Consumer finance companies post mixed performances in H1
First-half results were mixed for the 11 licensed consumer finance companies which have posted their half-year financial reports so far.
Profitability in the sector will face growing pressure as the costs of finding new customers and raising capital keep increasing, industry insiders said.
Merchants Union Consumer Finance Co, a wholly owned subsidiary of China Merchants Bank and China Unicom, made 4.6 billion yuan (US$640 million) in the first half, up 51.5 percent year on year. Its net profit grew by 17.5 percent to reach 710 million yuan.
That was followed by Industrial Consumer Finance Co with a profit of 442 million yuan, and Mashang Consumer Finance Co, which earned 301 million yuan from January to June.
Bank of Beijing Consumer Finance and Jincheng Consumer Finance, both established in 2009 among the first four consumer finance companies, did less well. They reported profits of 30 million yuan and 80 million respectively.
A relatively new entrant to the sector, Hunan Changyin 58 Consumer Finance, incorporated in 2017, registered an operating income of 199 million yuan and a net loss of 43 million yuan.
Competition in the sector is intense and traditional consumer finance firms will face great challenges as commercial banks and Internet giants gain advantages in the lucrative market, said analysts.
On the other hand, factors like the rising cost of customer and capital acquisition, as well as demand for risk management, will continue to weigh on all market participants.
Mashang Consumer Finance said on Wednesday that it would seek a fourth round of fundraising, reduce its loan interest rates and fees for customers and devote more to technological research and development.
Zhao Guoqing, founder and CEO of the firm, said he plans to introduce one or two new financial institutions, probably banks, as shareholders, to enhance liquidity management and risk resistance. The company has also charged less interests and fees to make financial services more accessible to the general public. By the end of June, the rates have been lowered by 7.1 percentage points compared with a year ago.
Consumer credit companies are licensed by the China Banking and Insurance Regulatory Commission. The country now has 24 such companies, most backed by banks. The government has supported the sector as part of its policy of “inclusive finance” and its goal of driving economic growth through domestic consumption.