Reporter Zheng Yu reports from Beijing
Stimulated by a number of favorable policies to promote consumption and stabilize growth, the consumer financial market is heating up.
A few days ago, China Bond Information Network announced that Bank of China Consumer Finance*** hereinafter referred to as "Bank of China Consumer Finance") successfully issued the "Zhongying 2023 First Phase of Personal Consumption Loan Asset-Backed **" with an issuance scale of 15$1.8 billion.
According to incomplete statistics from the reporter of China Business Daily, as of now, in 2023, licensed consumer finance companies have issued a total of 17 asset-based products (hereinafter referred to as "ABS"), with a total of more than 23 billion yuan, significantly exceeding the 101 in the whole of the previous year1.5 billion yuan.
Asset recognition continues to improve
A number of industry insiders told reporters that the obvious increase in the issuance of consumer finance ABS is an important signal for the market's recognition of consumer credit assets.
The relevant person in charge of consumer finance of Bank of China said that "Zhongying 2023 first phase of personal consumption loan asset-backed**" is the first ABS issued by the company in 2023. As a state-owned licensed financial institution, BOC Consumer Finance continues to build diversified financing channels, while optimizing the company's financing structure, it also vigorously replenishes development funds, improves financial service capabilities and consumer credit coverage, and strengthens its ability to provide financial services to the real economy.
The existing financing channels of consumer finance companies mainly include shareholder deposits, interbank loans, syndicated loans, and the issuance of financial bonds and asset-based products. Among them, financial bonds and credit asset-based products have higher qualification requirements for consumer finance companies.
Consumer finance companies have also gone through a long preparation period for the issuance of ABS.
Starting from the establishment of four licensed consumer financial institutions in four pilot cities in 2010, it was not until 2016 that BOC Consumer Finance issued the first consumer finance company ABS in the market, which officially opened the situation of ABS issuance of licensed consumer finance companies.
According to public information, from 2016 to 2019, only 6 licensed consumer finance companies successfully issued ABS products, but in 2023, consumer finance ABS has been popular in the market.
Up to now, 8 licensed consumer finance companies, including Immediate Consumer Finance Co., Ltd., Henan Zhongyuan Consumer Finance Co., Ltd., Industrial Consumer Finance Co., Ltd., Hubei Consumer Finance Co., Ltd., Haier Consumer Finance, Hunan Changyin 58 Consumer Finance Co., Ltd., Hangzhou Bank Consumer Finance, Bank of China Consumer Finance, etc., have issued a total of 17 ABS, with a total amount equal to about twice that of the same period in 2022.
Some experts told reporters that licensed consumer finance companies need to carry out ABS issuance work according to the structure of the product and market recognition, go through regulatory approval, and go through multiple steps including project start-up, asset screening and packaging, due diligence rating, preparation of issuance materials, approval of investment institution roadshows, bookkeeping issuance, etc., before the issuance can be successful.
The issuance of ABS is a fast, efficient and flexible financing channel, which revitalizes the existing assets of enterprises and can obtain new funds without incurring liabilities, especially when enterprises cannot meet the credit requirements of other financing methods, the issuance of ABS provides a new financing path for them. ABS raises funds through the issuance of high-grade bonds by SPVs, which are not reflected on the balance sheet of the original equity holders, thus avoiding the restrictions on the asset quality of the original equity holders. In addition, ABS financing involves fewer links, which greatly reduces intermediate costs such as remuneration and handling fees. The above-mentioned experts added that the issuance of ABS by consumer finance companies will help them revitalize their stock assets, increase the speed of capital flow, broaden financing channels, optimize their own financing structure, effectively stabilize debt costs, and improve business standardization, operation level and risk management capabilities.
Interest rates continue to fall
The financing channels of various licensed consumer finance companies continue to expand, and the interest rate of ABS issuance continues to fall.
According to the 2018 China Consumer Credit Market Research Report released by the Institute of Chinese Economic Thought and Practice at Tsinghua University, consumer finance ABS opens up new financing channels for consumer finance companies, and has lower financing costs than other financing channels when shareholder funds and bank borrowings are insufficient. For consumer finance, the cost of ABS funding on exchanges is about 5% to 8%.
In the ABS issued by a leading consumer finance company in 2019, the coupon rate of the preferred A tranche has dropped to 38%。In 2023, the coupon rate of ABS issued by licensed consumer finance companies has generally dropped to 35% or less.
For example, "Zhongying 2023 Phase 1 Personal Consumption Loan Asset-Backed **" includes the total issuance amount of senior A-rated asset-backed ** 110.8 billion yuan, with a coupon rate of 27%；Priority B-rated asset-backed** issuance aggregate 10.7 billion yuan, with a coupon rate of 33%；Subordinated asset-backed** issuance aggregate 30.3 billion yuan.
Public data shows that China's consumer market has a huge space and has become an important pillar of economic growth. According to the 2023 China Consumer Finance Company Development Report released by the China Banking Association, consumer finance companies are the only institutions specializing in consumer finance business, unlike traditional commercial banks, auto finance companies, microfinance companies and other institutions that are also engaged in consumer finance. As of the end of 2022, the number of customers served by consumer finance companies reached 33.8 billion person-times, a year-on-year increase of 184%；The asset scale and loan balance both exceeded 800 billion yuan, reaching 884.4 billion yuan and 834.9 billion yuan respectively, a year-on-year increase of 175%, which is higher than the growth rate of the economy and consumption, and has made a positive contribution to the recovery and expansion of consumer demand.
According to CICC's estimates, China's consumer credit balance (excluding housing loans) will be close to 28 trillion yuan in 2025, and the CAGR (compound annual growth rate) will remain at about 13%.
At present, the consumer finance market is developing vigorously and orderly, and licensed consumer finance companies insist on building core risk control capabilities based on big data algorithms, and build data ecological service platforms to improve operational capabilities. Promoting the iterative upgrading of financial services and implementing inclusive finance is also an important driving force behind our continuous pursuit of digitalization and intelligence. A licensed consumer finance insider with a cumulative issuance scale of ABS has approached 4 billion yuan told reporters.
Editor: He Shasha Proofreader: Yan Jingning).