitude towards compliance and investors. Compared to obscure financial terminology, the sincerity in addressing issues and the bottom line of compliant operation are the true core supports of long-term value. Lu Holdings’ performance throughout the disclosure and rectification process also confirms its responsibility and commitment as a conscientious enterprise.

01

Submitting Early: Honest Rectification Is Truly Rare

The financial restatement matters that attracted market attention this time have a limited overall impact, mainly involving historical issues from three years ago. All related problems have now been fully rectified, bringing an end to past compliance flaws.

For most ordinary investors, hearing “financial restatement” may inevitably cause concern, worrying about significant risks in the company’s current operations. However, a careful review of the announcement makes it clear that this restatement adjustment only pertains to historical financial data from 2022-2023, involving the consolidation adjustments of some controlled entities, disclosure improvements related to asset acquisitions, and other past issues. These are historical matters unrelated to the company’s current fundamentals and do not affect the company’s normal operations at this stage.

All of this stems from Lu Holdings’ effort to protect the principal interests of platform investors. According to supplementary investigation results, Lu Jinshuo Holdings provided a series of loans to third-party company Decheng Investment from 2017 to 2023. Part of these funds was used by Decheng Investment to acquire underlying assets of certain risky or risk-managed financial products, aiming to compensate retail investors who purchased related loss-making financial products through the platform.

What is even more commendable is that, regarding these historical issues, Lu Holdings did not choose to evade or conceal but actively led independent investigations, systematically sorted out and completed full rectifications. It also engaged Ernst & Young as the new auditor to conduct comprehensive audits and restatements of the three-year financial reports, disclosing all adjustment details, rectification progress, and results to the public, fully safeguarding investors’ right to know. After Ernst & Young’s audit, the net profits for 2022 and 2023 only saw minor adjustments, mainly to more accurately reflect the company’s financial status. This straightforward approach to facing problems and not avoiding flaws is the confidence of a compliant enterprise.

Meanwhile, the disclosure schedule of this annual report exceeded market expectations. The NYSE had previously approved the company’s extension of the annual report deadline to April 30, 2026. The process of financial restatement and audit is complex and detailed, and even with the full extension, it is reasonable. However, Lu Holdings completed all work two and a half months ahead of schedule, releasing announcements and financial reports, minimizing the information asymmetry period in the market and alleviating investors’ anxiety. This responsible attitude towards investors is highly convincing.

02

Operational Resilience and Key Indicators Shine

Even during this critical period of internal control rectification, Lu Holdings’ core operations remained unaffected. The 2024 annual report demonstrated strong operational resilience, indirectly confirming the robustness of the company’s fundamentals. The key data from the 2024 financial report show that as of December 2024, the loan balance enabled by the company reached 216.9 billion yuan, with an additional 213.1 billion yuan in new loans for the year, serving 25.9 million customers, including 5 million active customers, maintaining a stable industry scale.

The continuous improvement in asset quality also provides investors with tangible certainty. By the end of 2024, Lu Holdings’ 30-day overdue rate for all loans decreased from 6.9% in 2023 to 4.8%, and the 90-day overdue rate dropped from 4.1% to 2.9%, showing significant improvement in overdue indicators. During the same period, credit impairment losses decreased by 0.7% year-on-year to 12.613 billion yuan. In an industry under overall pressure, the company’s ability to achieve sustained asset quality improvement and simultaneous easing of impairment pressures fully demonstrates its professional risk management capabilities and control effectiveness.

03

Growth Momentum Continues to Release, Long-term Development Foundation Is Solid

The company’s growth resilience is also reflected in the momentum of new business expansion. The quarterly operational data for Q4 2025 shows that consumer finance has become the company’s core growth engine: as of the end of 2025, the balance of consumer finance loans reached 59.6 billion yuan, a year-on-year increase of 19.0%; in Q4 alone, new loans totaled 28.7 billion yuan, up 7.4% year-on-year. Additionally, the proportion of risk-bearing loans increased to 91.4%, indicating that the company’s proactive risk pricing and asset quality management have further strengthened, laying a solid foundation for stable future operations.

Meanwhile, the company continues to optimize its corporate governance structure and management team composition. The core management team possesses extensive experience and professional capabilities in retail finance and risk management, providing strong governance support for the company’s long-term steady development.

04

Upholding Conscience and Long-term Value Is Worth Expecting

Regarding the highly watched resumption of trading, the announcement clearly states that the company is actively promoting related work and will disclose subsequent progress in accordance with listing rules. In my view, resumption is only a matter of time. Compared to short-term trading resumption points, the long-term value lies in the company’s consistent adherence to compliance, responsibility to investors, and the conscience bottom line throughout the entire rectification cycle.

Having worked in the financial industry for many years, I have seen many companies shift blame or be perfunctory when facing problems. Lu Holdings’ approach of directly confronting issues, thoroughly rectifying, and honestly disclosing is truly rare. No company can be perfectly flawless in its development; encountering historical issues at certain stages is not scary. A truly conscientious enterprise is not one without flaws but one that does not evade or shirk problems, always upholds compliance, and prioritizes the legitimate rights and interests of investors and customers.

From completing the financial report ahead of schedule, to fully rectifying historical issues, and maintaining steady core operations, Lu Holdings has demonstrated responsibility and commitment as a financial enterprise. As a long-term investor in corporate development, I believe that such sincere, resilient, and bottom-line-conscious companies have long-term growth potential. With the comprehensive implementation of rectification work and continuous release of operational momentum, Lu Holdings is expected to return to a normal track in the capital market, achieve steady development, and continue to deepen inclusive finance, creating long-term value for investors.

-End-