Stocks are based on the research report of Golden Unicorn analysts, authoritative, professional, timely and comprehensive, to help you tap potential thematic opportunities!
China Huarong lost 100 billion yuan and plans to introduce CITIC Group, China Insurance Investment,China Life Insurance, Cinda and other battles
Author Finance Mayflower
According to the analysis of close traders, in the context of the current economic transformation and upgrading and stricter supervision, the market for non-performing asset management is in great demand, and the industry has entered a boom cycle. This is a factor that investors value this time.
By Chen Hongjie, reporter of Caijing
Edit | Yuan Man
It was postponed for nearly half a year. On the evening of August 18, 2021, China Huarong finally issued a profit warning for 2020: According to preliminary calculations, its 2020 operating results are expected to experience a loss, and the net loss attributable to the company’s shareholders is expected to be 102.903 billion yuan. .
Picture source/China Huarong official website
Companies that dispose of non-performing assets have become high-risk companies and need to introduce strategic investors to resolve them. Another announcement by China Huarong shows that on August 18, 2021, China Huarong has signed investment framework agreements with CITIC Group, China Insurance Investment, China Life, China Cinda, and Sino-Ocean Capital Holdings. Rongxin made a strategic investment in China Huarong by issuing shares.
Estimated loss of 100 billion yuan
In 2019, China Huarong’s net profit attributable to shareholders was 1.424 billion yuan. Why is China Huarong expected to lose 102.903 billion yuan in just one year?
A spokesperson for China Huarong said that in 2020, following the trial and judgment of the former chairman Lai Xiaomin’s bribery, corruption, and bigamy cases, China Huarong will continue to clean up and dispose of risky assets caused by radical operations and disorderly expansion during his tenure. At the same time, due to the market impact caused by the new crown epidemic, the ability of some customers to fulfill contracts has declined, and the quality of some assets has accelerated in the current period. In this regard, a comprehensive review, evaluation and impairment test of risky assets was carried out, and credit impairment losses and fair value changes losses were confirmed in the current period, which had a very significant impact on business performance.
One is to conduct an impairment test on the centralized disposal of stock risk assets. On the basis of the integration of overseas business in 2019, Huarong Overseas Chinese Asset Management Co., Ltd. (“Huarong Overseas Chinese”) integrated part of the stock assets of branches and subsidiaries within China Huarong Group for centralized management and disposal. China Huarong completed the approval of the project for the equity transfer of Huarong Huaqiao and issued an announcement on the potential sale on April 8, 2020. However, by the end of 2020, the transfer could not be implemented as planned. Huarong Overseas Chinese conducted a comprehensive review and evaluation of centralized management assets, and accrued credit impairment losses and losses from changes in fair value.
The second is to prudently assess the credit impairment loss for the current asset risk. The rapid growth of acquisitions and restructuring projects and fixed income projects from 2015 to 2017 will intensively expire in 2020. The historical reasons for the formation of assets are intertwined with the current market impact. Superimposed on the severe impact of the new crown epidemic and market “thunderstorms” incidents, the ability of customers to perform contracts has been greatly affected, and the quality of related assets is also under pressure compared with the previous period. After a comprehensive review and assessment of risks, credit impairment losses have been accrued.
Third, the risks of some subsidiaries have impacted the group’s operating performance. The underlying asset risk exposure of the asset management plan of the relevant financial service subsidiary accelerated. The risk assets of some subsidiaries in the asset management and investment segment have deteriorated. After a comprehensive review and assessment of risks, this part of the subsidiaries has accrued credit impairment losses and losses from changes in fair value.
What is the current operating status of China Huarong? Does it have the ability to sustainably operate? A spokesperson for China Huarong said that operations are currently normal and various businesses are developing steadily. In addition, in accordance with the established development strategy, we will continue to promote risk reduction, accelerate the transformation of the main business, and accelerate the tackling of existing risks. Improve corporate governance, strengthen internal risk control mechanisms, and strengthen endogenous development momentum.
China Huarong’s corporate bonds due in the future have been pulling the heartstrings of investors. April 7, 2021CICCAccording to the research report, the balance of outstanding domestic and overseas bonds of Huarong and its subsidiaries totaled more than 350 billion yuan. Its domestic bond issuers include China Huarong, Huarong Xiangjiang Bank, Huarong Securities, Huarong Financial Leasing, Huarong Rongde, and Huarong Industrial.
China Huarong responded by saying that it is closely monitoring market liquidity conditions, strictly conducting risk monitoring and control, maintaining normal and stable capital exchanges with financial institutions, sufficient liquidity, domestic and foreign bonds are redeemed on schedule, and liquidity risks are controllable.
“From April 1 to August 18, 2021, China Huarong and its subsidiaries have fully redeemed a total of 94 domestic and overseas bonds as scheduled, with a total amount of 63.344 billion yuan. At the same time, the company’s current capital status is good. Proper arrangements and adequate preparations have been made for the redemption of bonds due in the future.” China Huarong said.
Introduce CITIC Group, China Insurance Investment,
China Life, Cinda and other strategic investments
On the evening of August 18, 2021, another important signal issued by China Huarong is that it is advancing the introduction of strategic investment. It plans to introduce multiple investors to increase the capital of China Huarong through the issuance of new shares, which only involves capital restructuring. There are no plans for debt restructuring.
According to the agreement, China Huarong signed investment framework agreements with CITIC Group, China Insurance Investment, China Life, China Cinda, and Sino-Ocean Capital. The above-mentioned institutions intend to make strategic investments in China Huarong by subscribing to the newly issued shares of China Huarong.
However, the aforementioned framework agreement is not a binding formal share subscription document. The work related to the introduction of strategic investment is in progress. After the relevant transactions are confirmed, China Huarong will make timely announcements in accordance with the information disclosure rules. According to a reporter from Caijing, investors are still conducting due diligence on Huarong.
According to the analysis of close traders, in the context of the current economic transformation and upgrading and stricter supervision, the market for non-performing asset management is in great demand, and the industry has entered a boom cycle. This group of investors should value it. China Huarong has also accumulated a lot of industry experience, project resources, and customer resources in the field of non-performing asset management.
China Huarong’s main business is the disposal of non-performing assets. However, in recent years, it has developed into a large financial holding group. In addition to insurance, it has everything else, including banking, securities, trust, financial leasing, investment, futures, consumer finance, etc.
Regarding the post-war development, China Huarong stated that it will base itself on the functional positioning of financial asset management companies, insist on returning to main responsibilities and main businesses, accelerate business transformation, serve the needs of national development strategies, and use “investment + investment banking” means to vigorously expand Substantial issues corporate restructuring, actively carrying out the divestiture of state-owned enterprises’ main and subsidiary businesses, rescue of large-scale entities, urban renewal, acquisition of defaulted bonds, bankruptcy reorganization, and risk disposal of high-risk small and medium-sized financial institutions.
Massive information, accurate interpretation, all in Sina Finance APP
Editor in charge: Yang Hongbu
.