“A trillion-dollar blue ocean market is being activated.” said an asset management practitioner.

Securities Times reporters learned from a number of joint-stock banks that after the China Banking and Insurance Regulatory Commission officially issued the "Notice on Carrying out the Pilot Work on the Transfer of Non-performing Loans" (hereinafter referred to as the "Notice"), banks are actively promoting the implementation of the notice. Among them, the credit card department is the most active. Industry insiders revealed that many banks have begun to package non-performing personal loans, and the market size is expected to reach tens of billions soon. "In the long run, reaching a scale of trillions is not a problem."

The notice shows that the first batch of banks participating in the pilot include 6 major banks and 12 joint-stock banks, and the pilot institutions participating in the acquisition of non-performing assets include 4 financial asset management companies (AMC), qualified local AMCs and 5 banks are financial asset investment companies (AICs).

Some industry insiders revealed that at present, several national AMCs are not very willing to take over the non-performing asset package of personal loans, and their attitude is relatively passive. “On the one hand, they do not lack this business; on the other hand, they themselves There is not much experience in dealing with non-performing personal loans.” The person speculated that this may be one of the reasons why the regulatory authorities have further relaxed the acquisition restrictions of local AMCs.

How big is the market size?

The Securities Times reporter learned that in recent years, the scale of bank personal loan business has grown rapidly. According to the 2019 annual report data, the total personal loans of the six state-owned banks are approximately 27.9 trillion yuan, accounting for 10% of the total loan balance. More than 40%.

Housing mortgage loans, which are not included in the pilot this time, have always been the bulk of bank personal loans. However, due to the low non-performing rate of housing mortgage loans and the relatively high non-performing ratio of credit card and other personal loans, banks' non-performing housing mortgage loans, non-performing credit card loans and other non-performing personal loans basically present a "three equal" structure.

According to Wind data statistics, as of the end of 2019, except for the Industrial and Commercial Bank of China, which has not disclosed the detailed structure of personal non-performing loans, the balance of personal non-performing loans of the other five major state-owned banks exceeded 130 billion yuan. Among them, the non-performing housing mortgage loans The balance exceeds 45 billion yuan, accounting for about 35%; the balance of credit card receivables reaches 38 billion yuan, accounting for nearly 30%.

Last year, the domestic economy was affected by the COVID-19 epidemic, and bank asset quality was under pressure. The non-performing rate of personal loans increased, and the non-performing rate of credit card loans increased most significantly. Although the non-performing credit card ratio has begun to reach an inflection point in the third quarter, banks' demand for the disposal of personal credit non-performing assets has still increased significantly.

Securities Times reporters learned from a number of joint-stock banks that banks are actively promoting the implementation of the "Notice", especially the credit card department. Industry insiders revealed that many banks have begun to package non-performing personal loans, and the market size is expected to reach tens of billions soon. In the long run, reaching a scale of trillions is not a problem.

Some institutions are still waiting and watching

From the supply side of banks, there is no doubt that there is a need to promote the pilot, and the size of the asset package that can be provided is also considerable. However, from the acquisition side, the enthusiasm of various AMCs participating in the pilot is somewhat divided.

A person from a major state-owned bank said that the bank’s existing demand for the transfer of personal loan non-performing asset packages is already very large, and the incremental demand is still increasing. However, to complete the disposal of the asset package, the transferee needs to have Sufficient capacity to undertake. "In particular, personal loan assets are special. If the transferee does not handle them well, it will affect the bank's reputation."

Judging from the current market situation, there is a certain supply and demand in the bank's non-performing asset package transfer market as a whole. Due to the mismatch problem, not many institutions have been included in the pilot batch transfer of personal loans this time. Zhang Feifan, co-founder of Yanghai Assets, revealed that the AMCs currently participating in the pilot are highly motivated and have low enthusiasm. “In some places, AMCs are highly motivated and optimistic about this market opportunity. There are also many institutions who feel that the non-performing business of personal loans is dirty and hard work.” , tiring work, worried about thankless efforts and reputational risks, so I still stay on the sidelines."

In addition, a non-performing asset practitioner also pointed out that there are still many questions about the valuation and disposal of batch transfers of non-performing personal loans.

According to reports, the pricing method of personal credit non-performing asset packages mainly uses statistical models and extracts historical data for valuation, but this method requires complete financial data and complex and scientific algorithm models. The person joked that most valuations and pricing in the current market are based on "slapping one's head."

In the disposal process, this "Notice" stipulates that AMCs that receive personal loans in batches must form their own collection teams, establish a personal information protection system, and are not allowed to transfer them twice. The above-mentioned person said that it will be difficult to rely on the judicial system to deal with personal credit bad debts in the short term, and there may not be many qualified institutions that can complete the collection of personal loans under the above requirements.

“This is a long-term mechanism and system construction, not necessarily something that has short-term results.” Wang Yifeng, chief financial analyst at Everbright Securities, pointed out that this pilot is to provide banks with richer and more Flexible means of disposal of non-performing assets, but it is difficult to say how much impact it will have on banks in relieving the pressure on non-performing assets within this year. "Of course, at this stage, exploring non-performing disposal methods other than liquidation will be conducive to accelerating the liquidation of risks in the banking system."

Official notice of "one collection and one release"

This official document has been in the works for nearly half a year. In June 2020, the China Banking and Insurance Regulatory Commission issued a draft to the industry for comments, planning to liberalize the transfer of single-household corporate loans and the batch transfer of personal non-performing loans. Compared with the consultation draft, the official notification document has the following two changes:

First, the scope of personal non-performing loans included in the batch transfer pilot has been narrowed. The "housing mortgage loans and automobile consumption loans" mentioned in the consultation draft have been excluded from the pilot scope. This notice only mentions "personal consumption credit loans, credit card overdrafts, and personal business credit loans" and points out that "personal housing mortgage loans" Loans, personal consumption mortgage (pledge) loans, personal business mortgage loans and other personal loans with clear collateral (pledge) shall be mainly collected by the bank itself, and in principle shall not be included in the scope of external batch transfer."

Second, restrictions on local AMCs participating in acquisitions have been relaxed. The notice pointed out that local asset management companies can transfer single-family non-performing corporate loans from banks within their own provinces (autonomous regions and municipalities directly under the Central Government), and batch transfer of personal non-performing loans has been changed from being limited to the jurisdiction of the province to not subject to geographical restrictions.

“Personal loan non-performing loans are characterized by small amounts and large quantities, which require banks to spend a lot of manpower, material resources and time on post-loan preservation. This has always been a long-standing problem for banks, and it is also urgent this time. We hope that the batch transfer of non-performing personal loans will be implemented. "Zhang Feifan said that in comparison, the current disposal process for personal loans with collateral is relatively complete, the judicial authorities are highly cooperative, and it is less difficult for banks to handle.

Wang Yifeng also pointed out that banks with collateral for non-performing loans are less willing to transfer them. They mainly focus on self-collection and have relatively little demand for transfers.

“In addition, mortgages such as housing have strong territorial characteristics, and it is difficult for acquirers such as local AMCs to deal with such assets across regions.” Wang Yifeng added that the notice issued this time The document relaxes the participation conditions of local AMCs to a certain extent. It also reflects that the regulatory authorities hope to introduce more new institutions and new entities to this market to participate in non-performing disposal under the current background that the overall need is to resolve risks on a larger scale.

Some practitioners also revealed that “the four major AMCs are not very willing to take over the non-performing asset package of personal loans, and their attitude is relatively passive. On the one hand, they do not lack this business, and on the other hand, the four major AMCs themselves I don’t have much experience in dealing with non-performing loans.” The person speculated that this may be one of the reasons why regulatory authorities have further relaxed restrictions on local AMC acquisitions.