Jinmei Xin Consumer Finance plans to issue its first tranche of ABS to raise 500 million yuan, with the non-performing loan rate rising year after year over the past three years.

China Internet Finance, November 21 (Reporter An Ran, Zhu Ling) Recently, Jinmei Xin Consumer Finance disclosed the issuance announcement for its first batch of 2022 personal consumer loan asset-backed securities (ABS), with an issuance scale of 500 million yuan, including 365 million yuan in the senior tranche and 135 million yuan in the subordinate tranche.

The issuance report also revealed Jinmei Xin Consumer Finance’s bad debt data in recent years. The non-performing loan (NPL) ratios (calculated by overdue 60 days) for the past three years (2019, 2020, 2021) and the end of the first quarter of 2022 are 0.20%, 1.04%, 1.46%, and 1.65%, respectively.

Regarding issues such as “rising non-performing rates year after year,” China Internet Finance contacted Jinmei Xin Consumer Finance for an interview. As of press time, no response has been received.

First Batch of ABS to Raise 500 Million Yuan

Jinmei Xin Consumer Finance was established in October 2018 with an initial registered capital of 500 million yuan. It is a consumer finance company jointly funded by Xiamen Jinyuan Financial Holdings Co., Ltd., Gome Holdings Group Co., Ltd., and China Trust Commercial Bank Co., Ltd.

Notably, this is Jinmei Xin Consumer Finance’s first time raising funds through ABS issuance. The assets pooled into this ABS are all offline large-scale consumer loans, totaling 7,179 loans with an outstanding principal balance of 500 million yuan. The average outstanding principal per borrower is 69,700 yuan. The loans are used for renovation, household appliances, furniture, mobile phones and digital devices, education, travel, and wedding expenses.

Issuing ABS by consumer finance companies involves certain thresholds. According to regulatory requirements, licensed consumer finance companies need approval from the China Banking and Insurance Regulatory Commission (CBIRC) to issue ABS. They must meet conditions such as maintaining a capital adequacy ratio not lower than the minimum required by regulators and having three consecutive years of profitability. In March this year, Jinmei Xin Consumer Finance obtained approval from the Xiamen CBIRC bureau to issue ABS.

From a diversified financing perspective, Jinmei Xin Consumer Finance currently only lacks access to financial bonds. In September last year, it successfully secured its first two-year pure Taiwanese syndicated loan, raising 400 million yuan with a 2-year term. In June this year, it increased its registered capital from 500 million to 1 billion yuan through cash contributions from existing shareholders.

Rising Non-Performing Rates

In the industry, Jinmei Xin Consumer Finance has been known as a “small but beautiful” player. As of December 31, 2021, its net operating income was 312 million yuan, up 30% year-over-year; net profit was 69.3 million yuan, up 18.3%. By the end of 2021, total assets reached 4.563 billion yuan, with total liabilities of 3.92 billion yuan.

However, the reporter also noted that its non-performing loan ratio has been increasing year after year. The issuance report shows that the non-performing loan balances for the past three years (2019, 2020, 2021) and the end of Q1 2022 were 4.287 million yuan, 30.1455 million yuan, 60.6633 million yuan, and 74.3213 million yuan, respectively. The NPL ratios (overdue 60 days) are 0.20%, 1.04%, 1.46%, and 1.65%.

During its business operations, Jinmei Xin Consumer Finance has also exposed various risks. Last year, due to deficiencies in its credit management system and improper loan management leading to misappropriation of funds, it was fined 2.9 million yuan by the Xiamen CBIRC bureau. This is the largest penalty in the consumer finance industry so far this year.

Licensed Consumer Finance Accelerates Financing to Reinforce Capital

Since the beginning of this year, multiple consumer finance companies have diversified their funding channels through asset securitization, syndicated loans, and financial bonds. Overall, in the first three quarters, licensed consumer finance institutions planned to raise over 100 billion yuan. Among them, only MaShang Consumer Finance issued over 5 billion yuan in ABS this year.

Su Xiaorui, senior consulting analyst at Analysys, said that since the second half of last year, licensed consumer finance companies have frequently received approvals for issuing ABS and financial bonds, mainly aiming to optimize their financing structures and strengthen their capital bases.

“Now, competition among consumer finance institutions is more about comprehensive capabilities, including diversified funding sources, cost control, risk management, and compliance operations,” said Wang Pengbo, senior analyst at Broadcom Consulting.

According to incomplete statistics by the reporter, among the 30 consumer finance companies currently in operation, 21 have obtained interbank borrowing approval, 8 have approval to issue financial bonds, and 14 have approval to issue ABS. Funding channels are becoming increasingly diversified.