That said, the stricter rules had mostly already been baked into those aforementioned stocks, and, with this news now in the rearview mirror, perhaps an overhang can be lifted. In fact, JY shares sprung sharply higher last week after it reported strong Q3 results.
Still, the environment and sentiment for Chinese micro-lenders is decisively negative right now. So, it was a bit surprising to see another one launch an IPO in the middle of this storm. That company is LexinFintech (LX), which priced its 12.0 million ADS IPO at $9, the low end of the $9-$11 price range. The fact that LX was even able to drum up enough interest right now is impressive, actually. Helping its cause is that it has a team of tier one underwriters behind the deal, including Goldman Sachs, BofA Merrill Lynch, and Deutsche Bank. Shares are slated to open for trading later this morning on the Nasdaq.
For a little more background on LX, the company specifically focuses on serving educated young adults (ages 18-36) in China. It had approximately 3.0 million active customers in 2016 and 3.3 million active customers in the nine months ended September 30, 2017, representing a 103% increase and a 34% increase from 2015 and the nine months ended September 30, 2016, respectively.
LX's online consumer finance platform, Fenqile, addresses its customers' credit needs by offering personal installment loans, installment purchase loans and other loan products. It offers a wide variety of products on its e-commerce channel and allow customers to use their credit lines to finance purchases. LX matches customer loans with diversified funding sources, including individual investors on its Juzi Licai online investment platform, institutional funding partners in its direct lending programs and investors of its asset-backed securities.
The company's technology infrastructure enables highly automated loan originations, cost-effective servicing and built-in scalability. In general, potential customers can complete the application for its credit line within a few minutes by providing basic personal information and authorizing us to collect information from various data sources. Approximately 95% of all loan applications are handled and approved automatically within seconds on average. Its data insights and technology capabilities enable it to assess credit risks and facilitate effective fraud detection and prevention, while requiring limited efforts by our customers.
For the nine months ended September 30, 2017, operating income increased by 35% y/y to RMB2.9 billion. This increase was primarily due to a substantial increase in financial services income, in particular interest and financial services income. Operating cost increased by 19.9% to RMB3,102 million ($466 million) in the nine months ended September 30, 2017.
LX's gross profit increased significantly by 146% to RMB886 million ($133 million) and its gross margin increased from 12.2% to 22.2%.
Operating expenses increased by 53.4% to RMB613 million ($92.1 million) with increases in all three categories of operating expenses. As a result of the foregoing, LX recorded a net profit of RMB140 million ($21.0 million) in the nine months ended September 30, 2017, compared to a net loss of RMB105 million in the nine months ended September 30, 2016.