China Huarong Asset Management has released long-delayed performance results for 2020, indicating that it sustained major losses last year during the peak of COVID-19 pandemic yet managed to turn a profit in the first half of 2021.
In 2020 Huarong’s net losses were 106.274 billion yuan, while net losses attributable to company shareholders were 102.903 billion yuan for a YoY decline of 7324.3%, according to performance results released on 28 August.
Huarong’s operating revenues were 101.732 billion yuan in 2020, for a decline of 7.5% compared to 2019.
Huarong said that in 2020 fair value changes and attendant reductions in asset value during the COVID-19 pandemic had an “extremely heavy impact” on its operating performance.
In the first half of 2021 however Huarong managed to turn a profit, with net profits attributable to company shareholders of 158 million yuan, for a YoY decline of 24.6%. The annualised average return on equity was 1.7%, and the annualised average return on assets was 0.2%.
Huarong’s total revenues in the first half were 46.063 billion yuan, for a YoY rise of 0.8%, while its total expenditures were 40.902 billion yuan, for a YoY decline of 0.4%. Net profits were 1.624 billion yuan, for a YoY rise of 105.0%.
Huarong said that its non-performing asset operations are the core business for the company, and the main source of both revenues and profits. In the first half of 2021 total revenues from non-performing asset operations were 27.046 billion yuan, for a YoY decline of 3.5%, while pre-tax profits were 5.767 billion yuan, for a YoY decline of 24.1%.
Financial services revenues increased 0.9% in the first half to reach 16.744 billion yuan, while asset management and investment revenues increased 6.6% to reach 4.84 billion yuan.
As of the end to the first half Huarong’s total assets were 1.605617 trillion yuan, for a decline of 2.2% compared to the end of last year.
Total liabilities were 1.539864 trillion yuan, for a decline of 2.4%, while total equity was 65.753 billion yuan, for an increase of 2.3%, and total equity attributable to company shareholders was 19.212 billion yuan, for an increase of 5.8%. The asset-liability ratio fell from 96.1% to 95.9%.
Huarong said that it would dispense with noncore business subsidiaries in the “near future” to increase internally generated fund inflows, as well as shore up capital levels.
Earlier in the year Huarong announced on 31 March that it was delaying the release of its performance results for 2020, on the grounds that auditors needed more time and information to scrutinise a “relevant transaction.” The announcement led to the suspension of Huarong’s shares from trading in Hong Kong on the same date.
On 18 August Huarong warned investors of massive losses in 2019, due to credit impairments in part related to the disposal fo risky assets linked to disgraced former chairman Lai Xiaomin.
Huarong was first established by the Chinese government at the turn of the century, and is China’s biggest manager of distressed debt. It’s also the third largest issuer of bonds on the international market amongst Chinese financial institutions.