Consumer Finance Shift: Rampant Debt Issuance Amid Urgent Asset Disposal
In the current context of incremental contraction, stock involution, and upward migration of risks, licensed consumer finance companies are actively seeking change. Reporters have observed that this change is manifested, on one hand, in the acceleration of the disposal of non-performing personal loans. As of September 25th, this year has seen 13 consumer finance companies list 107 batches of non-performing personal loan (personal consumer loan) asset packages on the Central Bank's Asset Registration Center, with the total number of assets exceeding 2.28 million, and the unpaid principal and interest exceeding 21.8 billion yuan, surpassing the total for the whole of last year.
On the other hand, licensed consumer finance companies are "frantically" issuing financial bonds. Recently, Zhongyuan Consumer Finance completed the issuance of its second 2 billion yuan financial bond of the year, while companies such as China United Consumer Finance, Industrial Bank Consumer Finance, Bank of China Consumer Finance, Hangzhou Bank Consumer Finance, and Maimai Consumer Finance have collectively issued 29 financial bonds this year, totaling 48.4 billion yuan, setting a historical record.
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"Whether it is issuing financial bonds or transferring non-performing personal loans, the aim is to allocate and manage funds reasonably, and to enhance overall competitive strength," said several experts interviewed. In the current environment, consumer finance institutions should firmly implement their own business management on the basis of compliant operations, choose the right business strategies and business models according to their own advantages and regulatory policy orientations, and while improving their technological level, continue to maintain a tight risk control line.
Bulk Transfer of Non-Performing Assets
Licensed consumer finance companies have begun to sell non-performing assets in bulk.
On September 24th, Ant Consumer Finance and Beijing Bank Consumer Finance respectively published the 4th and 14th personal non-performing loan (personal consumer loan) transfer announcements for 2024 on the Asset Registration Center (Asset Registration Website). Ant Consumer Finance plans to transfer 200,328 non-performing loans with unpaid principal and interest of 590 million yuan in this issue, starting at 56 million yuan. Beijing Bank Consumer Finance plans to transfer 73,330 non-performing loans with unpaid principal and interest of 2.73 billion yuan in this issue, starting at 15.8 million yuan.
According to statistics from the Asset Registration Center, the transaction scale of bulk transfer of personal non-performing loans in 2023 reached 96.53 billion yuan, a growth of 449.4% compared to 2022. Among them, the transaction scale of non-performing transfers by consumer finance companies was 18.37 billion yuan, accounting for about 19%. In the first half of 2024, the transaction scale of bulk transfer of personal non-performing loans was 32.15 billion yuan, a year-on-year increase of 127.5%. Among them, the transaction scale of non-performing transfers by consumer finance companies was 6.52 billion yuan, accounting for about 20%.
According to incomplete statistics by reporters, as of September 25th, this year has seen 13 consumer finance companies list 107 batches of non-performing personal loan asset packages on the Asset Registration Center, with the total number of assets exceeding 2.28 million, unpaid principal of 14.555 billion yuan, and unpaid principal and interest exceeding 21.8 billion yuan, surpassing the total for the whole of last year. Among them, Bank of China Consumer Finance, China United Consumer Finance, and Beijing Bank Consumer Finance have been the most active, with the amount of unpaid principal and interest ranking in the top three.
Specifically, Bank of China Consumer Finance has密集ly published 60 personal non-performing loan transfer announcements, with asset numbers exceeding 100,000 and unpaid principal and interest exceeding 9.4 billion yuan; China United Consumer Finance has published 22 personal non-performing loan transfer announcements, with asset numbers exceeding 630,000 and unpaid principal and interest exceeding 5.4 billion yuan; Beijing Bank Consumer Finance has published 14 personal non-performing loan transfer announcements, with asset numbers exceeding 730,000 and unpaid principal and interest exceeding 3.9 billion yuan; Ant Consumer Finance has published 4 personal non-performing loan transfer announcements, with asset numbers exceeding 570,000 and unpaid principal and interest exceeding 1.7 billion yuan.A person involved with BOC Consumer Finance once stated to a reporter: "After the pilot of the batch transfer of non-performing loans in 2023, this business has been made a regular management measure for disposing and resolving non-performing loans. Currently, the batch transfer of non-performing loans is being steadily and orderly promoted according to the company's business management plan, forming a measure for disposing and resolving non-performing loans together with collection and write-off."
A person involved with China UnionPay Consumer Finance once stated to a reporter that carrying out the batch transfer of non-performing loans helps to better resolve financial risks, optimize the allocation of financial resources, and thus promote the virtuous cycle of financial assets and the steady development of financial institutions. On December 30, 2022, the regulator included consumer finance companies in the pilot scope of non-performing loan transfer for the first time, and several consumer finance companies have issued related projects. The company tries to carry out non-performing loan transfer projects in combination with development needs and promotes related work steadily and orderly. In the future, the batch transfer of non-performing loans will be a regular measure for financial institutions and will be steadily promoted in an open and transparent market bidding mechanism.
"It is expected that in the future, all licensed consumer finance companies will transfer non-performing assets through the Silver Registration Center. However, the average discount rate and principal recovery rate of personal non-performing loan business continue to decline, and the transaction price is basically below 10% of the unpaid principal." Wang Shiqiang, a senior researcher at Bingjian Technology Research Institute, told the reporter that for consumer finance companies, it is urgent to improve customer quality and control non-performing loan issues. In the context of the continuous downward trend of interest rates, consumer finance companies need to make full use of artificial intelligence technology to reduce costs and increase efficiency, and control risks. In the post-loan aspect, artificial intelligence technology can help consumer finance companies understand changes in customer quality more timely and give timely warnings.
Intensive issuance of financial bonds
In addition to accelerating the disposal of non-performing assets, licensed consumer finance companies are also "crazy" about issuing financial bonds. On September 23, the Shanghai Clearing House announced that the 2024 financial bonds (second phase) of Zhongyuan Consumer Finance were successfully issued. The total scale of this financial bond issuance is 2 billion yuan, with a term of 3 years and a coupon rate of 2.3%. The issuance period is from September 20 to 24, and the interest calculation period is from September 24, 2024, to September 23, 2027. Among them, the basic issuance scale is 1 billion yuan. Due to the attached over-issuance right, the actual full申购 multiple exceeded 1.4 times, and an additional issuance of 1 billion yuan of bonds was added, with a final issuance amount of 2 billion yuan.
The previously disclosed prospectus shows that the funds raised from this bond issue of Zhongyuan Consumer Finance are mainly used to supplement the company's medium and long-term working capital and other uses allowed by regulatory authorities. Guotai Junan is the lead underwriter/bookrunner for this bond issue, CITIC Construction Investment is the lead underwriter, and Zhongyuan Bank, Industrial Bank, and China Zheshang Bank are joint lead underwriters. After comprehensive evaluation by China Chengxin International, the main credit rating of Zhongyuan Consumer Finance is AAA, and the credit rating of this bond issue is AAA.
Since the second half of 2023, when regulatory authorities reopened the issuance of financial bonds by consumer finance companies, various consumer finance companies began to apply for bond quotas, and this year has entered a period of intensive bond issuance. So far this year, 9 consumer finance companies including China UnionPay Consumer Finance, Industrial Consumer Finance, BOC Consumer Finance, Hangzhou Consumer Finance, and Majiang Consumer Finance have issued a total of 29 financial bonds, with a total scale of 48.4 billion yuan, setting a historical high.
Wu Zewei, a researcher at Xingtu Financial Research Institute, told the reporter that the main reason for consumer finance institutions to issue financial bonds is that the current financing cost of issuing financial bonds is relatively low, and the term is also relatively long. Consumer finance can take this opportunity to adjust the capital structure and reduce the debt cost to ensure that the corporate interest spread is within a reasonable range. Whether it is issuing financial bonds or transferring non-performing assets, the purpose is the same, one is the liability side, and the other is the asset side. The ultimate goal is to increase profits. For consumer finance companies to find new development space, they need to increase marketing efforts, expand the customer base, actively develop financial technology, empower business through technology, reduce operating costs, and improve profitability, thus achieving the effect of increasing revenue and reducing expenditure.
"Among the financing methods commonly used by licensed consumer finance, the funds obtained from financial bonds have the lowest cost, which is conducive to consumer finance companies obtaining low-cost and stable sources of funds. Therefore, against the backdrop of the gradual narrowing of the net interest spread, the frequency of bond issuance by licensed consumer finance has increased compared to the past." Su Xiaoli, a senior researcher at Suxi Zhiyan, told the reporter that under the current circumstances, institutions need to continuously improve internal control systems and strengthen personnel management on the basis of compliant operations, choose the right business strategies and business models according to their own advantages and regulatory policy orientation, improve technology levels, and continue to tighten the risk control line.
A researcher from Majiang Consumer Research Institute who did not wish to be named told the reporter that at present, the consumer finance industry is in a relatively difficult historical period of incremental contraction, stock internal volume, and risk migration. Consumer finance institutions need to firmly implement the "five autonomy", that is, autonomous operation and management, autonomous credit approval, autonomous information data control, autonomous loan issuance instructions, and autonomous brand publicity management, and transform towards high-quality development."Currently, market competition and downward demand are the main pressures faced by consumer finance companies, with increasing customer acquisition costs and compliance pressures such as data." Wang Pengbo, a senior researcher in the financial industry at Broadcom Consulting, pointed out in an interview with a reporter that issuing debt is to supplement funding needs, which helps to expand the business scale, increase market share and competitiveness, and also optimize the capital structure. While consumer finance institutions improve their diversified financing channels, they also need to enhance their customer management capabilities.