Xinwang Bank Branch

  "China News Weekly" reporter / Su Jiede

  Issued in the 995th issue of China News Weekly on 2021.5.17

  Nearly 30 days have passed, and no company has participated in the equity auction of Xinwang Bank.

On April 15th, posted an equity auction information, Sichuan Xinwang Bank Co., Ltd. (hereinafter referred to as Xinwang Bank) held by Sichuan Juyang Enterprise Management Group Co., Ltd. (hereinafter referred to as Juyang Group)6 % Equity (about 180 million shares) will be auctioned on May 17.

  This equity auction originated from a financial leasing contract dispute between Juyang Group and Great Wall Guoxing Financial Leasing Co., Ltd.

The Urumqi City Railway Transportation Intermediate Court ordered the Juyang Group to perform the obligations of 532 million yuan in arrears, but the Juyang Group has not fulfilled all the obligations so far.

As early as 2018, the court seized a 6% stake in Xinwang Bank held by Juyang Group.

  The estimated price of the equity of Xinwang Bank held by Juyang Group is about 518 million yuan, and the starting price is 363 million yuan, which is about 70% of the estimated price.

As of May 7, no one has signed up and paid a deposit of 30 million yuan.

  Xinwang Bank is the third domestic private bank with an Internet background, and it has attracted market attention because of its pure online concept.

In 2014, financial reforms promoted the development of private banks to usher in the opening moment.

Two years later, Liu Yonghao, Lei Jun, and Cao Shiru jointly established Sichuan’s first private bank, Xinwang Bank, with their shareholding ratios of 30%, 29.5% and 15% respectively.

  However, according to regulatory requirements, the upper limit of the shareholding ratio of a single shareholder of a private bank is 30%.

This means that Xinwang Bank’s major shareholder Liu Yonghao’s New Hope Group and Lei Jun’s Xiaomi Group cannot take over these shares.

As a new generation of Internet banks, Xinwang Bank is experiencing growing pains.

Performance fell against the market

  "This auction is a matter for the shareholders themselves and is not related to Xinwang Bank, and it will not have an impact on the bank's operations." Xinwang Bank previously responded publicly.

  It is not an isolated case that bank equity with an Internet background is auctioned.

In April last year, the Ali judicial auction platform auctioned 2.24% of Jiangsu Suning Bank Co., Ltd. (hereinafter referred to as Suning Bank) held by Kangdexin. Kangdexin was forced to delist because of a financial fraud scandal that shocked the market last year.

In this auction, a total of 2 people signed up. After two rounds of bidding, Changxing County Yaoyue Enterprise Management Partnership acquired the shares for 95.6 million yuan, which was only 300,000 yuan higher than the starting price and 30% lower than the assessed price.

  "If the bank's equity can be relatively stable, the development will be relatively stable." Liu Xiaochun, vice president of the Shanghai New Finance Research Institute and former president of Zheshang Bank, told China News Weekly that the equity auction will visibly affect the bank's brand image.

  The first two major shareholders cannot enter the market, and other small shareholders may be restricted by funds and other issues that can hardly eat this part of the equity.

Dong Ximiao, the chief researcher of China Merchants Finance, believes that, especially at the moment, the minority shareholders of some private banks face greater difficulties themselves, and it is difficult for them to come up with a large amount of "real money" for capital increase and share expansion; although the majority shareholders are generally strong, There is a willingness to increase capital, but it is subject to the 30% upper limit of shareholding.

  Behind the unattended equity auction, what is difficult to conceal is the overall decline in the scale of assets and profitability of Xinwang Bank.

According to the announcement of Hongqi Chain, the third largest shareholder of Xinwang Bank, the total assets of Xinwang Bank at the end of last year were 40.561 billion yuan, a decrease of 8.14% from the beginning of the year.

In terms of operating performance, Xinwang Bank's annual revenue was 2.357 billion yuan, a year-on-year decrease of 12.09%; net profit was 706 million yuan, a year-on-year decrease of 37.69%.

  Both Internet banks, Weizhong Bank and Internet Merchant Bank, saw their performance rise sharply last year, and the revenue of the two banks increased by more than 30% year-on-year.

In terms of net profit, e-commerce banks increased slightly, and WeBank increased by more than 20% year-on-year.

  "The performance in the first quarter of this year will rise." Xinwang Bank responded to China News Weekly, saying that there were some pains in the transformation of the company.

The main business of Xinwang Bank previously was for the C-end (consumers). Last year, it began to deploy the B-end (merchants), and its business was sinking to small-scale individual merchants such as personal supermarkets.

  Deposits are the foundation of banks. Compared with the 17 private banks that have announced their performance, 5 banks have more than doubled their deposits, and the other 10 banks also have positive growth, but two banks, including Xinwang Bank, have experienced negative growth. This is a decrease of 20% year-on-year.

Xinwang Bank’s deposit growth rate has shown a roller coaster phenomenon. In 2019, Xinwang Bank’s deposits also nearly doubled year-on-year.

  Regarding the reasons for the decline in performance last year, the relevant person in charge of Xinwang Bank previously stated that it was mainly affected by the epidemic and strategic adjustments brought about by policy changes.

Xinwang Bank's previous main business direction was in the field of personal consumer credit. The epidemic has brought a certain impact on the willingness and repayment ability of long-tail people.

  "It stands to reason that the epidemic does not actually affect Internet business. To find the reasons for the decline in performance, it depends on its operating conditions in the previous year." Guo Dagang, former secretary-general of the Beijing Internet Finance Industry Association and independent researcher, told China News Weekly, At that time, Xinwang Bank relied on the deposit business of the online lending platform, and the financial statement data of assets and liabilities rose sharply.

  During the pre-opening period, Xinwang Bank made online loan deposit management a strategic business for the whole bank.

In 2016, the original China Banking Regulatory Commission issued the "Interim Measures for the Management of Business Activities of Online Lending Information Intermediaries", which kicked off the strict supervision of the P2P online lending industry. Online lending platforms need to select qualified banking financial institutions as lenders and borrowers to deposit funds. Management agency.

In 2018, the China Mutual Finance Association announced the depository whitelists of the first batch of 25 banks, and Xinwang Bank was selected.

Liu Bo, chief operating officer of Xinwang Bank, previously introduced that the team has contacted more than 200 online lending institutions and reached preliminary cooperation intentions with more than 100. The time for the depository system to be online can be shortened from two months, which is common in the industry, to one month.

  Judging from public information, Xinwang Bank is one of the banks with the most online loan deposit management.

According to Netdaily, an information agency in the online lending industry, Xinwang Bank’s depository fee billing method is divided into two parts, one is the system access fee of 200,000 yuan, and the other is the depository fee, which is charged at 0.05% of the transaction volume and guaranteed annually. 300,000 yuan, with a cap of 1.2 million yuan per year.

In addition, the withdrawal fee is charged annually, a lump-sum of 1 yuan.

  In addition, Internet banks such as Xinwang Bank can absorb deposits and inter-bank lending.

In contrast, Internet financial institutions generally hold consumer finance licenses, small loan licenses, third-party payment licenses, etc. Each license corresponds to one or several businesses, but they cannot legally absorb deposits and lack sources of funds.

  Businesses such as online loan deposit management have brought significant benefits to it.

In 2017, Xinwang Bank had a net loss of 169 million yuan, and its net profit in 2018 was 368 million yuan.

By 2019, Xinwang Bank achieved operating income of 2.681 billion yuan, a year-on-year increase of double; net profit of 1.133 billion yuan, a year-on-year increase of more than twice.

  However, with the tightening of mutual financial supervision and the continuous liquidation of P2P platforms, the above-mentioned business of Xinwang Bank has shrunk rapidly.

According to previous disclosures by the Internet Finance Association of China, Xinwang Bank’s fund deposit management online lending platform has been reduced to single digits.

In 2018, this number was 109.

  Xinwang Bank responded to China News Weekly that fund depository and other businesses accounted for a relatively large proportion of Xinwang Bank’s revenue, but did not disclose specific data. “In the past few years, Internet finance was supported. Xinwang Bank, as an enterprise (also You can earn this part of the money). In the past two years, the policy has been completely tightened, and companies must adjust their strategies in time to keep up with the pace of regulatory policies."

  "When an organization started, its rapid development covered up many problems." Guo Dagang believes that if there is no room for new business expansion at this stage, and the growth rate of performance declines, the problems accumulated in the development process of the previous two years will emerge.

Lost in "high interest rates"

  Only four years after its establishment, it was criticized by the regulatory authorities, and Xinwang Bank had a very unstable start.

  On March 18, 2021, the Consumer Protection Bureau of the China Banking and Insurance Regulatory Commission issued the "Notice on the Cases of Infringement of Consumers' Legitimate Rights and Interests by Xinwang Bank".

The report shows that since the fourth quarter of 2019, the regulatory system has received a significant increase in consumer complaints and reports on Xinwang Bank, and the number of complaints and reports on car loans ranks second among banking financial institutions.

  In November 2019, hundreds of police officers rushed into the Beijing branch of Meili Auto Finance and took away dozens of employees. The founder of the company, Liu Yannan, was also investigated by the police.

The media reported at the time that Liu Yannan was taken away by the police because the useful installment he founded was classified as a "1105" large-scale hacked internet routine loan project.

There are two major brands under Meili Finance, founded by Liu Yannan. Meili Auto Finance focuses on instalment loans for auto consumption, and Effective installment focuses on instalment loans for personal consumption.

In terms of shareholder composition, the major shareholder of Meili Auto Finance is New Hope Group, holding 16.3%; Liu Yannan ranks second, and JD Digital is also one of the shareholders.

  Senior executives were arrested, problems such as high-interest loans from Meili Auto Finance were exposed, and Xinwang Bank was also affected.

  The Bulletin of the China Banking and Insurance Regulatory Commission pointed out that Xinnet Bank’s business cooperation with an Internet auto consumption installment service platform violated consumer rights. There are three specific manifestations: First, Xinnet Bank’s pre-loan investigation is not due diligence.

Second, the collection management of Xinnet Bank is not in place.

There are problems such as lack of a corresponding management system for SMS collection and incomplete operating procedures for telephone collection.

Third, the business cooperation between Xinwang Bank and the Internet platform has pushed up consumer financing costs.

  The above-mentioned notice of the China Banking and Insurance Regulatory Commission further pointed out that the ratio of the platform fee or service fee charged by the Internet platform to the car financing amount by consumers is concentrated between 14% and 28%, and some rates reach more than 30%; The annual interest rate range of loans issued by the applicants is 7.7%~8.9%, with an average value of 8.49%.

The comprehensive financing costs borne by consumers, such as rates and interest rates, are significantly higher than the normal interest rates for auto consumer loans.

  Regarding the issues pointed out in the notice from the China Banking and Insurance Regulatory Commission, Xinwang Bank previously stated that the issues “concentrated on individual business channels at the beginning of our bank’s opening. In the past year or so, our bank has established a special rectification team based on the guidance of regulatory authorities. Self-examination and continuous rectification have been fully launched, and the rectification of major issues has made phased progress."

  Not only Xinwang Bank, WeBank also stepped on thunder.

The rise of long-term rental apartments around 2015. Five years later, the largest operator of long-term rental apartments, Eggshell Apartments, exploded. As the largest partner bank, Weizhong Bank generated about 1.4 billion yuan in bad debts, directly eroding the bank's profits.

  After the loan was released, it still faced the problem of being difficult to recover.

However, Xinwang Bank responded to China News Weekly that it lacked an effective method of dunning.

  "Risk assessment is not simply assessing the borrower's creditworthiness and willingness to repay. The important thing is that after passing the data assessment, the bank must come to a conclusion about how much money can only be loaned to him." Liu Xiaochun told China News Weekly , And more importantly, whether the bank can force the borrower to repay.

In Liu Xiaochun's view, relying on Tencent's WeBank and Alibaba's Internet Merchant Bank, it has the ability to "force borrowers to repay."

He said: “For example, the platform can close the borrower’s online store, which means that the borrower’s source of income is gone. Considering that his own online store cannot be closed, then within his ability, he will try his best to get the loan. Return it. So relatively speaking, the security is high. Other platforms have no choice but to violently collect."

  Zhang Huaqiao, chairman of the Hong Kong Manniu Investment Company, told China News Weekly that the essence of Taobao and Tmall’s loan risk control logic is store pledge loans, which is an important starting point.

However, banks without a grasping hand still account for the vast majority, which is a challenge for the entire industry.

Internet Banking "Dancing in Shackles"

  Starting with the establishment of WeBank in December 2014, private banks with Internet backgrounds have begun to explore the way in China. There are currently 9 banks, including WeBank, Internet Commercial Bank, Xinwang Bank, Suning Bank, and Zhongbang Banks, Zhongguancun Bank, Yealink Bank, Huatong Bank and Baixin Bank account for half of the entire number of private banks.

  These Internet banks generally face the contradiction and pressure of rapid expansion of loan scale and capital adequacy ratio approaching the red line.

There are two channels for banks to replenish capital. One is endogenous, which mainly includes annual retained earnings and some excess provisions; the other is exogenous, which mainly includes listing and financing, capital increase and share expansion, issuance of convertible bonds, and secondary Capital debt, etc.

  The industry generally believes that the offline storage capacity of Internet banks is very limited and cannot be compared with mainstream banks.

However, Xinwang Bank recently responded to China News Weekly: “Our bank’s endogenous capital has grown rapidly and has been well matched to its business development plan. As of April 30, 2021, our bank’s capital adequacy ratio is approximately 17.5. %, better than the industry level, and there is still a considerable distance from the regulatory requirements for supplementary capital."

  "Contradictions always exist. We are always dancing in shackles. In fact, the so-called traditional banks also feel that they are insufficient in capital and hope to supplement capital to expand their scale." Liu Xiaochun admitted frankly that many banks are obviously small and want to be fat. , Then you can only eat "hormones."

In his view, banks must absorb deposits if they want to lend. They can only raise interest rates a little bit.

But precisely because of this, it may cause banks to do high-risk businesses.

  "Risk is not necessarily zero to be the best. There must be a balance between risk and return. Therefore, bank lending is not the concept of maximizing returns and minimizing risks, but matching returns and risks." Guo Dagang believes that private banks With shareholders as the endorsement, the enterprise's anti-risk ability is the boundary of the bank's anti-risk ability.

  There are actually many restrictions on the composition of shareholders of private banks.

Last year’s two sessions, the All-China Federation of Industry and Commerce mentioned in its recommendations that “in practice, private banks face some invisible thresholds, such as equity ratios, shareholder attributes, and business qualifications. These restrictions are necessary in the early development of private banks, but in China The two-way opening of the financial industry to internal and external development today has reached the time window that needs to be adjusted with the times." The All-China Federation of Industry and Commerce recommends that, in accordance with the policy criteria for foreign-funded institutions investing in Chinese financial institutions, the same treatment should be given to private shareholders, and the holdings should be relaxed. The upper limit of share ratio.

  In addition, the emerging new loan models also test the risk resistance of private banks.

For example, a joint loan model in which several banks provide loans to a company has become popular in recent years.

WeBank has Micro Loans, Internet Merchant Banks has Internet Merchant Loans, and Xinwang Bank has Good People Loans.

  Yin Zhentao, director of the Financial Technology Research Office of the Institute of Finance of the Chinese Academy of Social Sciences, told China News Weekly that through the joint loan model, technology companies can infinitely increase leverage and rapidly expand the scale of joint loans under the condition of relatively small capital contributions.

He believes that Internet banks have become larger, but the risk of loans lies with commercial banks, and some more risky customers have entered the banking system.

In order to cope with the challenges posed by joint loans, in July last year, the China Banking and Insurance Regulatory Commission issued the Interim Measures for the Administration of Internet Loans by Commercial Banks, which set clear requirements for commercial banks to engage in Internet loans or jointly lend with other institutions.

Among them, the co-funding of loans with cooperative institutions, the proportion of capital contribution of the partner in a single loan shall not be less than 30%.

Yin Zhentao said that this regulation is intended to regulate in principle the risk-taking mechanism and business processes of both parties in capital contribution and joint loans, especially the core risk control cannot leave the bank, cannot be outsourced, etc.

  Committed to providing customized financial services to consumers and small and micro enterprises through Internet technology, this is the slogan put forward by many Internet banks or financial technologies when they were established.

However, there are many misunderstandings in the current inclusive finance under the banner of financial technology.

Liu Xiaochun introduced: “Assuming a person can pay back 500 yuan, but the bank borrows 600 yuan, then this 100 yuan is at risk. There is another situation where the borrower has only 500 yuan, and the bank has to lend him 1,000 yuan. This is not the case. The problem of high and low risks is a problem that should not be borrowed at all." He believes that many people now regard the second situation as inclusive finance and believe that this demand is also reasonable.

  “The so-called Internet banking, if it can be said that under the same regulatory rules, it can do better and more efficiently than banks that do not use financial technology, it means that the Internet platform banking mechanism is correct.” Liu Xiaochun believes: “The technology itself is not too good. The key to the great mystery is that the technology must conform to the laws of finance to have real effects."

  China News Weekly, Issue 17, 2021

Statement: The publication of the "China News Weekly" manuscript is authorized in writing