Credit Card Balance Transfer has risen rapidly in recent years as the number of domestic credit card issuance increases, and is entering a full harvest period.
Since 2018, Samoye Kinsuit, another credit card subsidiary, has officially submitted its prospectus to the NYSE, following the entry into the capital market of the credit card eco-exhibition platforms such as Victor Kinsey, 51 Credit Card, and Win-win Technology.
Compared with many of the above-mentioned peers, the high-quality customer base, low rates and unsecured light assets model is Samoye Kim's core business highlights in the prospectus disclosure. In the prospectus, CEO Lin Jianming of Samoye Golden Garment describes the logic of this model as a virtuous circle of "attracting high-quality users at low rates, generating high-quality assets, attracting low-risk assets to continue attracting low-cost funds, and low-cost funds to continue supporting low-rate" assets.
However, due to its distinct business characteristics, credit card compensation has more stringent requirements for capital costs and fine wind control. Especially under the increasingly crowded ecological track and the pressure of profit, whether these bright spots can support the future capital market remains to be seen.
Low interest rate leads to profit bottleneck
Samoye gold clothing was established in May 2015 and completed the C round of financing in early 2017. Compared with the previous listed companies, Samoye's gold clothing is smaller and has just realized losses. According to the prospectus, the company's net operating income was 240 million yuan in 2017, an increase of 353.5 percent over the same period last year; by the first half of 2018, its net operating income was 230 million yuan, which is close to the full-year income of last year. While net revenue grew sharply, Samoye Golden Garment also crossed the break-even point with a net profit of $25.61 million in the first half of 2018.
Besides the expansion of net revenue, the change of product structure is also worthy of attention. According to the prospectus, Samoa Golden Clothes consists of three major sectors: credit card installments, cash advances and credit loans. Among them, the credit card staging business "save" is its core product, APR (weighted average annual interest rate) is 10.04% - 24%, the latter two business APR are 15.58% - 24.00% and 24.00% - 36.00% respectively.
According to Oliver Wyman, China's personal credit market balance is estimated to be about 42.3 trillion yuan by 2017, and is expected to increase to 71.8 trillion yuan by 2022. Among them, the credit card loan market is expected to maintain a compound annual growth rate of 25%. Among all kinds of credit card repayment channels, service providers (lending institutions, etc.) have the greatest potential, reaching a compound annual growth rate of 55%.
It is noteworthy that, although the absolute value of credit card installment business continued to rise, in 2017 and the first half of 2008, this kind of business accounted for the total business of Samoye Kinswear from 74.7% to 42.1%, shrinking significantly. According to the prospectus, by the end of June 2018, the outstanding principal balances of the three major businesses of the platform were 2.23 billion yuan, 1.06 billion yuan and 2.2 billion yuan, respectively. The proportion of large cash loans has rapidly risen.
A credit card compensation practitioner told China Business News that the decline in the proportion of credit card compensation business may be related to two factors, the platform as a whole business revenue rose, the denominator became larger. In addition, the average transaction amount of the new large credit loan business is 2.6 times the average transaction amount of the credit card installment, which also dilutes a considerable share. Reporters noted that according to the prospectus, the current large credit loan business qualifications of the crowd accounted for 33.9% of the total credit customers.
But the profit bottleneck caused by low interest rates is also worth noting. A credit card compensation business platform told reporters that the key to the establishment of credit card compensation business model is closely related to three factors: capital costs, fine wind control and product viscosity, in which the cost of capital is the premise, the key to market competition lies in interest rates and quotas, which is also directly reflected in the structure of business products. Change.
Unlike the small-win technology just listed, Samoye Kinsuit locates the lending agency, only docking institutional funds, which also makes it more competitive in the cost of capital. Reporters consulted the prospectus found that between 2016 Q4 and 2017 Q4, the direct guarantee mode of the cost of funds from 9.6% to 8.2% year-on-year. In the first half of 2018, the cost of capital under the unsecured model rose to 12.9% as institutions took on risks.
But roughly, the overall profit ceiling is limited when compared with the current average APR of 18.25% for Samoye Kinsuit, which is based on combined costs such as operating services. The industry consensus is that most of the credit card compensation business mainly undertakes the drainage purpose, can not sustain the profitability demand, after the completion of the phased task of attracting high-quality users, product structure changes, increase the loan quota is inevitable.
Yin Zhentao, deputy director of the Research Institute of Financial Law and Financial Supervision of the Chinese Academy of Social Sciences, told reporters that overseas listings have no hard requirements for profits and pay more attention to growth. From the business process point of view, the flow of lending institutions to obtain quick results, coupled with the docking of large-scale funds, easy to quickly scale up, faster than the listing cycle of a simple online lending platform. But this kind of business profit is indeed a bottleneck, so diversified development is an inevitable choice. "Whether it is diversion or technology export cooperation, are involved in the sharing of complex interests, but also to a certain extent to dilute profits."
In the prospectus, Samoye Kim also said, "The goal is to continue to optimize my portfolio of credit services by increasing the proportion of eligible cash advances and credit loans to customers, so as to improve my profitability."
However, the change of product structure has obviously raised higher requirements for fineness of wind control. According to the prospectus, as of 2016, December 31, 2017, and June 30, 2018, the M3 + overdue rates of credit card compensation and cash advances of Samoye Kim Suit were 0.42%, 0.82% and 1.66% respectively, while the write-off rates within the same range were 0.04%, 1.23% and 2.66%, indicating that the risk of bad debt continued to rise. In addition, Samoye gold service did not disclose the bad debt data of credit loan category separately.
The reality of "light" lending is still being explored.
Another highlight of Samoye Kinsuit's prospectus is its vigorous promotion of the "de-guaranteed" and "de-pocketed" light asset model since 188.
For a long time ago, lenders were usually the first party responsible for credit losses, taking the risk of overdue, or even repurchasing overdue assets. Most lenders opened margin accounts in banks. This model is very popular in the market because it allows financial institutions to collect interest margins almost exclusively as capital channels.
An important background for this change is the promulgation of "No. 141" at the end of last year, requiring financial technology-oriented lending institutions to be isolated from "wind control outsourcing" and "risk pocket bottom" and other forbidden zones, which directly led to the lending institutions exhibition mode has been greatly adjusted.
According to the prospectus, Samoye Kinsuit is funded mainly by commercial banks (42.3%), consumer finance companies (35.6%), trust companies (15.4%) and microfinance companies (6.8%). In the guaranteeing model of the bottom of the loan institutions, Samoye gold clothing usually pays such fees as risk margin, credit guarantee or credit guarantee insurance, and guarantee fees. After the de-guaranteed model, Samoyagin charges financial institutions a fee for loan-matching services without assuming the credit risk of the transaction.
Data show that the proportion of guaranteed transactions reached 84.3% in 2017, but by the first half of 2018, about 56.2% of transactions had been completed on the basis of de-guaranteed transactions. In June 2018, the proportion of matching transactions based on this model has risen to 71%.
This also led to an increase in the cost of capital, which rose to 12.9% in the first half of 2018 by pushing risk costs away from the unsecured model to institutions.
The traditional lending model needs to add margin to the banking institutions, which leads to a heavier business model. Light lending is a business trend recognized by the market. The typical product of this model is micro-lending, which is charged by precise customers with strong wind-control capability, and the risk of loans is borne by banks.
However, this model obviously requires higher asset quality, the willingness and ideas of financial institutions are also in the process of transformation, large-scale de-guaranteeing is still being explored, so some alternative guarantees are also used. Reporters noted that the two quarter of 2017 began, Samoye gold clothing began to introduce trust funds. In the first half of 2017 and the first half of 2018, 28.7% and 20.2% of the funds came from trust loans respectively. In the trust loan model, Samoye Kinshu and the trust company set up a trust program, the trust company to lend to borrowers, but Samoye Kinshu provides funds to subscribe for inferior assets. Reporters noted that although the model is different from the pocket of direct guarantees, but in the prospectus, Samoye Kim also classified this part of the business as a "guaranteed model".
It is worth noting that Samoye's gold service recorded the overdue trust scheme as loan receivable. The prospectus shows that, by the end of 2017 and the first half of 2018, loans receivable (deducting loan loss provision) amounted to $1.21 billion and $1.05 billion respectively, while the provision loss (Loan Loss Provision) amounted to $15 million and $40.1 million.
In addition, Samoye Golden Clothing Direct Guarantee business mainly through the affiliated company Hunan Huixin Investment Guarantee Co., Ltd. undertakes, industrial and commercial data show that the company is currently paid-in capital of 100 million yuan. Samoye also acknowledges that the leverage limit on financing guarantees should not exceed 10 times of its net assets, with a maximum of 15 times under certain conditions, and does not rule out future capital increases for the company.
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