2020年度中國不良資產市場報告

1、Contents.Notice to ReadersChapter 1: Market UpdateNPL Balance in China Commercial Banks5Chapter 2: Overview of Recent NPL Transactions5NPL Bid & Transaction Trend5Breakdown of NPL Transaction Volume by MarketDistribution of NPL Bid & Transaction VolumeChapter 3: Overview of Online NPL AuctionsChapte

2、r 4: Overview of Online Collateral Judicial Auction10 Overall Auction Summary12 Auctions by Asset Type14 Judicial Auction Overview in Zhejiang & Guangdong Province16 Sponsoring OrganisationsMarket Report in China NPL Market 2020A publication from:This Report, undertaken jointly by Zheshang Asset Res

3、earch Institute and Pepper Group (China), provides readers with a better scope to understand the dynamics and recent activities within Chinas NPL market. It has released its first edition since August 2020 and will be published on a quarter basis to focus on current government regulations and polici

4、es, recent industry activities, insight into primary and secondary market of NPL transactions, and online judicial auction market.CHINA NPL MARKET REPORTLi ChuanquanDeputy General Manager of Zheshang AMC CSO of Zheshang AMCDean of Zheshang Asset Research InstituteKaren ChenCEO of Pepper ChinaCo-Head

5、 Principal Investments Asia Pepper Group“Looking forward, there may be a boom in both supply and demand of NPL market”CHINA NPL MARKET REPORTChina Plans to Let Banks Sell Sourced Personal Loans to Ease RisksThe China Banking and Insurance Commission (CBIRC) has launched trials “Notice Concerning the

6、 Undertaking of Non-performing Loan Transfer Trial Work” on January 12, 2021, to accelerate the disposal of personal non- performing loans (NPLs), and states that NPLs for the trial would include:Single Corporate NPL;Bulk personal NPLs (confined to personal consumer credit loans, credit card overdra

7、fts, and personal business credit loans; Excluding the personal mortgage and vehicle loans)Under the trials Chinese banks will be permitted to transfer above NPLs to five national asset management companies (AMC) and regional AMCs, and regional AMCs will be permitted to accept corporate NPLs from ba

8、nks within the same provincial jurisdiction, although no reginal restrictions will apply to the bulk acceptance of personal NPLs. The first group of participants in the trials will include the big six state-owned banks and 12 joint-stock banks that operate in China on a nationwide basis, as well as

9、national AMCs and qualified regional AMCs.Comments: The move will beef up financial strength at Chinese banks by helping them offload as much as RMB 1 trillion (US$155 billion) of personal NPLs. The policy will benefit retail banks particularly, as it offers a market- oriented option for banks to ge

10、t rid of the risks and to trim their size of bad loans.Currently, banks often write off such loans when they have gone bad. They can also issue asset-backed securities backed by sourced personal loans, though banks still need to be responsible for debt collecting.Chinas Fifth National AMC Officially

11、 LaunchedChina Galaxy AMC has been approved by CBIRC on December 17, 2020 as Chinas fifth national AMC, with capitalization of RMB 10 billion (US$1.5 billion). China Galaxy AMC is headquartered in Beijing, with China Galaxy Financial Holdings and Central China Huijin Investment being the biggest sha

12、reholders.China has given the green light for the first national AMC to be established in more than 20 years. The task has taken on added urgency as Chinas financial system must brace for a record wave of bond defaults and slumping corporate earnings, as the coronavirus pandemic weighs on consumptio

13、n and crimps economic growth.Comments: According to the regulator, China Galaxy AMC is authorised to buy and invest in non-performing assets of financial institutions, as well as to carry out bankruptcy restructuring and management. The fifth national AMC will provide a respite to Chinas financial i

14、nstitutions, which have been under pressure from rising defaults and potential policy tightening.China Galaxy AMCs establishment also represents a milestone in China NPL market and signals further diversification of market players at the national level, combined with more regional AMCs, financial as

15、set investment companies (AIC) and foreign companies like Oaktree Capital obtaining the asset management license, China NPL market is further opening to both domestic and foreign market participants, which will lead to greater competition, more innovation and better quality of service.Chinas Persona

16、l Bankruptcy Regulation“The Personal Bankruptcy Regulation of Shenzhen Special Economic Zone” was enacted on August 31, 2020 and will come into effect on March 1, 2021. This is Chinas first regulation on personal bankruptcy, even though it is only applicable in Shenzhen.The Regulation has a total of

17、 173 articles, which aims to(1) regulate the personal bankruptcy procedures; (2) balance the relationship between debtors, creditors, and other interested parties; and (3) help creditable debtors to regenerate financially.Previously, China had only the Enterprise Bankruptcy Law applicable to the who

18、le country, but there was no enactment of personal bankruptcy law. Therefore, the law was dubbed as “half bankruptcy law” by Chinese scholars. Now, the Regulation has filled in the other half, at least in Shenzhen.Comments: The regulations protect those honest debtors who unfortunately run into fina

19、ncial trouble. Those who intend to take advantage of the loopholes to.doge their debt liabilities will find that their intentions will not be realized. Instead, they will receive severe publishments. As following, Zhejiang province is also said formally to explore the personal bankruptcy system in D

20、ecember 2020.China Promotes Piloting of NPL Cross- border TransferThe State Administration of Foreign Exchange (SAFE) has launched a pilot project for NPL cross-border transfer in Beijing in October 2020, allowing the Beijing Financial Assets Exchange to carry out cross-border transfer of NPLs to su

21、pport the development of the real economy. According to the Beijing Development Guide for Foreign Asset Management Institutions, Beijing willexplore the use of qualified trading platform to carry out piloting for the NPL cross-border transfer.Besides, Guangdong province and Zhejiang province are als

22、o exploring piloting measures for NPL cross- border transfer.Comments: The pilot of NPL cross-border transfer in Beijing is not the first one. In 2017, the Shenzhen Branch of SAFE was launching related pilot measures for NPL cross-border transfer. In recent years, foreign investors have shown great

23、interest in the domestic NPL market. With the gradual liberalization of policies, especially after the China-US trade agreement, foreign investment in NPL industry has gradually increased.CHINA NPL MARKET REPORTExhibit 1-1 NPL Balance in China Commercial Banks16171819201.6%0.5-1.7%1.01.8%2.01.51.9%2

24、.52.0%3.0NPL Ratio %NPL BalanceBalance (RMB trillion)Source: China Banking and Insurance Regulatory CommissionChinese banks saw the size of the bad loans shrinking at the end of 2020 comparing to previous quarters as businesses recovery from the pandemic gathered steam. As of the end of 2020, the NP

25、L balance of China commercial banks was RMB 2.7 trillion (US$ 416 billion) for a decrease of RMB 134 billion during the last quarter, and the NPL ratio of Chinese commercial banks was 1.84%, for a decrease of 12 bps compared to the end of the preceding quarter.The NPL ratio of China commercial banks

26、 was also declined slightly in 2020 compared with the end of 2019, while the NPL balance was still on the rise. According to banks data disclosed, the watch-list 1 loans were declined in both the scale and proportion, and gradually migrated to three last categories, indicating more adequate exposure

27、 of NPLs. Since the provision of commercial banks is also kept at a reasonable level, it is believed that overall quality of bank assets might remain stable. It is expected that in 2021 the NPL ratio of commercial banks will remain stable, the upward trend of NPL balances will continue, and commerci

28、al banks will keep intensifying NPL disposals.In 2020, the expiration of the Peoples Bank of China (PBOC) s loan repayment extension to small and medium-sized enterprises (SMEs) hurt by the pandemic outbreak will foreseeably increase NPL supply. According to PBOCsCHINA NPL MARKET REPORTarrangement,

29、the policy of temporarily deferring loan repayment for SMEs will end by March 31, 2021, involving total loan amount at least RMB 4.7 trillion. Although it seems that the situation of banks NPL balance is relatively severe, regulators have conducted stress tests and prepared contingency plans accordi

30、ngly, and as AMCs and investors are fully prepared, we believe that the tidal wave of NPL investment on the horizon will provide both great returns for market participants and downward protection for Chinas economics.Besides, although at present commercial banks are still the most important supplier

31、s of NPLs, the channels for obtaining NPLs are becoming increasingly diversified. In additional to bank NPLs, there are also distressed assets of trust companies, financial leasing companies, investment guarantee companies, and other non-bank financial institutions.Exhibit 1-2 Provincial NPL Balance

32、 (RMB billion) and Ratios by end of 20208171111137121519631049141612518Looking forward, there may be a boom in both supply and demand side of NPL market. In supply side, liquidity support and the expiration of credit extension will inevitably produce a large number of NPLs and require greater dispos

33、al effort under central governments view toward stable and neutral monetary policy. In demand side, recently the markets attention to the NPL market has been increasing, and both domestic and foreign investors have been prepared as the investment return in China is relatively higher than in other co

34、untries at present. Besides, there is also room for value mining and improvement of NPLs as China is expected to maintain a medium-to-high economic growth rate until 2035.Shandong (1)Gansu (2)149199Jiangsu (3)144Zhejiang (4)140Guangdong (5)127Sichuan (6)121Hebei (7)Jilin (8)70120Hunan (9)67Shanghai

35、(10)66Beijing (11)63Guangxi (12)63Shanxi (13)60Jiangxi (14)Henan (15)Guizhou (16)Xinjiang (17)Hainan (18)Xizang (19)52434231142Total NPL Ratio (%) in Commercial Banking Industry | 2020 3%2%-3%1%-2% 10050 10010 50 1092632620158671018512,4017,591NPL Size (OPB) (RMB mn)For size (OPB) distribution of on

36、line NPL auction cases, about 70% of both bidding and transaction cases are of size below RMB 10 million, from which we can see that the small-size NPLs are the main assets sold in online platform, and targeting to those local individual buyers and small-scale institutional buyers. As for large-size

37、 NPLs of size above RMB 100 million, there are 926 bidding cases and 326 transaction cases, among the bidding cases the largest one is of RMB3.67 billion, while among the transaction cases the largest one is of RMB 3.29 billion.Source: Public Information, Zheshang Asset Research Institute“Collateral

38、 1 auctions are correlated to the underlying performance of the real estate market, especially for commercial and industrial collateral. Resumed real estate performance in late 2020 has driven a higher volume of auctioned collaterals and a higher realization level for judicial auctions”O(jiān)verall Judic

39、ial Auction SummaryThe following data for collateral auctions covers all auction records, including 1st auction cases, 2nd auction cases and sale-off cases. The number of 1st auctions reflects the actual number of auctioned assets (in other words, the assets in 2nd auction and sale-off stage have fa

40、iled in their corresponding 1st auction) and the change of number of 1st auctions represents the actual change in the size of the online collateral auction market. Moreover, the proportion of 1st auctions to the total number of auctions reflects the liquidity of the online auction market in a positi

41、ve correlation.In 2020, there was a total of 516,701 auction cases of collateral (Real Estate) nationwide across all major online auction platforms, which was 2.4% more year-on-year. Exhibit 4-1 below illustrates that the total number of auctions in 2020 only decreased year-on-year in the eight prov

42、inces of Zhejiang, Guangdong, Jiangsu, Fujian, Shandong, Beijing, Shanghai, and Tianjin while it increased in the other provinces and province-level municipalities 2.Exhibit 4-1 No. of Collateral Online Auctions in Main provinces and the yoy changes %60,00050,00040,00030,000(6.3%) (7.1%)(29.4%)(10.8

43、%)17.5%13.9%11.7%36.3%5.8%15.6%20,00010,0000(13.6%)6.8%0.1%(2.7%) (21.1%) (5.7%) Exhibit 4-2 No. of Collateral 1st Online Auctions in Main provinces and the yoy changes %2019202030,00025,00020,00015,00010,0005,00004.8%(30.3%)(6.2%) (7.3%)(13.4%)(9.7%)13.2%2.1%10.2%(1.2%)10.7%30.6%0.8%(8.6%) (13.8%)

44、(9.1%) 20192020Source: Main online auction platforms, Zheshang Asset Research InstituteCHINA NPL MARKET REPORTNote 1: Not only collateral, but some seized properties of NPL will also be listed and auctioned in online judicial auction platform. Hereafter collectively called “collateral” for better de

45、scription;Note 2: A province-level municipality, formally a municipality under the direct administration of central government, is the highest level of classification for cities used by the Peoples Republic of China, currently including Beijing, Tianjin, Chongqing and Shanghai.Page | 10CHINA NPL MAR

46、KET REPORTIn 2020, there was a total of 300,496 1st auction cases of collateral (Real Estate) nationwide on major online platforms, a year-on-year slightly decrease of 0.1%. The number of 1st auctions accounted for 58.2% of the total number of auctions, a year-on-year decrease of 1.4% compared with

47、2019. In terms of different provinces as Exhibit 4-2 above, the number of 1st auctions in 2020 in Anhui, Hunan, Jiangxi, Guangxi, Sichuan, and Chongqing increased year-on- year, while the number for the remaining 10 provinces and province-level municipalities all decreased year-on-year.As demonstrat

48、ed in Exhibit 4-3 chart, all province-level municipalities excluding Guangdong, Fujian, Shandong, and Shanghai, have seen the proportion of 1st auctions to total auctions decrease, which indicates that except Guangdong, Fujian, Shandong, and Shanghai, the market liquidity of judicial auctions all de

49、clined in other 12 provinces and province-level municipalities. Among the 16 provinces and cities, Sichuan, Guangdong, and Jiangsu have the largest market scale, and Zhejiang, Shanghai, and Beijing have the best market liquidity, primarily due to the relatively strong performance of local real estat

50、e, and the robust market demand.Exhibit 4-3 Proportion of No. of 1st Auctions to No. of all Auctions %6.3%0.1%(0.5%)0.7%(2.8%)(0.7%)(2.5%)(2.1%)(2.5%)(2.1%)(4.2%)(2.0%)(0.1%) 0.2%(6.2%)(1.0%)80%75%70%65%60%55%50%20192020Source: Main online auction platforms, Zheshang Asset Research InstitutePage | 1

51、1Judicial Auctions by Asset TypeExhibit 4-4 Residential Collateral Auction discount rate & conversion rate % in state level100.0%95.0%90.0%85.0%80.0%75.0%70.0%Discount rate of starting price Discount rate of transaction price45.0%40.0%35.0%30.0%25.0%20.0%Auction conversion rateNote: the discount rat

52、e is the starting price or transaction price to the collateral valuation price, and the conversion rate is the # of successful auction cases to all auction cases 1Source: Main online auction platforms, Zheshang Asset Research InstituteIn 2020, the price of residential collateral auction transactions

53、 has seen an upward trend, at an overall higher level than 2019, at the same time, the gap between the transaction price relative to the starting price is in an increasing trend, indicating that the residential assets auction premiums are expanding.The conversion rate of residential assets has exhib

54、ited volatility in 2020, and lower than that of 2019.Exhibit 4-5 Commercial Collateral Auction discount rate & conversion rate % in state level95.0%22.0%90.0%20.0%85.0%80.0%18.0%75.0%16.0%70.0%14.0%65.0%60.0%12.0%10.0%Discount rate of starting price Discount rate of transaction priceAuction conversi

55、on rateSource: Main online auction platforms, Zheshang Asset Research InstituteIn 2020, the price was showing a downward trend for commercial assets auctions, where the average level was slightly lower than 2019, and the price premium is shrinking relative to the starting price and the discount rate

56、 of transaction price was even lower than the discount rate of initial bid. The conversion rate fluctuated and in a downward trend, at an overall lower level than 2019.CHINA NPL MARKET REPORTNote 1: As the 1st auction, 2nd auction and sale-off cases of the same collateral are not linked to each othe

57、r in online auction platforms and cannot be identified, the conversion rate of the collaterals sold in the 2nd auction or sale-off stage is not 100%, which leads the overall level of conversion rate here lower than the actual situation in the market.Page | 12Exhibit 4-6 Industrial Collateral Auction

58、 discount rate & conversion rate % in state level100.0%95.0%90.0%85.0%80.0%75.0%70.0%65.0%45.0%40.0%35.0%30.0%25.0%20.0%15.0%10.0%Discount rate of starting priceDiscount rate of transaction priceAuction conversion rateSource: Main online auction platforms, Zheshang Asset Research InstituteIn terms o

59、f auction prices, the overall discount rate of transaction price for industrial collateral auctions fluctuated in 2020, but the average level was higher than in 2019. At the same time, the premium of the transaction price relative to the starting price was quite large and still expanding. The conver

60、sion rate fluctuated and slightly lower than 2019.Recovery levels for collateral auctions of residential and industrial real estate at around 35% are comparatively better than those for commercial real estate which features conversion levels below 20% in recent years, because residential and industr