On December 27, 2021, China Huarong announced that it would transfer 70% equity of Huarong consumer finance (hereinafter referred to as “Huarong consumer finance”) to Bank Of Ningbo Co.Ltd(002142) at the transfer price of RMB 1.091 billion through public listing and auction in Beijing financial assets exchange. Bank Of Ningbo Co.Ltd(002142) also released the announcement of the resolution of the fifth extraordinary meeting of the seventh board of directors in 2021, which showed that the board of directors of the bank unanimously considered and adopted the proposal on Bank Of Ningbo Co.Ltd(002142) foreign equity investment, and agreed that the company would transfer 70% equity of Huarong consumer finance with RMB 1.091 billion.
Meanwhile, the equity transfer still needs the approval of relevant regulatory authorities. The announcement pointed out that after obtaining the approval of relevant regulatory authorities, China Huarong and Bank Of Ningbo Co.Ltd(002142) will jointly handle the registration of equity change and complete the necessary operation processes such as industrial and commercial change.
This transaction shows that although the competition road of consumer finance is slightly “crowded”, the “gold content” of consumer gold license is still full. The appraisal price of this equity transfer of Huarong Xiaojin is RMB 727 million. The transfer price finally confirmed through online bidding adopted by Beijin is RMB 1.091 billion, 50% higher than the appraisal price.
“The business model and product standardization of consumer financial products at the retail end. In the financial business, the professional threshold of consumer financial business is not high.” A consumer finance company initiated by a joint-stock bank told reporters.
Unlike most consumer finance companies initiated by banks or industrial companies, Huarong consumer finance is 70% owned by China Huarong in AMC industry. Since its establishment, its operating performance has almost ranked the bottom among licensed consumer finance companies. From 2016 to 2019, the total revenue of Huarong consumer finance was 90.1 million yuan, 766 million yuan, 1.201 billion yuan and 1.029 billion yuan respectively, and the corresponding pre tax profit was – 37 million yuan, 128 million yuan, 16.8 million yuan and – 263 million yuan respectively.
The above-mentioned consumer finance company said that the banking consumer finance company and the industrial consumer finance company have their own advantages, Bank Of Ningbo Co.Ltd(002142) in recent years, they have made efforts in retail finance, or will import more professional management and resources to Huarong consumer finance to improve its profitability.
In fact, from the performance of licensed consumer finance in recent years, the differentiation between head companies and tail companies has gradually intensified. Among the 15 consumer finance companies that disclosed the operating revenue indicators for 2020, the operating revenue of Zhaolian consumer finance and home credit consumer finance in the first echelon exceeded 10 billion, only the asset scale of Zhaolian consumer finance exceeded 100 billion, while several consumer finance companies in the tail had a revenue of less than 1 billion and an asset scale of less than 5 billion.
“With the intensification of market competition, the competition mode of consumer finance industry will also change. From the competition of incremental customers to the competition of stock customers, from the differentiated competition among different customer groups, different products and different scenarios, to the homogeneous price competition among the same customer group, similar products and the same scenario, and from the competition of products and prices to financial technology And management capabilities. ” In the consumer finance industry development report (2020) released by think tank 10, it is pointed out that competition will inevitably lead to the Matthew effect and crowding out effect of the survival of the fittest, and the market position of the strong will continue to be stable and strengthened in the competition; In the competition, the market scale of the weak is shrinking, and may even be squeezed out of the market.
In recent years, Bank Of Ningbo Co.Ltd(002142) the effectiveness of online retail transformation has accumulated rich experience for the operation of its consumer finance. In its 2021 semi annual report, the bank said, “the company’s digital operation has been promoted in depth to promote the implementation of large retail strategy, Bank Of Ningbo Co.Ltd(002142) app, online banking and other platforms have continuously improved their customer acquisition ability, Wuxi Online Offline Communication Information Technology Co.Ltd(300959) business has made concerted efforts to promote the average daily scale of personal loans to increase by 52.11% year-on-year.” By the end of June 2021, Bank Of Ningbo Co.Ltd(002142) app had 5.3473 million customers, an increase of 18.04% over the end of the previous year; App has 2.5534 million monthly live customers, an increase of 11.5% over the end of the previous year. As of the end of the reporting period, the number of wechat bank customers was 1.86 million, a year-on-year increase of 44%.
On November 18, 2021, Bank Of Ningbo Co.Ltd(002142) officially announced that the new upgrade of personal bank app2022 appeared. At the same time, Bank Of Ningbo Co.Ltd(002142) wealth open platform was launched, becoming the first urban commercial bank in the industry to launch wealth open platform.
From the perspective of APP interface design, Bank Of Ningbo Co.Ltd(002142) fully draws on the style of Internet platform app and is close to the usage habits of young users. Meanwhile, app2022 launched a pure credit unsecured loan product, direct loan. Direct loan is applied online only, and it can be borrowed and repaid at any time, with a maximum amount of 200000 yuan. Its subsidiary products are directly spent, which can be paid and consumed with direct loan line, covering various life payment scenarios, and can meet customers’ all-round credit needs.
Paying attention to online products and user operation is an important ability for the bank’s retail business to retain users. The China Merchants Bank Co.Ltd(600036) and Ping An Bank Co.Ltd(000001) famous for retail business are examples of the industry’s early opening of APP upgrading and the transformation of thinking from “customers” of traditional banks to “users” of the Internet. The introduction of online traffic is very important for a consumer finance company standing at the starting point. According to the observation of people in the industry, the scale of Zhaolian consumer finance has expanded rapidly in the short term, mainly benefiting from the advantageous traffic support given by China Merchants Bank Co.Ltd(600036) in its app in its early operation.
Bank Of Ningbo Co.Ltd(002142) if we can “fly” Huarong Xiaojin, it will also feed back the group’s revenue and improve its performance. Tianfeng Securities Co.Ltd(601162) the research report believes that the acquisition of the consumer money license can open the regional restrictions on the consumer loan exhibition industry of urban commercial banks, realize the nationwide exhibition industry, and help the company accelerate the promotion of residents’ wealth management business. The Bank Of Ningbo Co.Ltd(002142) retail loans are mainly consumer loans. As of the end of 21h1, the balance of consumer loans accounts for 64% of retail loans. Consumer finance business is expected to become a new performance growth point of the company.
On August 20, 2020, the Supreme People’s Court issued a new judicial interpretation defining that the upper limit of judicial protection of private lending interest rate is four times of one-year LPR, replacing the original provision of “two lines and three districts based on 24% and 36%.
Although consumer finance companies hold financial licenses and theoretically their business does not belong to “private lending”, since the above judicial interpretation of the supreme law was issued, local courts still deal with interest penalty disputes between consumer finance companies and customers according to the definition of 4x LPR in specific cases. In addition, according to insiders, many consumer finance companies are guided by the window and require that the interest rate pricing should not exceed 4 times LPR.
If the Consumer Finance Companies’s interest rate pricing falls back to 4 times the LPR’s red line, it will impose constraints on its differential pricing, population sinking and different risk scenarios.
The above consumer finance companies believe that the positioning of the consumer finance company itself is to differentiate from the middle and high-end customers of the bank and provide consumer credit services to sunken customers such as “blue collar” and “small town youth”. However, on the one hand, it is squeezed by the financial business of the Internet platform, on the other hand, as a licensed institution, risk management is subject to strong compliance constraints and scale growth is difficult.
(Economic Observer)
