From "Scale Race" to "Stable Operations": Financing Leasing Plans Diverse Layout
Since 2024, with the issuance of additional government bonds and the implementation of monetary policy, the positive factors in economic operations have been increasing, and the effects of measures to stabilize growth have become apparent, leading to an overall upward development trend in the leasing industry.
By synthesizing financial data from several financial leasing companies and financial statements of financing leasing companies, it has been observed that the past fervor of top leasing companies competing for the growth rate of asset scale has subsided. In the first half of 2024, the asset scale of financial leasing companies and financing leasing companies has increased and decreased, but leasing companies have placed more emphasis on the diversified expansion of their business in order to achieve their own transformation and upgrading.
The competition for asset scale has receded.
"If in the past we considered how to expand and strengthen the asset scale, now we are thinking about how to occupy emerging industries and accelerate business layout," said a person in charge of a manufacturer's financing leasing company.
As 2024 enters its final quarter, the management of several financial leasing companies and financing leasing companies are considering how to seize new industry tracks.
In recent interviews, the reporter noticed that with the tightening of regulation and changes in the market, for financial leasing companies and financing leasing companies with a scale of hundreds of billions, the increase in asset scale is no longer consistent.
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The "China Leasing Industry Development Report CL100-2024" released by the Leasing Industry Working Committee of the China Association of Enterprises with Foreign Investment shows that among 106 sample companies, there are 21 leasing companies with a scale of hundreds of billions. Among them, the total asset scale of four companies, including Guoyin Financial Leasing Co., Ltd. (hereinafter referred to as "Guoyin Leasing"), Ping An International Financial Leasing Co., Ltd., Shanghai United Financial Leasing Co., Ltd., and Jiangsu Financial Leasing Co., Ltd., has increased by more than 10% compared to the beginning of the year, while the total asset scale of three companies, including Everbright Financial Leasing Co., Ltd. and Haitong Hengxin International Financial Leasing Co., Ltd. (hereinafter referred to as "Haitong Hengxin Leasing"), has decreased compared to the beginning of the year.
In addition, among the 61 leasing companies with a total asset scale of 10 billion to 100 billion yuan, the total asset scale of 42 companies has increased to varying degrees compared to the beginning of the year, while the total asset scale of 19 companies has decreased compared to the beginning of the year. Among the 24 financing leasing companies with a total asset scale of less than 10 billion yuan, the total asset scale of 16 companies has increased to varying degrees compared to the beginning of the year, while the total asset scale of 8 companies has decreased compared to the beginning of the year.
Regarding the reasons for the increase in the asset scale of some financial leasing companies and financing leasing companies, a person in charge of a leasing company in Jiangsu told the reporter that the increase in the total asset scale is mainly due to the expansion of the company's financing leasing asset scale. The increase in asset scale indicates that the company has strong business development capabilities and can attract more customers and funds.
Regarding the reasons for the decline in the asset scale of some financial leasing companies and financing leasing companies, the United Credit Research Report believes that under the adjustment of industrial structure and the overall credit adjustment of the market in recent years, the problem of asset quality of financial leasing companies has gradually emerged, and efforts should be increased to prevent risks and improve the level of leasing asset management.Regarding the differences in asset scale, Zhang Huan, a researcher at the Leasing Industry Working Committee of the China Association of Enterprises with Foreign Investment, told reporters that in the first half of 2024, against the backdrop of the domestic and international economic environment and stricter regulatory policies, although some financing leasing companies withdrew from the market, the leasing industry as a whole still showed an upward development trend, with a slowdown in growth rate. Large financing leasing companies, with diversified business layouts and continuous deepening of service efficiency to the real economy, have performed well in terms of performance, and their asset growth rate has remained in a stable range. With increasing market competition pressure, small and micro financing leasing companies continue to carry out business innovation, improve asset quality and risk control capabilities, and their overall asset scale has increased steadily.
In addition, the "2024 First Quarter China Leasing Industry Development Report" released by the Leasing United Research Institute shows that the number of leasing companies nationwide has remained basically stable. As of the end of March 2024, the total number of financing leasing companies nationwide (excluding single project companies, branches, SPV companies, and companies acquired overseas, including some companies listed as out of contact or abnormally operating in some regions) is about 8791, a decrease of 60 from the end of 2023, with a financing leasing contract balance of 5.62 trillion yuan, a decrease of 25 billion yuan from the end of 2023, a decrease of 0.44%.
In terms of bond issuance, in the first half of 2024, the total scale of bonds issued by financing leasing companies was 406.53 billion yuan, with a total of 116 issuing entities. Among non-structured financing products, the scale of bonds with a main rating of AAA accounted for a high proportion, at 91.05%; in terms of issuance varieties, the scale of ultra-short-term financing bills accounted for the highest proportion.
In terms of issuance interest rates and spreads, in the first half of 2024, the spreads and coupon rates of non-structured bonds issued by leasing companies showed a downward trend compared to the same period last year. Looking at the nature of leasing companies, in the first half of 2024, financial leasing companies issued 31 three-year corporate bonds, with most issuing entities at the AAA level, and their issuance interest rates and spreads were lower than most of the same level of commercial leasing companies.
Gong Chen, a researcher in the financial institution department of New Century Rating, believes that this reflects a certain difference in the recognition of commercial leasing companies with the same AAA-level main ratings by investors.
Diversified layout
The reporter noticed that under the situation where the asset scale of financing leasing companies has receded, the industry is more inclined to diversify business layouts.
The person in charge of the aforementioned Jiangsu Financial Leasing Company told the reporter that the company focuses on serving small and micro enterprises in the market positioning, and meets the financing needs of different customers through various business models such as direct leasing, sale and leaseback, and manufacturer leasing.
"The company continued to deepen this market positioning in the first half of 2024, expanded the network of cooperative manufacturers and dealers, and enhanced the service ability for end customers. In the first half of the year, the proportion of financing leasing balances in the company's clean energy, high-end equipment, transportation, and other sectors continued to grow, showing that the company's market positioning in these fields has been effectively implemented and recognized by the market. By establishing cooperative relationships with more than 3,000 manufacturers and dealers, we further consolidated our position in the small and micro enterprise market. In addition, the company continued to increase investment in strategic emerging industries such as new energy, intelligent manufacturing, and modern agriculture in the first half of the year."
The reporter found in the interview that some financial leasing companies still have unclear business directions.In response to this, the head of the asset management department of a bank-affiliated financial leasing company suggests that financial leasing companies can become learning models and channels for leverage for financial leasing companies, especially those affiliated with banks. Some specialized financial leasing companies have been developing in a market-oriented manner for many years, with flexible mechanisms and many advanced models in industrial operations and lease management.
"In addition, it is about establishing cooperation with equipment manufacturers to deeply carry out direct leasing and operational leasing of equipment. The partners are not limited to manufacturing enterprises; equipment dealers, EPC contractors, and system integrators can all serve as cooperative organizations for the manufacturer leasing model. Partners can bring batch and continuous business to them according to the risk control standards of financial leasing companies," said the head.
It is worth noting that from a policy perspective, the introduction of multiple policies is also guiding the industry direction and institutional business layout. Gong Chen believes that since 2023, regulatory authorities have issued a series of policy documents, proposing requirements for the corporate governance, leasing business direction, leasing structure, and leasing objects of financial leasing companies. Policies related to commercial financial leasing propose to support the development of green leasing, equipment leasing, aircraft leasing, and other businesses, and involve guiding financial leasing companies to return to their origins, operate compliantly, and strengthen risk control.
According to publicly disclosed information from financial leasing companies, Guoyin Financial Leasing, Haitong Hengxin Leasing, and 11 other financial leasing companies achieved a total of over 190 billion yuan in leasing business deployment in the first half of 2024; overall, green energy, high-end equipment, transportation logistics, and inclusive finance are the main business directions of the aforementioned companies.
Furthermore, the financial "five major articles" have also become the main direction for the leasing industry to expand its business. According to the "China Financial Leasing Industry Development Report (2024)" (hereinafter referred to as the "Report") released by the China Banking Association, financial leasing companies focus on doing well in the "five major articles" of technology finance, green finance, inclusive finance, elderly care finance, and digital finance, playing an important role in promoting the construction of a financial powerhouse.
According to the "Report", in 2023, financial leasing companies added 145.251 billion yuan, 571.233 billion yuan, and 123.368 billion yuan in technology finance, green finance, and inclusive finance, respectively, with a compound annual growth rate of 43.40%, 75.47%, and 32.20% in the past three years. They have played an important role in cultivating new quality productive forces, promoting sustainable development of the industry, and improving the accessibility of financial services; they have accelerated digital transformation, with an annual investment in transformation funds exceeding 1 billion yuan, optimizing business processes, improving customer experience, and continuously improving service quality; they have actively expanded elderly care finance, with increasing investment and asset balances in related fields year by year, and the scope of business continues to expand.
The "Report" also calls for optimizing the leasing business structure of financial leasing companies, reasonably controlling the growth rate of business and leverage level, strengthening the limit management of post-sale leaseback business in new business, and clarifying that the proportion of post-sale leaseback business in new business in 2024 should be reduced by 15 percentage points compared to the first three quarters of 2023, striving to achieve the regulatory requirements by 2026, with the proportion of new direct lease business not less than 50%.