In recent years, under the influence of the economic environment, the market scale of non-performing assets has been increasing. According to the Bancassurance Regulatory Commission, the balance of non-performing loans of China's commercial banks reached 2 trillion yuan in 2018, approaching the all-time high in 2003, and the non-performing rate rose to 1.89%, also setting a new high after the financial crisis in 2009. With the increase of the scale of non-performing assets, the market has experienced 17 years of hot, 18 years of stability, 19 years will usher in structural opportunities, institutions with excellent disposal capacity and industrial background will usher in new opportunities for structural adjustment in 19 years.
The new structural opportunities for the non-performing assets industry in 2019 come from the following four aspects.
I. the number of defects on the supply side is increasing.
The scale of non-performing assets of banks is rising again.
Since the beginning of 2018, the CBIC has strengthened its supervision, forced loans more than 90 days overdue into bad loans, and forced non-performing assets with false statements to return to the statement, coupled with the slowing down of economic growth, trade war and other factors, adverse risks continue to be exposed. By the end of 2018, the non-performing assets of commercial banks had reached 2 trillion yuan, approaching the all-time high in 2003, and the non-performing rate had increased to 1.89%, which was 0.15 percentage points higher than the non-performing loan ratio of commercial banks in 2016 and 2017. Banks are the main suppliers of non-performing assets, and the increase in non-performing assets increases the choice of non-performing assets disposal institutions.
2.the demand side tends to be rational.
The disposal pressure of the seller increases and the relationship between supply and demand is reversed.
Unlike the hot market in 2017, the supply of non-performing assets continued to grow in 2018, but the turnover did not increase with it, but fell slightly. Affected by the widening gap between the two, the scale of assets to be transferred will further accumulate, the market supplier will bear greater transfer pressure, it is expected that the market discourse will return to the buyer, the buyer will have more bargaining space.
The buyer continues to expand capacity.
Market participants mainly include four major asset management companies, local AMC and private disposal institutions. As of November 2018, 53 local AMC have been approved, of which Zhejiang, Guangdong, Fujian, Shandong and other places have appeared the third AMC,. It is expected that this license will be gradually liberalized in the future.
3.Change in the structure of buyer's market participants.
The participants in the primary and secondary market of non-performing assets investment have changed greatly after the development in recent years.
(1) supplier.
The supply side of non-performing assets in the primary market has changed from a single supply of banks to a multi-supply pattern of banks, trusts, asset management companies, network loan platforms, and so on. The providers of assets are no longer limited to banking institutions, but banks still account for a large proportion of non-performing assets, about 48%.
(2) participants in the secondary market.
The secondary market is mainly composed of four types of participants, namely, the traditional four major asset management companies, local AMC, banking AIC and private disposal institutions. The disposal of non-performing assets depends on three aspects: capital strength, resource acquisition capacity and disposal capacity. The above institutions have different advantages and disadvantages in these aspects.
Top four asset management companies. According to the regulatory requirements, banks' non-performing assets should be sold to licensed non-performing asset disposal companies in the form of bulk packaging, that is, the four major asset management companies. Based on the license advantages, the four major asset management companies have been the main participants in the primary market. However, the main business of the four major asset management companies is not in the non-performing assets disposal sector for a long time, but more rely on the license to get the asset package, the actual proportion of self-disposal is low, accounting for about 30%. The remaining assets are mainly sold to other institutions for disposal at a higher price to earn passage fees. However, with the tightening of real estate financing and the suppression of non-standard financing, the demand for the four major asset management companies to return to the main business is getting higher and higher. it is judged that after the first round of extensive development, the four major asset management companies will gradually enter the stage of self-disposal. give full play to the advantages of funds and resources. However, the transformation is not achieved overnight, it needs to match resources from the organizational structure, personnel training and other aspects in order to achieve the desired results.
local AMC. Since October 2016, the General Office of the CBRC issued a letter on appropriate Adjustment of relevant policies of Local Asset Management companies to provincial governments (Banking Supervisory Office memo (2016) No. 1738), removing the restriction that local AMC may not transfer non-performing assets, and liberalizing the "second child", allowing provinces and cities to set up one more company, and the CBRC has significantly speeded up the publication of local AMC lists. In addition, the notice also reduced the requirement of "batch transfer" from 10 to 3, lowering the threshold for the disposal of non-performing assets, which is conducive to the acceleration of bad disposal of local AMC. Up to now, a total of 53 formal AMC have been licensed by the local banking regulatory commission, and another 6 are still under examination and approval. The background of the emergence of local AMC is that China's economic growth is decreasing, the proportion of non-performing assets of banks is increasing year by year, the disposal scale is intensified and the impact of financial deleveraging is superimposed. The local AMC is weaker than the four major amc in terms of capital strength and resource acquisition ability, but if we make good use of local resources, we can obtain resources and funds in the local market, which is also the result that regulators hope to see, and can gain competitive advantage in regional competition. the disadvantage is that the shareholder background, staffing and organizational structure of local AMC need to be run-in in a short period of time. Whether a competitive advantage can be achieved in a new field requires the concerted efforts of the company and its employees.
Bank AIC. In July 18, the Banco Insurance Regulatory Commission recently issued the measures for the Administration of Financial assets Investment companies (hereinafter referred to as the "measures"), which stipulates that banks can only carry out debt-to-equity swaps through financial asset investment companies, and negotiate independently the price of their claims acquired from banks. AIC is set up to deal with the non-performing assets of banks, especially the creditor's rights that need debt-to-equity swap. According to the "measures" AIC in the scope of fund raising and investment, compared with AMC, the purpose of AIC is the same, but the functions are different, the financial strength and the ability of access to resources are no less than those of AMC, because they belong to the same banking department, perhaps the ability to obtain resources is stronger, but based on the reasons of policy establishment, there will be the same problems as AMC in terms of disposal capacity.
Private disposal institutions. Private investment institutions are the most active participants in the market. The scale of funds and the ability to obtain resources are weaker than those of the big four and local AMC. However, based on its flexible organizational structure, keen market sense and long-term accumulation of primary and semi-market resources (in cooperation with licensees), relatively high-quality assets can be obtained. However, most of the private investment institutions only do a certain professional market, and the market buys and sells to earn the price difference, and the profit space is gradually shrinking, which is a great challenge to the private institutions. To judge the future, we need private institutions with industrial background, make use of industrial resources and influence, take non-performing assets as a channel to obtain upstream resources, really integrate into the industry, and enhance the value of assets in order to compete.
4.The way of disposal is more open and transparent.
In 2015, online platforms such as Taobao and JD.com went online to establish links with local courts, standardize the auction process, and establish online information display channels, which greatly improved the information transparency of the last link in the disposal of non-performing assets. It has caused a lot of pressure to the traditional offline auction institutions and bad disposal institutions, and it is no longer feasible to make money simply through information asymmetry. Profits, which make a difference by buying and selling assets, are also gradually being squeezed. In this case, it will clear a number of private institutions that do not have the real disposal capacity to make profits only by buying and selling information, but for professional investors with industrial background, there is a fairer environment to choose suitable targets. Non-performing assets gradually enter the 3.0 mode, that is, the integration of industrial background and assets.
Through the above analysis, the supply of non-performing assets will continue to increase in 2019, and market participants will face structural adjustment, superimposing the fairness and transparency of the online auction platform, so that investment institutions with real disposal capacity and industrial background can get a fairer bidding environment, which will probably stand out in the face of structural adjustment opportunities.
