Thanks to the one-time profit from selling its virtual banking business, China Ping An's financial subsidiary, OneConnect (OCFT. N; 06638. HK), continued its six-month turnaround trend in the third quarter.
In the latest released third quarter report, Financial OneConnect achieved a net profit attributable to shareholders of 110 million yuan in the first three quarters of this year, a year-on-year increase of 138.9%. If the one-time gains mentioned above are excluded, the continuous operating business of Financial One Account in the first three quarters still resulted in a net loss attributable to the parent company, but the net loss narrowed by 41.9% year-on-year, improving from 51 million yuan in the same period last year to 30 million yuan.
In April of this year, Financial One Account sold its virtual banking business to Lufax Holdings, a subsidiary of Ping An Group in China, for a consideration of HKD 933 million.
Since 2024, the company's profitability has further improved. These achievements are due to adjusting the product portfolio, expanding domestic and foreign markets, and continuing to implement strict cost control and improve resource allocation efficiency, which has laid a solid foundation for achieving profitability in the medium term, "said Shen Chongfeng, Chairman and CEO of Financial One Account, at the third quarter earnings conference.
However, for OneConnect, how to reverse the year-on-year decline in revenue remains a top priority. According to the third quarter report data, the sustained business revenue of Financial One Account in the third quarter was 417 million yuan, a year-on-year decrease of 48.3%. Financial OneConnect stated that this is mainly due to the contraction of cloud service platform revenue as its strategy gradually terminates. Financial OneConnect announced in May that it has received notices from several subsidiaries and affiliated companies of Ping An Group of China to cease using the cloud services provided by the company on the Gama Financial Cloud Platform.
It is worth mentioning that recently, Financial One Account also disclosed a batch of three-year related party transaction agreements with Ping An of China to undertake the previous batch of agreements that will expire in 2024. The transaction content includes product and service provision, financial service procurement, property leasing, etc. The most important product and service provision agreement specifies that in the next three years (2025-2027), multiple subsidiaries of Ping An China will pay a recommended annual cap of 2.223 billion yuan, 2.304 billion yuan, and 2.343 billion yuan respectively for transaction fees related to products and services to Financial One Account. Compared with the previous batch of agreements covering 2022-2024, which all exceeded the transaction limit of 3 billion yuan, the transaction limit for the next three years has clearly decreased significantly.
Financial One Account explained that this is mainly due to the termination of cloud service procurement by affiliated customers and the company's focus on expanding third-party customers and overseas markets; On the other hand, the company will continue to develop its banking business and continuously improve its life insurance product system. It is expected that the related related business income will continue to rise in the next three years. Therefore, it is expected that the annual cap from 2025 to 2027 will maintain a stable growth trend.
I want to emphasize that our relationship with Ping An Group has never changed. As the only financial technology export window within Ping An Group, we will greatly integrate into the digital reform wave of Ping An Group, "Shen Chongfeng said at the performance conference. He explained that the evaluation of the upper limit of related party transaction amounts for Ping An Group and its subsidiaries to purchase financial OneConnect products and services will consider multiple factors, including the historical transaction amounts of both parties, future demand changes of each member company and group, etc.
Compared to the hindered revenue growth in the domestic market, the sustained growth in the overseas market has gradually been regarded as an important driving force for the performance growth of Financial One Account. According to the third quarter report data, in the first three quarters of 2024, the overseas third-party customer revenue of Financial OneConnect increased by 23.4% year-on-year, and its proportion in third-party revenue increased to 22.8% (excluding data from the virtual banking business sector), an increase of 7 percentage points year-on-year.
We pay special attention to overseas markets, and Southeast Asia and other regions will become strong engines for our performance growth, "said Shen Chongfeng. According to data, as of the end of the third quarter, OneConnect's financial services have covered more than 20 countries and regions including South Africa, Singapore, Thailand, and Malaysia, serving a total of 192 overseas financial institutions and providing them with products such as intelligent credit systems.
In the future, Financial One Account will focus on improving product standardization rates, delivering more high-value products, and gradually increasing gross profit levels. At the same time, the company will continue to optimize its cost structure and make targeted strategic investments in overseas business layout and high-value product research and development, "said Lin Rubo, Chief Financial Officer of Financial One Account.