By Sherry Qin


Lufax Holding's shares rose sharply in Hong Kong, tracking a robust performance in the U.S. overnight, as investors welcomed news of a special dividend despite lackluster fourth-quarter results.

The Shanghai-based company's Hong Kong-listed shares climbed 27% early Friday to 19.70 Hong Kong dollars (US$2.52), on track for their largest daily percentage gain since listed in April 2023. Its U.S.-listed shares surged 46% overnight.

The financial services provider for small enterprises in China declared a special dividend of US$2.42 per American Depositary Share, providing shareholders the option to receive payment in cash or additional shares, it said in an exchange filing after the Hong Kong market closed on Thursday.

"With the strong capital position and visibility of our business growth in the near term, we are well positioned to further respond to our shareholders' constant feedback to increase shareholder return... with a total [dividend] estimated size of approximately CNY10 billion (US$1.39 billion)," said Gregory Gibb, Lufax's co-chief executive.

Citi analysts called the outsized special dividend "a major surprise." Together with Lufax's US$0.039 per ADS dividend for the first half of 2023, it implies a dividend payout ratio of over 1000% in 2023, Citi analysts led by Judy Zhang said in a research note.

The special dividend came despite disappointing fourth quarter results. Lufax's fourth-quarter net loss was CNY832 million, up 3.3% compared with the same period a year earlier. Its total income dropped 44% to CNY6.86 billion, dragged by a decline in loan volumes.

However, YongSuk Cho, Lufax's chairman and chief executive, said the company had completed its restructuring and in the first quarter has seen an improvement in the proportion of current loans expected to become non-performing after three months.

"While we expect the market to react positively to the strong shareholder return, we doubt that this special dividend is sustainable longer-term," Citi's Zhang added.


Write to Sherry Qin at sherry.qin@wsj.com


(END) Dow Jones Newswires

03-22-24 0014ET