Produced by | Bullet Finance
Author | Wei Han
Edit | lightning
American Editor | Li Yufei
Audit | Ode
The 2023 annual report season has come to an end, and the annual operation of the consumer finance industry is gradually becoming clearer.
Looking at the "report card" in 2023, most of the top companies are "bank-based" consumer finance companies such as Zhaolian Consumption and Industrial Consumer Finance. Instant Consumer Finance (hereinafter referred to as "Immediate Consumption") has performed well in terms of revenue, profit, asset size and other indicators, and is one of the few "industry-based" consumer finance companies that can rank among the top spots.
On April 19, Chongqing Department Store (600729.SH), an A-share listed company, released its 2023 annual report, revealing that its 31.06%-owned company Immediate Consumption Co., Ltd. has continuously innovated financial services and maintained stable operating performance. For the whole year, the net profit of immediate consumption was 1.982 billion yuan, and the investment income of Chongqing Department Store was 615 million yuan.
Such profitability should not be underestimated, and it has significantly increased the profits of Chongqing Department Store. In 2023, the operating profit of Chongqing Department Store will climb to a record high of 1.435 billion yuan, and the investment income of 615 million yuan will be indispensable. In every research report on Chongqing Department Store, "immediate consumption" is a key word that cannot be avoided.
How long can the growth momentum be maintained with immediate consumption?
1. Will the rapid growth come to an end?
In the three years since 2021, immediate consumption has made a particularly significant contribution to the profit of Chongqing Department Store. Based on the ratio of "investment income from immediate consumption / net profit attributable to the parent of Chongqing Department Store", the contribution rate jumped from less than 30% in 2019 and 2020 to a high level of 44% to 63%.
Such a jump is related to the fact that the business situation of immediate consumption has risen to a higher level. Chongqing Department Store announced that in 2023, the immediate consumption revenue will be 15.795 billion yuan and the net profit will be 1.982 billion yuan. Based on the data announced in 2022, the year-on-year growth rate of profit is 16.74% and 10.85%, respectively.
In terms of asset scale, the total assets of immediate consumption rose from 66.510 billion yuan in 2022 to 71.280 billion yuan in 2023, a year-on-year increase of 7.17%. In the horizontal comparison of the industry, the scale of such assets is larger than that of most consumer finance companies, only lower than that of Zhaolian Consumer Finance and Industrial Consumer Finance, which were jointly established by Ant Money, China Merchants Bank and China Unicom, and almost shoulder to shoulder with Bank of China Consumer Gold.
It is worth noting that the performance growth of immediate consumption is showing signs of hitting the ceiling. In a research report published by Cinda Securities on October 28, 2023, it was noted that the third quarterly report of Chongqing Department Store showed that immediate consumption contributed investment income of 75 million yuan in the current quarter, a year-on-year decrease of 47%.
Can finance continue to make upward breakthroughs? Industry trends provide a reference worthy of reference.
According to the iResearch report, Internet financial platforms, which were previously represented by Ant Group, have grown rapidly with their traffic and technological advantages, and have become the largest contributor in the field of consumer credit in the narrow sense, second only to credit cards. With the licensing and business transformation of Internet financial platforms, the business share originally occupied by giants such as Ant Group has been transferred to consumer finance companies. This is an important industry background factor for the growth of "immediate consumption" in recent years.
However, with the advancement of rectification, Ant Consumer Gold has reappeared as a giant in the consumer finance track. The offensive and defensive roles are reversed, and the pressure of guarding the share needs to be vigilant has come to the "immediate consumers" again.
The pace of consumption recovery in society as a whole is also worth paying attention to. According to the National Bureau of Statistics, the total retail sales of consumer goods in 2023 increased by 7.2% year-on-year. This growth rate is based on a 0.2% year-on-year decline in 2022. In 2024, steady growth and continuous policies to promote consumption will continue to be pursued, and whether residents' consumption demand can be continuously stimulated, thereby driving the growth of immediate consumption performance, still needs to be further observed.
Consumer finance, like other financial industries, is closely related to business development and capital strength. At present, the ways in which consumer finance companies replenish their capital strength include retained earnings, issuance of Tier 2 capital bonds, and shareholder capital increases, each of which affects the operating rhythm of consumer finance companies.
In 2022, the company successfully raised 680 million yuan in syndicated loans, and in recent years, it has also been a "big player" in expanding its financing channels by issuing asset securitization products (ABS). According to a report by China Economic News Network in December 2023, the scale of the 5 ABS issues issued immediately throughout the year is about 7 billion yuan, ranking first in the industry. In April 2024, the company issued the first tranche of 1 billion yuan of financial bonds in 2024.
However, Fitch Bohua's 2024 Consumer Finance Company Outlook report points out that the capital replenishment of consumer finance companies is still highly dependent on shareholder capital increases and profit retention.
In terms of capital increase, what is the strength of shareholders who consume immediately?
2. The new industry regulations increase the responsibilities of the parent company
As an "industrial" consumer finance company, the shareholding structure of Immediate Consumption is significantly different from that of "banking".
Let's start with "Banking". China Merchants Bank and China Unicom each hold half of the shares, and Industrial Bank also holds 66% of the shares. Overall, the shareholding structure is relatively simple and the control is clear.
However, the shareholders of the "industrial system" are diverse: the largest shareholder, Chongqing Department Store, holds 33.09%, Beijing Zhongguancun Kejin Technology Co., Ltd. holds 31.43%, Wumart Technology Group Co., Ltd. holds 17.17%, and Bank of Chongqing and Sunshine Property Insurance are also among the shareholders.
Two details are worth noting.
First, in addition to the former contributing investment income to the latter, there are also business dealings between the immediate consumption and the major shareholder Chongqing Department Store. According to the 2023 annual report of Chongqing Department Store, the company handled a total of 2.1 billion yuan of "shareholder deposits" in immediate consumption throughout the year, and the total interest income of the deposits consumed in immediate consumption was 72.2373 million yuan. These deposit rates range from 4.22% to 5.36%.
Second, Wumart Technology Group, one of the major shareholders of Immediate Consumption, also indirectly holds a large number of shares in Chongqing Department Store. Chongqing Department Store is still an enterprise without actual controller, and the chairman is Zhang Wenzhong, the founder of Wumart Group.
The reason why it is important to understand the shareholder structure of immediate consumption is related to the recent release of new regulatory regulations.
(Photo / Photo Network, based on VRF protocol)
On March 18, 2024, the Measures for the Administration of Consumer Financial Companies, formulated by the State Administration of Financial Regulation, was officially released and has just come into force on April 18. Compared with the 2013 pilot measures, the main revisions include increasing the capital contribution ratio and qualification requirements of major investors, and increasing the proportion of capital contribution from 30% to 50% of the total share capital.
Guosheng Securities' research report found that there are currently 15 consumer finance companies with the largest shareholder holding less than 50% of the shares, and immediate consumption is one of them.
At present, the total shareholding ratio of Chongqing Department Store and Wumart Technology Group is just over 50%, but in view of the complex equity relationship between the three, the interests of shareholders of listed companies and the compliance requirements, there is no clear analysis and conclusion on whether they can meet the requirements of the above-mentioned regulatory measures. In addition, equity transfer may not be an easy task.
What's more, as an important funder of consumer finance, whether it is Chongqing Department Store or "Wumart Department", capital is a difficult problem in front of us.
In 2020 and 2021, Chongqing Department Store paid generous dividends for two years, which once again aroused the market's attention to the capital situation of Wumart. According to Jiemian News, under the background of the impact of the epidemic and the continued shrinking of the entity at that time, Chongqing Department Store's cash dividend ratio in 2020 was 146.88%, with an amount of up to 1.475 billion yuan, and a total of 1.501 billion yuan (including tax) in 2021, with a cash dividend ratio of 178.20%.
At that time, some analysts pointed out that Wumart Group and Zhang Wenzhong may be the greater beneficiaries of such abnormal dividends. According to the analysis of the article in the Yangtze River Business Daily in 2022, at that time, Chongqing Department Store earned 2 billion yuan in two years, but paid a strange dividend of 3 billion yuan.
Returning to immediate consumption, there is no "rich dad" is a reality that must be faced. Hoping for capital replenishment based on shareholder strength, the feasibility is probably a big question mark that has not yet been resolved.
Immediately consumed itself and also sought an IPO. As early as 2020, the Chongqing Banking and Insurance Regulatory Bureau issued information and agreed in principle to its IPO. In January 2021, the company also signed a mentoring agreement with CICC and China Securities Construction Investment. In April 2023, Zhao Guoqing, chairman of the company, revealed that the company is still in the process of counseling.
3. Without a "rich dad", what are the odds of PK banking?
In addition to the "hard power" of shareholders' funds, whether the "soft power" of business synergies can also be the focus of market investment in consumer finance companies.
As one of the few "industrial" consumer finance companies, the natural disadvantages of immediate consumption in the face of "banking" competitors are self-evident.
Most of these "bank-based" consumer finance companies, which are backed by joint-stock banks, leading city commercial banks and even large state-owned banks, have multiple advantages in terms of capital cost, credit evaluation capabilities, customer base, and online and offline integration. Just as the business data shows that regardless of Ant Consumption, there are Zhaolian Consumption and Industrial Consumption Gold that need to catch up before immediate consumption, and there are also Bank of China Consumer Gold, China Post Consumer Gold, Ningyin Consumer Gold and other desperate pursuits, and the "banking system" competitors are strong.
In particular, Ningyin Consumer Gold, which is backed by the head city commercial bank Bank of Ningbo, has total assets of 45.671 billion yuan at the end of 2023, a year-on-year increase of 460.72%, and its operating and profit have also increased by 193.96% and 676.92% respectively.
Immediately consumed, and realized that there is no disadvantage of "rich dad". In an interview with Guo Jianni, general manager of Instant Consumption, she bluntly said that Immediate Consumption "does not have a 'rich father' and cannot rely on others".
(Photo / Photo Network, based on VRF protocol)
Digitalization and innovative services may be one of the breakthroughs sought by immediate consumption. In the above interview, Guo Jianni emphasized that the development of immediate consumption is business-oriented, with data support for professional decision-making, and "the most important point is to promote internal innovation with mechanisms". In addition, the company continues to invest in artificial intelligence to explore digital consumer finance. Sino-Singapore Jingwei has also paid attention to the immediate consumption of scientific and technological innovation to help development.
Another breakthrough may lie in the fact that "industrial" consumer finance companies also have some advantages that "banking" do not have. For example, Minsheng Securities saw in the research report the potential for synergy between immediate consumption and Chongqing Department Store. Specific cooperation scenarios include, in 2018, Immediate Consumption and Chongqing Department Store opened home appliance shopping credit and interest-free installments, and launched "face payment" in department stores.
However, the breakthrough in the direction of science and technology has already been dazzling with the dazzling light of ant consumption, and it is not yet known whether the synergistic effect between immediate consumption and Chongqing Department Store can really take effect. In the context of increasingly fierce competition in the consumer finance market, the competition with the "banking system" will be a competition full of uncertainties, and every step of immediate consumption will test its wisdom and resilience.
*The title image in the article comes from: Camera.com, based on VRF protocol.