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 (Reporters An Ran and Zhu Ling) Recently, Jin Meixin Consumer Finance disclosed the issuance announcement for the first phase of personal consumption loan asset-backed securities (ABS) for 2022, with an issuance scale of 500 million yuan, including a senior tranche of 365 million yuan and a junior tranche of 135 million yuan.

This issuance report also disclosed Jin Meixin Consumer Finance’s non-performing loan (NPL) ratio data in recent years. Over the past three years (2019, 2020, 2021) and at the end of the first phase (Q1 2022), its NPL ratios (calculated based on loans overdue by 60 days) were 0.20%, 1.04%, 1.46%, and 1.65%, respectively.

Regarding the issue of “rising NPL ratios year after year,” China Internet Finance reporters contacted Jin Meixin Consumer Finance for an interview but had not received a reply by the time of publication.

First Phase ABS Aims to Raise 500 Million

Jin Meixin Consumer Finance was established in October 2018, with an initial registered capital of 500 million. 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.

The reporter noted that this is Jin Meixin Consumer Finance’s first time financing through the issuance of ABS. The assets included in this ABS pool are all offline large-scale consumer loan products, totaling 7,179 loans, with an outstanding principal balance of 500 million yuan and an average outstanding principal balance per borrower of 69,700 yuan. The loan purposes include home renovation, household appliances, furniture and electronics, mobile digital devices, education, travel, and wedding expenses.

Issuing ABS for consumer finance companies comes with certain thresholds. According to regulatory requirements, licensed consumer finance companies must obtain approval from the banking and insurance regulatory authorities to issue ABS, and they must meet conditions such as a capital adequacy ratio not lower than the minimum requirements set by regulatory authorities and continuous profitability for the past three years. In March of this year, Jin Meixin Consumer Finance received approval from the Xiamen Regulatory Bureau of the Banking and Insurance Regulatory Commission for ABS qualification.

From the perspective of diversified financing channels, Jin Meixin Consumer Finance is currently only lacking financial bonds. Last September, it successfully launched its first two-year pure Taiwan-funded syndicated loan, raising a total of 400 million yuan, with a term of two years. In June of this year, Jin Meixin Consumer Finance increased its registered capital from 500 million yuan to 1 billion yuan through a cash-based proportional increase by existing shareholders.

NPL Ratio Rises Year by Year

In the industry, Jin Meixin Consumer Finance has been known for its “small and beautiful” approach. As of December 31, 2021, its net operating income was 312 million yuan, a year-on-year increase of 30%; net profit was 69.2986 million yuan, a year-on-year increase of 18.3%. By the end of 2021, total assets were 4.563 billion yuan, and total liabilities were 3.92 billion yuan.

However, the reporter also noted that its NPL ratio has been rising year after year in recent years. The issuance report shows that over the past three years (2019, 2020, 2021) and at the end of the first phase (Q1 2022), the balance of non-performing loans for Jin Meixin Consumer Finance was 4.287 million yuan, 30.1455 million yuan, 60.6633 million yuan, and 74.3213 million yuan, with NPL ratios (calculated based on loans overdue by 60 days) of 0.20%, 1.04%, 1.46%, and 1.65%, respectively.

Jin Meixin Consumer Finance has also exposed numerous risks during its business operations. Last year, it was fined 2.9 million yuan by the Xiamen Banking and Insurance Regulatory Bureau for illegal activities, such as defects in credit management systems and improper loan management leading to the misappropriation of some loan funds. This is also the largest penalty in the consumer finance industry so far this year.

Licensed Consumer Finance Companies Accelerate Financing

Since the beginning of this year, many consumer finance companies have been financing through diversified channels such as asset securitization, syndicated loans, and financial bonds. Overall, in the first three quarters, licensed consumer finance institutions planned to complete funding replenishment exceeding 10 billion yuan. In terms of ABS, only Mashang Consumer Finance alone has issued over 5 billion yuan in ABS this year.

Su Xiaorui, a senior consulting advisor in the financial industry at iResearch, stated that since the second half of last year, licensed consumer finance companies have frequently received good news regarding the approval of ABS and financial bonds, mainly aiming to optimize their financing structure through multiple measures and strengthen their capital strength.

“Now the competition among consumer finance institutions is more reflected in comprehensive capabilities, including the diversification and cost of funding sources, as well as risk control and compliance capabilities,” said Wang Pengbo, a senior analyst at Botong Consulting.

According to incomplete statistics by the reporter, among the 30 consumer finance companies currently in operation, 21 have been approved for interbank lending qualifications, 8 have been approved for issuing financial bonds, and 14 have been approved for issuing ABS, indicating a gradual diversification of funding channels.