The listing tide is coming?
Editor’s note: This article is from the micro-channel public number “Hope Finance” (ID: Xinfinance), Author: Hung Ruo Xin, Yi Lei.
Behind the hot and cold changes in the capital market is the prediction of the future of the industry.
——Xin Finance
The earnings season is approaching, and consumer finance companies have also handed in their transcripts after the 2020 epidemic. As expected, the business and financial growth of most companies have both slowed down, and it is not easy to maintain positive growth.
Among several top platforms, only “Joint Union Consumer Finance” and “Industrial Consumer Finance” have maintained a double-digit growth rate in their financial performance;
The former “King of Scale”-“Home Credit Consumer Finance” is facing two consecutive years of negative growth, and “Immediate Consumer Finance”, which is expected to impact the first share of consumer finance companies, has also suffered a decline in finance and business for the first time. Situation.
In the turbulent market environment, the most exciting news may be that consumer finance companies have seen the dawn of entering the secondary market. After the consumer finance listing application was approved in 2020, China Merchants Bank According to the announcement, the research on the listing of China Merchants Union Consumer Finance Co., Ltd. has been launched through the plan.
And Centaline Bank also mentioned in the “2nd Five-Year” strategic plan that its subsidiary Centaline Consumer Finance strives to be listed within the next five years.
Prior to this, the last consumer finance company to IPO was in 2019. Home Credit Group, the parent company of Home Credit Consumer Finance, had planned to go to Hong Kong for an IPO. However, with the withdrawal of the listing application and the declining performance under the epidemic, Home Credit’s road to listing has gradually drifted away.
For any industry, the birth of the “first share” is always a milestone. It means that the business model and development stage of an industry are gradually becoming mature and can accept the rigorous scrutiny of the capital market.
From this perspective, from Home Credit’s IPO to the sprint of latecomers, the hot and cold changes in the capital market are behind the prediction of the future of the industry-the business model that the former is good at is gradually failing, and Latecomers built a more stable “moat.”
It is foreseeable that in the next few years, the consumer finance industry is expected to usher in a wave of listing craze. But even so, the challenges faced by consumer finance in the short and medium term still cannot be underestimated.
Shrinking demand, narrowing net interest margin and even the long-term zero interest rate environment follow. With the approval of Didi’s shares in Hangyin Consumer Finance, the efforts of Didi, Ant, Xiaomi, Sina and other giants will further impact the existing The “involution” between the top platforms will continue.
1, The myth of growth is no longer
It is no longer necessary to elaborate on how severe the impact of the epidemic on the financial industry is. Even in the banking industry, it is rare that it can maintain steady growth and deliver high scores. Consumer finance companies have completely bid farewell to the “myth” of rapid growth.
From the perspective of individual companies, under the general trend of slowing growth, Zhaolian Consumer Finance and Industrial Consumer Finance on the top platforms are the two with the most stable growth.
The former, following its aspiration to become the “most profitable” consumer finance company in 2019, will continue to be on the “throne” in 2020, with net profit exceeding 1.6 billion yuan, a year-on-year increase of 13.78%; during the same period, revenue increased by 19.33% year-on-year to 12.8 billion. Yuan, the scale of assets broke through the 100 billion mark.
In contrast, Industrial Consumer Finance has maintained its aggressive momentum in 2019. In 2020, its revenue and profit will reach 6.465 billion yuan and 1.35 billion yuan, with year-on-year growth rates of 27.9% and 30.9%, respectively. The best performance in the Ministry of Platform.
In contrast, the transcripts of the other two top platforms are not satisfactory.
Among them, the three indicators of immediate consumer finance revenue, net profit and asset scale have all declined year-on-year.
Home Credit Consumer Finance will encounter an even more embarrassing situation in 2020. Although the company’s general manager recently issued an open letter stating that Home Credit China’s loss in 2020 is untrue, judging from its performance in the first half of the year, the situation is not optimistic.
As of June 2020, Home Credit Consumer Finance’s assets were 87.78 billion yuan, a 16% decrease from the end of 2019; in the first half of 2020, only net profit was 53 million yuan, compared with 7.93 in the same period of the previous year. 100 million yuan. In the same period, the amount of new loans issued was only 18.272 billion yuan, and the non-performing rate was as high as 3.77%, an increase of 0.17 percentage points from the previous year.
This is still the case for the head platform. Other smaller or later consumer finance companies will face greater challenges in 2020.
Among them, Hubei Consumer Finance, which is in the hardest-hit area of the epidemic and has encountered risk events, has seen its net profit drop by more than 80% in 2020, delivering its worst “report card” so far.
In contrast, Central Plains Consumer Finance has relatively bright growth, which will achieve revenue of 2.109 billion yuan in 2020, a year-on-year increase of 72.87%.It is the fastest growing consumer finance company that has disclosed its financial report. In addition, China Post Consumer Finance also achieved double growth in profit and asset scale in 2020.
The “Giant Family” consumer finance army, which was newly added to the license expansion last year, has just started and has not yet formed a scale.
According to the disclosed data, as of the end of 2020, the balance of Ping An Consumer Finance’s loans is 3.5 billion yuan; Xiaomi Consumer Finance will achieve a net profit of 1.1 million yuan in 2020, and Sunshine Consumer Finance will lose 96 million yuan in 2020.
Considering that they are all backed by financial groups or technology giants, they have a good foundation and promising prospects.
2, The listing is misleading
Even without the 2020 epidemic, the consumer finance industry has already bid farewell to the era of “scale is king” and entered a new stage of development. This is a point of view that we have discussed repeatedly before.
In the fourth quarter of last year, the central bank’s voice on “It is not appropriate to rely on consumer finance to expand consumption” also set the tone for the entire industry.
In this turning period, consumer finance companies have sped up their listings, which is worthy of fun.
At present, Immediately Consumer Finance is the closest to the IPO. According to the information on the official website of the Chongqing Supervision Bureau of the China Securities Regulatory Commission, Immediately Consumer Finance Co., Ltd. has completed the registration of counselling and registration with the Chongqing Securities Regulatory Bureau on January 6, 2021. .
If you count the China Merchants Union Consumer Finance and Zhongyuan Consumer Finance, which have already made public listing plans, a more grand “IPO wave” may be just around the corner.
From the perspective of industry insiders, further broadening of channels for replenishing capital may be the most direct reason.
The aforementioned Chongqing Banking and Insurance Regulatory Bureau’s reply to the immediate consumer finance listing mentioned that the funds raised in the consumer finance offering should be used to supplement the company’s core tier 1 capital immediately after deducting the issuance expenses.
This can not only further reduce the cost of capital and enhance business competitiveness, but also for the prevention of financial risks-consumer finance, as a business sector with large fluctuations in the financial cycle, needs to maintain the core capital adequacy ratio of financial institutions And other indicators are within the safety standards.
From the perspective of the entire industry, IPO itself is a sign of maturity in the industry—the sustainability of its business model and its ability to resist cyclical fluctuations are sufficient to accept the rigorous scrutiny of the capital market.
A noteworthy detail is that in 2019, Home Credit Group, the parent company of Home Credit Consumer Finance, planned to IPO in Hong Kong. At that time, Home Credit was still the largest consumer finance company in China by assets.
But in the end Home Credit withdrew the listing application and stated, “Due to a series ofUnforeseen challenges have affected the global macroeconomic environment. The withdrawal of listing applications is due to the market environment. Currently, the company is well-capitalized and does not need to be listed to maintain business growth. “
At the same time, in the Chinese market where Home Credit Group’s business accounted for the largest proportion of its business, its business has become exhausted. In 2019, Home Credit’s quarterly net profit showed a downward trend. Although the asset scale remained leading, the profit scale It has been crushed by the China Merchants Federation of Consumer Finance, and even approached by the latecomer Industrial Consumer Finance. These are all “early warning” signals.
From this perspective, Home Credit Consumer Finance’s listing may not only be a setback in the capital market, but also the “failure” of the business model it has adhered to over the past few decades.
While other platforms are accelerating online and digital transformations, Home Credit Consumer Finance’s “popular tactics” that have been insisting on can no longer adapt to the new market environment.
Although Home Credit had already put accelerated transformation into the daily routine, the sudden epidemic in 2020 did not leave them too many opportunities.
Under such a background, the aggressive state of China Merchants Union and Immediate Consumer Finance in the capital market may be better understood. Their management of online traffic and the building of digital capabilities make them easier to be accepted by the capital market. .
3, Conclusion
From the perspective of regulatory trends, consumer finance companies are still in a relatively advantageous position compared to other competitors.
Starting from last year, as the P2P cleanup finally came to an end, and small loan companies put on a “tightening curse”, consumer finance companies have received a “big gift package” from supervision:
At the end of 2020, the China Banking and Insurance Regulatory Commission issued the “Notice on Promoting Consumer Finance Companies and Auto Finance Companies to Enhance Sustainable Development Capabilities and Improve the Quality and Efficiency of Financial Services” to provide consumption in terms of financing channels, capital replenishment methods, and provision requirements. More space for financial companies.
On the other hand, the loose liquidity and lower interest rate environment in 2020 will also make the cost of funds continue to decrease, and thus obtain a higher margin of safety.
Data shows that the weighted average loan interest rate of inter-bank consumer finance ABS products issued in 2020 is 11.76%, the average issuance interest rate is 3.58%, and the excess interest margin is 8.18%, which is a further increase from 2019.
As more consumer finance companies are eligible to issue ABS and financial bonds, these are opportunities for them to further expand their advantages and seize the market.
But these bonuses are not for everyone. The openness of the market also means that competition is intensified. If the underlying assets are sinking and non-performing products rise, the capital market may also give a negative answer.
At the same time, ants,New giants such as Xiaomi and Ping An are all ready to go. Recently, Didi’s investment in Hangyin Consumer Finance has also been approved, which means that another traffic giant has entered the game.
At the moment, the importance of flow to the credit business is no longer necessary.
Using a very popular term recently to describe it is “involution”-in the cyclical fluctuations, most platforms will adopt relatively conservative customer acquisition strategies and raise the threshold of risk entry. It also means that everyone is The competition for high-quality assets has become fiercer, and to compete for these customers requires greater traffic, better operations, and lower capital costs.
From the perspective of the capital market, last year’s listing of Ant’s “suspension” has lingering influence on the entire industry. Regulators may adopt a more cautious attitude towards listing reviews in the financial sector.
Not only consumer finance companies, but other companies that made public listing plans last year have not followed suit for a long time.
Furthermore, the domestic capital market as a whole has shown a tightening trend for IPOs this year. Compared with the high pass rate of over 95% of the A-share IPO in 2020, the situation has taken a turn for the worse since 2021.
On the one hand, the IPO barrier reappeared. As of March 15, the entire A-share market had submitted IPO application materials, but 479 companies had not yet passed the review by the Issuance Examination Committee or the Listing Committee. At the same time, since the beginning of the year, 70 IPO companies have terminated their audits, and this number has also set a new historical record.
In addition to the shocks in the A-share market after the Spring Festival, investors’ enthusiasm may no longer be the same. There are still many hurdles to overcome in the IPO of consumer finance companies.