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360 DigiTech (NASDAQ: QFIN) Q3 2021 Research Summary

360 DigiTech caters mainly to underserved borrowers who have limited access to credit; customers often use its affordable line of credit as a supplement to credit card debt

The positive effects of widespread digitalization and e-commerce growth on China’s financial services industry became more pronounced during the pandemic as the movement restrictions drove more retail customers to online platforms. 360 DigiTech, Inc. (NASDAQ: QFIN), which operates as a link between consumers and financial institutions, is thriving on the rapid adoption of digital lending services.

Unique Model

360 DigiTech is a specialty finance company operating in the financial services industry, supported by its strategic partner 360 Group. It offers a technology-empowered platform for financial institutions to connect with customers for delivering consumer finance and wealth management services. It also offers banking and insurance services.

The focus of the business is on underserved borrowers who do not qualify for availing of loans from traditional banks. Borrowers often use the company’s affordable line of credit as a supplement to credit card debt. Under the holistic model, the lending process includes customer acquisition, product matching, risk management, and post-lending management.

Read management/analysts’ comments on 360 DigiTech’s Q2 results

What differentiates 360 DigiTech from others in the industry is the use of advanced technology at all stages and its innovative and highly successful capital-light model. AI-assisted procedures play a key role in post- lending management services. The automated identity authentication process is highly effective in keeping a tab on fraudulent credit applications, while the analytical system helps translate data into actionable insights. At the helm of the fintech firm is chief executive officer Haisheng Wu. The main subsidiaries and partners are:


  • HK Qirui International Technology Company Ltd.
  • Shanghai Qiyue Information Technology Co., Ltd.
  • Shanghai Qidi Information Technology Co., Ltd.
  • Beihai Qicheng Information & Technology Co., Ltd.

Variable Interest Entities

  • Shanghai Qiyu Information Technology Co., Ltd.
  • Fuzhou 360 Online Microcredit Co., Ltd.
  • Fuzhou 360 Financing Guarantee Co., Ltd.
  • Shanghai 360 Financing Guarantee Co., Ltd.

Key Numbers

Recent financial data indicate loan demand has bounced back from last year’s slump and almost reached the pre-crisis levels. The company ended the first half of 2021 on a high note, generating adjusted earnings of RMB1.62 billion for the second quarter, which is up 71% year-over-year. Driving the bottom-line growth, revenues grew by a fifth to RMB4.0 billion as Platform Services revenue more than doubled and offset a 22% decrease in the core Credit Driven Services business. Loan origination volumes jumped around 50% to RMB88.5 billion, and the company ended the first six months of the fiscal year with a healthy cash balance of RMB5.2 billion.

360 DigiTech Q2 2021 earnings infographic

The growth in loan volumes and outstanding balance accelerated in recent quarters even as loan-loss provisions remained elevated, reflecting the continuing uncertainty due to the pandemic. Recent stress tests have shown that the business is poised for continued healthy volume growth into 2022, despite the restrictive regulatory environment.


Going by the stable demand conditions and the pace at which the market is recovering from the COVID-19 crisis, 360 DigiTech is likely to repeat the blockbuster performance in the second half. Encouraged by the positive sentiment, the management recently revised up its full-year guidance for loan facilitation and origination to the range of RMB340 billion to RMB350 billion, which represents a 38- 42% year-over-year increase. The primary growth driver will continue to be the capital-light segment.

The Market

360 DigiTech is a leading player in China’s fintech industry, enjoying a competitive advantage due to its capital-light business strategy. Favorable pricing and the data-driven model continue to attract borrowers to the platform, while superior risk management capabilities give the company an edge over rivals.

The other key players in the field include Ant Financial, a consumer finance company owned by Alibaba Group Holding Limited  (NYSE: BABA) that is currently preparing for an initial public offering. Among others, WeBank, promoted by tech titan Tencent Holding, is strengthening its foothold in the Chinese fintech market.

Yirendai (NYSE: YRD), which primarily provides education and home remodeling loans, and customer credit technology firm Qudian Inc. (NYSE: QD) – which operates in the domestic market through its Instalment Credit Services and Transaction Services divisions – also share the market with 360 DigiTech.


The Chinese government’s policies for regulating the fintech industry often keep companies on their toes, but things are changing for the better and the regulatory environment is turning more favorable for business. However, the ongoing crackdown on technology providers could be a concern for fintech firms when it comes to expanding their portfolios.

Being part of an emerging industry, the company might find it challenging to ensure low delinquency rates while expanding the borrower base. Also, it is very important to ensure a high level of security, considering the involvement of sensitive information and highly complex technology. The other major factors that can cause headwinds to the business are macroeconomic fluctuations and volatile credit cycles.


In what is probably the biggest milestone in its successful journey, the company was rechristened from 360 Finance to 360 DigiTech in 2020. It is expected that the new identity would better define the brand. A few months ago, the management rolled out industry-specific loans products.

Key highlights from Citigroup Q2 2021 earnings results

The 360 Jietiao app, the company’s lending app that was taken offline due to technical reasons recently, was restored to app stores for download last month. The temporary suspension of new downloads did not have any material impact on operations.


Shares of 360 DigiTech made strong gains on the Nasdaq stock exchange in the first half and hit a record high in June. But it entered a downward spiral since then and settled around the pre-peak levels. In the past twelve months, the company’s market capitalization nearly doubled and is currently hovering above $3 billion.


The continued resilience of 360 DigiTech to the pandemic underscores its strong fundamentals and relevance of the business model. The company benefitted from a combination of virus-induced demand growth and widespread digital transformation. There is enough reason to believe the ongoing shift from the core Credit Driven Services to Platform Services would pick up momentum going forward.


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