What is the outlook for loan origination volume and credit risk in the upcoming quarters?

Fundamental outlook – Qfin’s Q2 unaudited results showed a solid expansion in its AI‑driven loan‑origination platform, with total loan‑origination volume up roughly 20 % YoY and a healthy pipeline of new SME and consumer‑credit products. The company’s decision to raise the semi‑annual dividend underscores confidence in cash‑flow generation and suggests management expects the loan‑origination momentum to continue. However, the broader Chinese credit environment remains fragile: property‑sector distress, higher‑interest‑rate pressures and a modest slowdown in consumer spending are all nudging credit‑risk metrics higher. Qfin’s own credit‑loss provisions rose modestly in the quarter, indicating that while the AI‑risk‑scoring engine is still effective, the “average borrower” profile is deteriorating.

Risk‑vs‑return balance – For the next two‑to‑three quarters, loan‑origination volume is likely to keep climbing, buoyed by digital‑onboarding efficiencies and the company’s expanding partnership network. Yet, credit‑risk will probably edge upward as macro‑headwinds translate into higher default rates, especially among thin‑margin, high‑leverage borrowers. Investors should therefore monitor two leading leading‑line indicators: (1) the “originations‑to‑balance” ratio (to gauge whether growth is sustainable) and (2) the net‑loss‑to‑gross‑loans ratio (to catch any acceleration in credit‑risk). A widening net‑loss ratio would merit a defensive tilt, while a stable or narrowing ratio would support a bullish stance on the stock.

Trading implication – The dividend hike and continued volume growth create a short‑to‑medium‑term upside bias, making the stock attractive on pull‑backs to the $2.80‑$3.00 range (its recent 2‑month support zone). However, keep a stop‑loss around 8 % below entry to guard against a potential credit‑risk‑driven pull‑back if macro data (e.g., PMI, consumer‑credit growth) start to turn sharply negative. In short, stay long on the momentum of loan‑origination growth but stay vigilant on credit‑risk metrics that could trigger a risk‑off re‑rating in the coming quarters.