Banks Set to Remain Major Force in Chinese Consumer Finance

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China’s banks are retaining their clout in the country’s consumer finance market amidst intensifying competition from newly approved consumer finance firms.

Data from the Chinese central bank indicates that in 2018 consumer finance saw rapid growth, with the outstanding consumer finance balance growing by between 33 – 40% per month in the first half of the year, before easing to around 30% in the second half.

Li Wanfu (李万赋), an analyst from Rong360, said to Zhongxin Jingwei that as established players banks still enjoy a marked advantage when it comes to consumer finance in China.

Banks can avail themselves of ample funds from their huge deposit bases, with larger banks having several tens of, or even several hundred, million depositors, while their funding costs remain comparatively low, with deposit rates in China currently ranging at between 1.3 – 2.4%.

Chinese banks are also key players behind the several dozen consumer finance companies that have obtained licenses from central government regulators.

The China Banking and Insurance Regulatory Commission (CBIRC) has approved licenses for 26 consumer finance companies, while banks serve as shareholders for 19 of them, or 73% of the total.

The majority of these consumer finance companies have total assets of under five billion yuan, while only seven having total assets of over 10 billion yuan, which puts them roughly on par with a medium-sized rural commercial bank in China.

Earnings vary wildly amongst China’s newly established consumer finance players. In the first half of 2018 Zhaolian Consumer Finance (招联消费金融) saw net profits of 604 million yuan, while Mashang Consumer Finance (马上消费金融) came in second with net profits of 366 million yuan.

In sharp contrast Suning Finance and Jiexin Consumer Finance (捷信消费金融) both slunk into losses.

 

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