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* The following is an excerpt, excerpted from the Related platform2023 Annual Report on China's Non-Performing Asset Market
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Foreword
At present, China's economy has shifted from a stage of rapid growth to a stage of high-quality development, and the economic growth rate has slowed down, but the structure is gradually optimized. In this context, the disposal of non-performing assets is facing the characteristics of "increasing downward pressure on the economy, increasing industry concentration, and obvious regional differentiation". The Financial Work Conference and the Economic Work Conference proposed to coordinate the prevention and resolution of major economic and financial risks. This article reviews the regulatory policies and laws and regulations issued since 2023, focuses on the analysis of the trend of non-performing assets, and summarizes four typical models of non-performing asset disposal. The UBP platform has a professional evaluation and consulting team, which can provide professional and thoughtful services to market participants.
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The size of the non-performing asset market
We distinguish financial (commercial banks, non-bank financial institutions), non-financial (enterprise) market participants and ** sectors to analyze the market supply of non-performing assets.
Non-performing loans of commercial banks
The asset quality of different types of commercial banks is differentiated.
Large commercial banks and joint-stock commercial banks have relatively low non-performing loan ratios due to their relatively good customer quality, high risk management capabilities and non-performing asset disposal capabilities, which are significantly lower than those of regional commercial banks, and show a downward trend. The asset quality of urban commercial banks in economically developed areas such as the Yangtze River Delta region is significantly higher than that in areas with relatively lagging economic development, and their provision coverage ratio is relatively high, and they have strong anti-risk ability. Similar to urban commercial banks, rural commercial banks' credit allocation and asset volume are highly correlated with the economic development of the areas in which they operate, and although the non-performing loan ratio has continued to decline through greater efforts to resolve non-performing assets, it is still at the highest level compared with other types of commercial banks, and the provision coverage ratio is lower than that of other types of commercial banks, and the ability to resist risks is weaker. Overall, the non-performing loan ratio of commercial banks across the country was 161%, down 005 percentage points; The provision coverage ratio is 2079%, up 235 percentage points, the overall anti-risk ability is strong. It is worth noting that at present, China's real estate market is facing increased adjustment risks, and in the first three quarters of 2023, real estate indicators such as real estate development investment, housing construction area, and commercial housing sales will continue to decline.
Trust industry
The total scale of trust assets continues to grow.
As of the end of the third quarter of 2023, the balance of trust assets was 2264 trillion yuan, a year-on-year increase of 75%。Since the implementation of the new asset management regulations in 2018, the year-on-year growth rate of trust assets has turned from negative to positive since the second quarter of 2022, and has maintained positive growth for six consecutive quarters. The proportion of financing trusts continued to decline, the proportion of investment trusts continued to rise, and the proportion of affairs management trusts remained stable at more than 1 3.
The structure of the use of trust funds continues to be optimized.
With the gradual transformation of the trust industry, the scale of funds invested in industrial and commercial enterprises and basic industries by traditional trust business has continued to decline. At the end of the third quarter of 2023, the scale of capital trusts invested in industrial and commercial enterprises and basic industries was 378 trillion yuan and 152 trillion yuan, a total of 53 trillion yuan, down 51%, accounting for 322%。The scale of trust funds invested in real estate continued to decline. At the end of the third quarter of 2023, the size of the fund trust invested in real estate was 102 trillion yuan, down 203%, accounting for a record low of 621%。At the same time, the total size of the market (bonds) is 575 trillion yuan, accounting for 3496%, accounting for a continuous increase, is the largest proportion of trust funds invested.
The operating performance stabilized and improved. In the first three quarters of 2023, the cumulative year-on-year growth rate of operating income, total profit and per capita profit of the trust industry turned from negative to positive (the cumulative year-on-year growth rate of operating income in the third quarter of 2023 was -3.).3% except), the trust industry's own transformation has shown results.
Bond default
In 2023, the risks in the bond market will gradually be resolved, and defaults will improve, with 31 issuers defaulting in substance, involving 85 domestic and foreign bonds, and the scale of bond defaults will decrease by 56% year-on-year3% to 13174.3 billion yuan. Among them, the scale of actual default in the domestic bond market was 4686.1 billion yuan, down 91%；In the overseas bond market, 23 bonds issued by 13 entities defaulted, with a default scale of 121$2.6 billion, down 660%, and the proportion of default scale increased from 82 in the previous year9% down to 644%。At the same time, the size of bond rollovers increased by 300% to 29396 billion yuan, involving 52 entities and 172 bonds, of which the scale of overseas bond extension accounted for 125%。On the one hand, the economic recovery has gradually dissolved the risks in the bond market, and on the other hand, the bond rollover has been used to avoid substantial bond defaults.
The defaulting entities are still concentrated in real estate enterprises.
In 2023, a total of 62 corporate entities defaulted in the domestic bond market, of which 47 were real estate development enterprises, accounting for 834%。The defaulting overseas debt enterprises are all real estate development enterprises or enterprises in real estate-related industries, and the default scale is 121$2.6 billion. In 2023, there will be a total of 14 new defaulting entities in the domestic bond market, of which 8 are real estate development enterprises, accounting for 81% of the defaulted bonds of the new defaulting entities6%。As the first department continues to optimize the relevant policies and measures of the real estate market, the risks of real estate enterprises will continue to be cleared, and the default situation has improved.
Urban investment bonds
As of December 31, 2023, the stock of urban investment bonds was 22,421, with a scale of 162,3219.4 billion yuan, a year-on-year increase of 96%。The issuance of bonds and the scale of net financing of urban investment enterprises increased by 24 respectively4% and 89%, showing positive growth. However, in the context of localized bonds, the net financing amount of urban investment bonds has continued to decrease since September, and net repayments were recorded in the last two months, indicating the marginal tightening of urban investment financing policies. The trend of short-term issuance continued, and the proportion of urban investment bonds with a maturity of less than 1 year (inclusive) and 1-3 years was 330% and 217%。
The maturity scale of urban investment bonds in 2024 will increase by 9% compared with 20237%。In March, April and August, the maturity pressure of urban investment bonds was relatively high, and the maturity scale was more than 400 billion yuan. In most provinces, the refinancing pressure of urban investment bonds is relatively high, and the proportion of the amount due in 2024 will be more than 30% of the stock size, of which Qinghai, Inner Mongolia, Tianjin, Yunnan and Gansu will account for respectively. 2% and 530%。The largest amount due is the production and investment platform (26.).9%), infrastructure construction (243%) and integrated platforms (230%）。The bond maturity scale of AA and below urban investment enterprises in 2024 is 171043.7 billion yuan, mainly in the more economically developed provinces, but it is necessary to pay attention to the downgrade and relocation of the main body and debt rating and outlook in the future.
In 2024, the nationwide work of resolving local debt risks will continue, and the credit risks of urban investment enterprises in key regions will be mitigated. In the context of debt accountability, local responsibility will be further consolidated and strengthened, and urban investment enterprises will continue to face a tight financing environment.
Analysis of disposal of non-performing assets
In recent years, with the increasing downward pressure on the macroeconomy and the in-depth adjustment of the industrial structure, the scale of non-performing assets in the whole society has shown an upward trend, and the demand for disposal of risky assets and investment opportunities have grown rapidly. There are many modes of disposal of non-performing assets, and we focus on the disposal methods of write-off of non-performing loans, batch transfer of non-performing loans of individual loans and transfer of non-performing loans of a single household to the public, **ization of non-performing assets, transfer of the right to benefit from non-performing assets, early corrective measures, and merger and reorganization.
Write-off of non-performing loans of commercial banks
On February 10, 2023, the China Banking and Insurance Regulatory Commission (CBIRC) issued the Measures for the Risk Classification of Financial Assets of Commercial Banks to promote banks to accurately identify and assess credit risks and implement asset risk classification. By broadening the channels for the disposal of non-performing assets and promoting the pilot transfer of non-performing loans in an orderly manner, the banking industry disposed of a total of 19 trillion yuan, of which the amount of non-performing loans written off reached 745.1 billion yuan, down 6.0 billion year-on-year1%。Since the write-off of non-performing loans is mostly concentrated at the end of the year, it is expected that the amount of non-performing loans written off in 2023 may exceed 1 trillion yuan.
Batch transfer of non-performing loans of personal loans and transfer of non-performing loans of a single household to the public
Since January 2021, the China Banking and Insurance Regulatory Commission (CBIRC) has launched two batches of pilot projects for the transfer of non-performing loans. As of January 19, 2024, 889 non-performing loan transfer business accounts have been opened in Yindeng Center. Among them, there are 288 joint-stock commercial banks, 190 large state-owned commercial banks and 119 financial asset management companies.
As of the end of 2023, the cumulative scale of non-performing loan transfer business reached 1,749200 million yuan, involving a total of 966 projects. Among them, there are a total of 521 batch individual business transfer asset packages, involving a scale of 1,188300 million yuan; 445 single-family corporate transfer asset packages, involving a scale of about 560900 million yuan. Among them, the transfer of non-performing assets of personal loans increased significantly, and the number and amount of transferred asset packages increased by 353 year-on-year respectively5% and 4494%, mainly personal consumption loans and credit card overdrafts, accounting for 43 transactions in 20234% and 390%。
In terms of the transfer of non-performing assets**, the transaction of non-performing asset packages of personal loans showed an upward trend. At present, depending on the quality of assets, most asset portfolio auctions** in 2023 will remain below 1% of the outstanding principal. The average principal ratio** increased from 30% to 50%。The average principal** ratio of single-family to corporate debt transfers will fluctuate in 2023, but on the whole, the principal** ratio of single-family corporate claims will basically stabilize at more than 70%.
Non-performing assets are **
In the context of macroeconomic pressure, the transformation of non-performing assets has become an important channel for banks to dispose of non-performing assets, and more and more initiators have entered the stage of normalized issuance of non-performing ABS.
In 2023, 117 non-performing loans (NPLs) were issued, an increase of 48 from the previous year and a year-on-year increase of 696%, accounting for 45% of the market share of credit ABS in the previous year70% rose to 5879%；The issuance size increased by 145$8.9 billion to $46.60.1 billion yuan, a year-on-year increase of 456%, accounting for 9. % of the market share of credit ABS from 9 in the previous year18% to 1345%。Among the total asset-backed loans**, the proportion of the number of non-performing loans (ABS) issuance and the total issuance amount was 6., respectively46% and 249%。
From the perspective of issuance structure, credit card non-performing loans (ABS) and personal housing mortgage non-performing loans (ABS) are the main ones. Since 2023, the asset quality of banks' credit card business has declined, and the non-performing ratio has increased slightly. According to the "Overall Operation of the Payment System" released by the People's Bank of China, the total outstanding credit of credit cards overdue for half a year in the first three quarters of 2023 was 28239.2 billion yuan, a year-on-year increase of 41%；The proportion of credit card receivables remains at 1%-120%。Affected by this, the number and scale of credit card non-performing loan ABS increased by 56 year-on-year1% and 252% (including China Merchants Bank with 5 orders, 238.1 billion yuan topped the list), and its number of issuance orders and issuance scale accounted for 54 respectively7% and 357%。The issuance scale of ABS for personal housing mortgage accounted for more than half, and the number of issuance orders and issuance scale increased by 156 year-on-year6% and 1485%。Among them, China Construction Bank with 5 orders, 683.2 billion yuan topped the list.
Transfer of the right to proceeds from non-performing assets
The transfer of the right to benefit from non-performing assets is another innovative non-performing asset resolution model in addition to the first-class non-performing assets, which has the advantages of short implementation cycle, controllable cost and high degree of marketization, and has developed rapidly in recent years and has become an important way for commercial banks to dispose of non-performing assets.
According to the Notice of the General Office of the China Banking Regulatory Commission on Regulating the Transfer of Credit Asset Income Rights of Banking Financial Institutions (Yin Jian Ban Fa 2016 No. 82), banking financial institutions can carry out credit asset income right business in Yindeng Center. The right to income from credit assets business can meet the needs of the transferor's institutions for credit asset off-balance sheet and stock asset financing, as well as the needs of investment institutions for enriching asset allocation.
Joint-stock commercial banks, urban commercial banks and rural commercial banks are the main participants in the transfer of the right to benefit from non-performing assets. For non-performing assets such as credit cards, since there is no collateral, the ** of the transfer of the right to income is 0About 5% off, which is lower than the transfer of non-performing assets of small and micro enterprises and personal operating loans**.
Hard constraints: early correction pilot, merger and reorganization
According to the People's Bank of China's rating of financial institutions, among the 3,992 participating banks in the second quarter of 2023, 3,655 institutions were rated within the safety boundary, accounting for 98.5 percent of the total assets of all participating banks28%。The number of high-risk banking institutions decreased by 312 from the peak of 649 in the third quarter of 2019, and the total assets of the 337 high-risk institutions are only 172%。High-risk institutions are mainly concentrated in rural cooperative institutions (including rural commercial banks, rural cooperative banks, and rural credit cooperatives), village and township banks, and some urban commercial banks.
Outlook for the distressed asset management industry
The capital supervision system is comprehensively improved
On November 1, 2023, the State Administration of Financial Supervision and Administration promulgated the Measures for the Management of Capital of Commercial Banks (hereinafter referred to as the "Capital Management Measures"), which will be officially implemented from January 1, 2024. The Measures for the Management of Capital of Commercial Banks issued this time is a comprehensive upgrade of the Measures for the Management of Capital of Commercial Banks (for Trial Implementation) issued in 2012, which has revised and improved the previous capital management measures from various aspects such as differentiated supervision, capital measurement methods, capital management processes, supervision and inspection, and information disclosure, which will help further improve the refinement of the capital management of China's commercial banks, promote banks to strengthen risk management, promote the steady operation of commercial banks, and improve the quality and efficiency of serving the real economy.
In addition to the capital adequacy ratio, the capital regulatory indicator also includes the leverage ratio. For commercial banks whose leverage ratio does not meet the minimum regulatory requirements, the State Administration of Financial Supervision and Administration and its dispatched agencies shall require the commercial banks to replenish Tier 1 capital and control the scale of assets on and off the balance sheet within a time limit.
Cross-border transfer of non-performing assets
In recent years, cross-border capital flows have been frequent and increasing in scale, especially in the case of banks absorbing foreign funds to revitalize their stock of non-performing assets and actively developing cross-border transfer of non-performing assets. Since 2004, the State Administration of Foreign Exchange (SAFE) and the state have issued a number of policies to regulate the cross-border disposal of non-performing assets. Some provinces and cities have issued policies to carry out pilot projects (Shenzhen, Guangdong Province, Hainan Province, Beijing Municipality and Shanghai Municipality) to actively carry out cross-border asset transfer practices. In 2022, the "Opinions of the Communist Party of China on Accelerating the Construction of a National Unified Market" proposed that with the support of the domestic cycle and the unified market, the global factors and market resources should be effectively used to make better connections between the domestic market and the international market. In the future, it is necessary to make overall plans for the construction of domestic and cross-border non-performing asset transfer markets, explore the establishment of a national non-performing asset transfer platform, and establish unified systems, procedures and information disclosure standards to expand the types of business for cross-border non-performing asset transactions.
Related platform services for the disposal of non-performing assets
Related has a professional appraisal and consulting team with many years of practical experience in the field of land, real estate and assets, and is able to provide market participants with professional and thoughtful services for the whole chain of non-performing assets.
In 2023, the UBP platform will participate in a total of 27 non-performing asset ** businesses, involving an amount of 2107.7 billion yuan.
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