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Behind the third penalty of China Post Consumer Finance: asset quality was under pressure and performance declined significantly

China Post Consumer Finance was fined again.

Recently, the Guangdong branch of the People's Bank of China announced an administrative penalty decision. According to the content of the information publicity form, China Post Consumer Finance Co., Ltd. (hereinafter referred to as "China Post Consumer Finance") was fined 780,000 yuan for "violating the regulations on the handling of credit investigation objections".

At the same time, because Chen, who was the deputy general manager of the consumer finance risk management department of China Post at the time, was directly responsible for the above-mentioned violations of laws and regulations, he was fined 156,000 yuan. According to Bedo Finance, this is the third time that China Post Consumer Finance has been publicly punished.

Behind the third penalty of China Post Consumer Finance: asset quality was under pressure and performance declined significantly

Behind the continuous punishment is the double embarrassment of China Post Consumer Finance in terms of internal risk control and asset quality performance. Through the financial report, it is not difficult to see that the company is now experiencing a bottleneck period of development of reputation and performance, and whether it can restructure the momentum with the help of the issuance of financial bonds and the transfer of non-performing loans still needs to be observed by the market.

1. Frequent fines, or involving multiple violations of laws and regulations

After reviewing the "Regulations on the Administration of the Credit Reporting Industry" (hereinafter referred to as the "Regulations"), Beduo Finance learned that if the information subject believes that there are errors or omissions in the information collected, stored or provided by the credit reporting agency, it has the right to raise an objection to the credit reporting agency or the information provider and request correction.

and where credit reporting establishments or information providers receive objections, they shall make a note of the objections to the relevant information, and where upon verification it is confirmed that there are errors or omissions, they shall correct them; If it cannot be confirmed, it will be noted. In addition, the relevant agency is required to verify and process the objection within 20 days from the date of receipt of the objection.

Therefore, "violating the provisions on the handling of objections to credit reporting" and the failure of credit reporting establishments and basic financial credit information database operating bodies to verify and handle objection information in accordance with provisions; We will not correct any errors or omissions; Providing false or inaccurate credit information.

According to Articles 38 and 40 of the Regulations, institutions that violate the relevant regulations will be ordered to make corrections within a time limit and be fined not less than 50,000 yuan but not more than 500,000 yuan; The directly responsible managers and other directly responsible personnel are to be fined between 10,000 and 100,000 RMB; If there are illegal gains, the illegal gains will be confiscated.

Behind the third penalty of China Post Consumer Finance: asset quality was under pressure and performance declined significantly

Although the public information table does not further disclose the specific reasons for the punishment of China Post Consumer Finance, it can be seen that the company may have a number of violations of laws and regulations related to "violation of the provisions on the handling of credit investigation objections" in its daily operations.

China Post Consumer Finance responded to the outside world that it attaches great importance to this special law enforcement inspection of credit reporting, sincerely accepts punishment and supervision, conducts in-depth analysis of related issues, and has completed rectification work to eliminate the risks and hidden dangers of credit reporting compliance. The company stressed that in the future, it will strictly implement regulatory requirements, strengthen credit compliance control, and promote high-quality development.

In fact, this is not the first time that China Post Consumer Finance has been "named" by regulators in recent years, and it was fined 800,000 yuan by the former Guangdong Banking Regulatory Bureau in 2017 for engaging in unapproved or unfiled business activities in violation of regulations; In 2021, he was fined 500,000 yuan by the former Guangdong Banking and Insurance Regulatory Bureau for serious violations of the principle of prudent operation in post-loan management.

Just two months before receiving the fine, China Post Consumer Finance issued a "Sunshine Credit" service commitment, proposing 14 prohibitions to employees, including: prohibiting forging or fabricating personal credit reports and review and approval opinions to obstruct inspections; It is not allowed to tamper with, illegally store and use, disclose, sell, or intentionally damage the information of credit customers.

Behind the third penalty of China Post Consumer Finance: asset quality was under pressure and performance declined significantly

On the one hand, there is the commitment of "Sunshine Credit" for integrity and compliance, and on the other hand, there are frequent risk control loopholes for fines. It is not difficult to see that the effectiveness of the compliance control of China Post Consumer Finance still needs to be strengthened.

Second, the assets are up, and the performance indicators are down

According to public information, China Post Consumer Finance was established in November 2015 and was jointly initiated by 7 companies including Postal Savings Bank and DBS Bank, with an initial registered capital of 1 billion yuan and a capital increase of 3 billion yuan in 2018. Among them, the Postal Savings Bank is the main sponsor and major shareholder of China Post Consumer Finance, holding 70.50% of the shares.

At present, the main business of China Post Consumer Finance is to issue consumer loans to consumers with small amounts and scattered characteristics, with "Post You Loan" as the core, including revolving loans, quick loans, owner loans, postal loans and other sub-products, users can apply for loans through the China Post Wallet APP to meet different lending needs.

After years of development, the total assets of China Post Consumer Finance have reached the level of 10 billion yuan, and the total assets by the end of 2023 have exceeded 50 billion yuan, a year-on-year increase of 17.83% to 58.222 billion yuan, of which the loan balance is 59.236 billion yuan, a year-on-year increase of 19.96%; The total liabilities were 52.313 billion yuan, a year-on-year increase of 18.45%.

Behind the third penalty of China Post Consumer Finance: asset quality was under pressure and performance declined significantly

According to the rating report of United Credit, the operating income of China Post Consumer Finance increased from 5.686 billion yuan in 2021 to 6.048 billion yuan in 2022. After entering 2023, China Post Consumer Finance achieved an operating income of 6.952 billion yuan, a year-on-year increase of 17.83%, ranking 6th in the licensed consumer finance industry.

In contrast, the profitability of China Post Consumer Finance is less stable. After achieving a net profit of 1.229 billion yuan in 2021, the company's profit level fell to 443 million yuan in the following year, and although the net profit in 2023 rebounded by 15.81% to 522 million yuan, it has not yet recovered to the level of two years ago.

Behind the third penalty of China Post Consumer Finance: asset quality was under pressure and performance declined significantly

Bedo Finance found that the ability of China Post Consumer Finance to use existing assets to create income has also declined significantly, with the average return on assets plummeting from 3.13% in 2021 to 0.97% in 2023; The average return on equity also fell from 27.99% in 2021 to 9.24% in 2023.

Behind the third penalty of China Post Consumer Finance: asset quality was under pressure and performance declined significantly

Going back further, the revenue growth rates of China Post Consumer Finance from 2018 to 2020 were 227.73%, 78.23% and 30.50% respectively; The profit growth rate was 199%, 71.92% and 15.49% respectively. In other words, while the total asset curve is rising, the growth rate of many of the company's performance indicators has continued to decline.

In addition, the capital adequacy of China Post Consumer Finance also continued to decline, with capital adequacy ratios of 11.54%, 10.51% and 10.94% at the end of 2021, 2022 and 2023, respectively, and Tier 1 capital adequacy ratios and core Tier 1 capital adequacy ratios of 10.56%, 9.54% and 9.56%, respectively.

Behind the third penalty of China Post Consumer Finance: asset quality was under pressure and performance declined significantly

Under the pressure of capital replenishment, China Post Consumer Finance issued the first phase of financial bonds in 2024 on July 29, with a basic issuance scale of 1.5 billion yuan and an excess issuance scale of no more than 500 million yuan. The company said the proceeds will be used to replenish medium- and long-term funding, as well as other purposes permitted by regulators.

Third, the non-performing assets are high, and the asset quality is under pressure

It should be noted that although China Post Consumer Finance is based on "inclusive finance", its loan interest rate is not low. According to the joint credit report, as of the end of 2023, the company's interest rate levels are distributed in 5%-10%, 10%-15%, 15%-20% and loans above 20%, accounting for 5.05%, 8.46%, 18.05% and 68.32%, respectively.

On the complaint platform, many consumers also complained about the high interest rate of China Post Consumer Finance, saying that they colluded with black-hearted intermediaries to issue "cut interest" and "routine loans". In addition, according to the search results of the judgment document network, there are as many as 50,592 documents related to the keyword "China Post Consumer Finance", most of which are related to loans, interest, contracts, and liquidated damages.

Behind the third penalty of China Post Consumer Finance: asset quality was under pressure and performance declined significantly

After reviewing the judgments of some financial loan contract disputes, Beduo Finance learned that the interest rate of most loans of China Post Consumer Finance is 23.76% per annum, which is close to the legal protection red line of 24%. At the beginning of this year, a judgment from the Nanhu District People's Court in Jiaxing City, Zhejiang Province, pointed out that the company's penalty interest was significantly high.

According to a judgment, the borrower Yang Moumou signed a credit contract for the "Post You Loan-Non-Revolving" offline personal consumption loan with China Post Consumer Finance in June 2022, with a loan amount of 171,000 yuan, an annual interest rate of 23.76% (calculated using the simple interest method), and 36 loan periods.

Since Yang Moumou began to be overdue in January 2023, according to the penalty interest rate of 1.5 times the loan interest rate, China Post Consumer Finance required Yang Moumou to repay the outstanding loan principal of 150,262.68 yuan, interest of 19,432.71 yuan, and penalty interest of 4,225.56 yuan as of July 24, 2023.

However, the court held that the total interest and penalty interest of 23,658.27 yuan claimed by China Post Consumer Finance was obviously high, and the calculation standard had exceeded the annual interest rate of 24%, so the court adjusted it at its discretion to calculate it based on the principal of the outstanding loan and the upper limit of the annual interest rate of 24%.

High interest rates have exacerbated the uncertainty of repayment, and the asset quality of China Post Consumer Finance has also continued to come under pressure. From 2021 to the end of 2023, the overdue loans of China Post Consumer Finance were 1.990 billion yuan, 2.502 billion yuan, and 3.465 billion yuan, respectively, and the non-performing loans were 1.023 billion yuan, 1.514 billion yuan, and 1.870 billion yuan, respectively.

At the same time, the non-performing loan ratio of China Post Consumer Finance also increased by 0.09 percentage points from 3.07% at the end of 2022 to 3.16%, which is at a high level in the industry. You must know that the company has continued to work the write-off of non-performing assets in recent years, and the non-performing asset ratio once dropped from 3.33% in 2019 to below 3%, and now there are signs of rearing.

Behind the third penalty of China Post Consumer Finance: asset quality was under pressure and performance declined significantly

In the author's opinion, if China Post Consumer Finance wants to solve the "burden" of non-performing assets from the root, it still needs to build its own firewall to prevent and resolve financial risks.

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