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On April 18, the Measures for the Administration of Consumer Financial Companies (hereinafter referred to as the "Measures") were issued for one month, and came into effect.
At the beginning of the issuance of the Measures, several indicators attracted the attention of the market. The first is to raise the minimum amount of registered capital of consumer finance companies from 300 million yuan to 1 billion yuan to raise the threshold for industry access; the second is to increase the shareholding ratio of major investors of consumer finance companies from no less than 30% to no less than 50% to consolidate the responsibilities of shareholders; and the third is to add the regulatory indicator that "the balance of guaranteed credit enhancement loans shall not exceed 50% of the total loan balance and the liquidity ratio shall not be less than 50%" to improve risk control capabilities.
The first two refer to the newly established consumer finance companies, while the third applies to all consumer finance companies. However, Silver Persimmon Finance noticed that after the issuance of the "Measures", some existing consumer gold companies have adjusted the first content. What are the reasons why consumer finance companies are eager to adjust, and how will the competitive pattern of the industry change in the future?
The capital increase of the existing license plate continues
After the release of the new regulations, the controlling shareholders of two consumer finance companies quickly threw out capital increase plans.
On March 25, Changsha Bank announced that it planned to jointly increase the capital of Hunan Changyin 58 Consumer Finance Co., Ltd., a holding subsidiary of the bank, with its own funds with its own funds, with a total capital increase of no more than 711 million yuan. It is worth mentioning that the previous registered capital of the consumer finance company was 900 million yuan, which has not yet reached the standard of 1 billion yuan.
On April 10, Bank of Ningbo announced that it intends to jointly increase the capital of Ningbo Bank Consumer Finance with Ningbo Financial Holdings Co., Ltd., and it is expected that after the completion of the capital increase, the registered capital will reach 4.5 billion yuan. The reason given by Bank of Ningbo for the capital increase is "to further enhance the market competitiveness of Ningbo Consumer Gold and meet its business development capital needs." "In July last year, Ningyin Consumer Gold had just completed a round of capital increase, and the registered capital increased from 900 million yuan to 2.911 billion yuan.
In the opinion of analysts, although the requirement that the registered capital is not less than 1 billion yuan is aimed at the newly established consumer finance company, it is also of guiding significance for the existing licenses. Due to the needs of business expansion, existing licenses may also be more willing to absorb capital.
It is reported that as a financial institution that issues consumer loans, the consumer finance company has a single business model and structure, and the natural capital consumption is relatively fast. However, since no consumer finance company has yet achieved public listing, and it does not meet the conditions for issuing preferred shares, capital increase and share expansion have become one of the few ways to replenish capital.
In fact, before the promulgation of the "Measures", the consumer finance industry had been continuously increasing its capital. For example, in January last year, the registered capital of Shangcheng Consumer Finance was changed from 1 billion yuan to 1.624 billion yuan, in December last year, the registered capital of Suyin KGI Consumer Finance was changed from 2.6 billion yuan to 4.2 billion yuan, and the registered capital of Chongqing Ant Consumer Finance (hereinafter referred to as "Ant Consumer Finance") increased from 18.5 billion yuan to 23 billion yuan.
Silver Persimmon Finance noticed that from the perspective of registered capital, the current 31 licensed consumer finance companies are more obvious, and the registered capital of the head institutions is generally more than 5 billion yuan, but there are also many small institutions with a registered capital of less than 1 billion yuan. According to statistics, there are still 9 consumer finance companies with registered capital of less than 1 billion yuan, of which Shengyin Consumer Finance (300 million yuan) and Jincheng Consumer Finance (420 million yuan) are less than 500 million yuan.
In the context of intensified competition in the industry, even if there is no minimum capital requirement, it has become the choice of many consumer finance companies to complete the "balance sheet expansion" through capital increase and enhance their competitive position in the industry. For example, after the completion of the capital increase last year, the total asset scale of Ningyin Consumer Gold has experienced rapid expansion. As of the end of 2023, the total assets of Ningyin Consumer Gold will be 45.671 billion yuan, a year-on-year increase of 460.72%, especially in the second half of the year after the completion of the capital increase, the asset scale will increase by about 27.223 billion yuan, and its ranking in the industry is expected to rise to the top ten.
Based on the macro environment and the characteristics of the consumer finance industry, a research report released by Fitch Bohua, a wholly-owned subsidiary of Fitch Ratings, in early March this year predicted that the effect of capital increase and expansion of mainland consumer finance companies will be further released in 2023-2024.
There are only more than 20 small and medium-sized banks that meet the requirements for new entrants
It is worth mentioning that the new regulations impose stricter requirements on major shareholders who are new to consumer finance companies, such as stipulating that their shareholding ratio shall not be less than 50%, and raising the entry threshold for major shareholders in terms of assets and operating income, which also puts forward higher requirements for small and medium-sized banks that want to enter the market.
"The consumer gold license is a national license, which is a good supplement for small and medium-sized banks that cannot operate across regions. Zeng Gang, director of the Shanghai Finance and Development Laboratory, said that because of this, small and medium-sized banks have become the main force in the past to develop consumer gold licenses.
According to the statistics of Silver Persimmon Finance, among the 31 licensed consumer finance companies, 23 are banks, of which 16 are city commercial banks, and most of them are A-share and H-share listed banks.
In the new regulations, there are also stricter requirements for domestic financial institutions to be the main investors of consumer finance companies, that is, they need to meet the requirements of "total assets of not less than RMB500 billion or the equivalent in freely convertible currencies at the end of the most recent fiscal year", which may also "turn away" more small and medium-sized banks that are willing to enter the market.
According to the "Top 100 Chinese Banking Banks" list launched by the China Banking Association in August last year, excluding the small and medium-sized banks that have already controlled the consumer finance company, there are currently only 21 small and medium-sized banks that can meet this total asset requirement, including 13 urban commercial banks and 8 rural commercial banks.
In Zeng Gang's view, the sinking of banks and the involvement of mutual finance companies have made the current consumer finance field a "red ocean". In the context of intensified competition in the industry, the financial strength and professional strength of shareholders are particularly important. The new regulations raise the relevant requirements for shareholders in the hope that shareholders can provide all-round support in the development of the company, and lay a better foundation for its sustainable development.
Zeng Gang believes that for existing licenses, there is still the possibility of equity transfer in the future. From the perspective of the overall development of the industry, the future will show a trend of differentiation. There is still plenty of room for development for leading institutions, especially companies with scenarios, strong market acquisition capabilities, and strong risk control capabilities. For some consumer finance companies that will only rely on price wars, the future space is bound to be compressed.