零售融资模式的转型.docx

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1、Equity ResearchAsia Pacific | ChinaCredit Suisse屈:p硕4叫砂机后忖&科曹110%7肝ice returnTrfenefnrmQtinn from ainrlorll mrtH&f nEI W I I I I UA LI、， I I w I I I J I W LU4I I I V I I W I I I W Ia D Lexino 营 70% u 2| 9Fg v 50%.叩Dai2 -g 30% -S 4YRD决 10% Diversified Fftmcials | Initi市iuft0%20%40%60%YTD share price

2、changeNote: 9F represents post-1 PO share price return. Closing prices as of 8 Oct, 2019. Source: Company dataBracing for an intensifying P2P clean-up. We see two fundamental conflicts at the core of the P2P model: (1) risk appetite mismatch between investors and borrowers, and (2) high regulatory c

3、ost vs small systemic impact. We expect accelerated P2P platform clean-up headinginto 4(X with continued roll-outof high regulatory hurdles while thetriple-reductions7 (i.e., reduction in the number of platforms, outstanding balance, and number of investors) remain in force for an extended period of

4、 timelikely through 1H 2020. A majority (98%) of the currently 708 operating platforms is likely shut down during this process. Picking the best-positioned players in transforming towards institutional funding.With limited licensing options available for now, loan facilitation (orassisted lending) m

5、odel is the most viable exit strategy for existing P2Ps. Despite a generally negative impact on take rate (higher funding cost and potentially lower APR) and operating margin (higher sales & marketing expense), a faster progress in transformation towardsthe loan facilitation model will be a key diff

6、erentiation in loan origination volume growth. In this report, we identify three areas of the online lending business most valued by the licensed financial institutions: (1) customers, (2) asset quality, and (3) regulatory compliance. Lexin and Qudian rankamong the best-positioned for transforming t

7、owards a 2B model. Yiren Digital ranks last. We adjust the WACC to reflect higher exposure to P2P-related regulatory uncertainty. Stock Calls-prefer Lexin and Qudian. We initiate coverage on Lexin with OUTPERFORM (TP of US$17,00) and 9F with NEUTRAL (TP at US$11.62). Maintain OUTPERFORM on Qudian (T

8、P US$11.70) and VCredit (TP HK$13.00). We assume coverage on PPDai with OUTPERFORM (TP cut to US$5.80 from US$8.80). We also assume coverage on Yiren Digital with NEUTRAL (TP cut to US$6.92 from US$20). We prefer (1) Lexin for long-term sustainability, thanks to a focused and differentiated customer

9、 base and effective risk control, and (2) Qudian for relative defensiveness of its evolving business model amid the regulatory uncertainty. One key risk is the sustainability of institutional partnership. We believe the on-boarding cycle of 3-6 months reduces banks willingness to abruptly terminate.

10、 Online lenders with stronger risk control should enjoy better funding sustainability than peers.Research AnalystsYiran Zhong852 2101 6125Charles Zhou, CFA852 2101 6177Richie Jiang852 2101 6198Ashley Dai852 2101 6102DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALY

11、ST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectiv

12、ity of this report. Investors should consider this report as only a single factor in making theirFigure 12: Comparison between consumer finance license and traditional (non-online) micro-credit licenseFigure 13: Leverage comparison between major listed online lending platformsFigure 13: Leverage com

13、parison between major listed online lending platformsSource: Company data, Credit Suisse estimatesConsumer financeTraditional micro-creditBusiness scope- Individual consumer loan- Deposit from domestic subsidiaries/shareholders- Borrowing from domestic financial institutions- Issuance of financial b

14、onds- Access to interbank funding- Advisory/agency business related to consumer finance- Insurance agency business for consumer finance related products- Fixed income securities investment- Other businesses approved by the CBIRC-Micro-loan business-Other businesses approvedRegulatory requirementRegu

15、latory bodyCBIRCLocal municipal bureau of financeMinimum registered capitalRmb300 mnRmb5 mn for limited liability companyRmblO mn for joint-stock limited companyLeveragelOxl-3xShareholderMajor shareholder at least 30% shareholdingFinancial institutions:- At least 5 years of consumer finance experien

16、ce- Assets of at least Rmb60 bn at latest financial year-end- Profit making for latest two consecutive financial years- Cannot transfer shares in five yearsNon-financial institutions:- Operating revenue of at least Rmb30 bn in latest financial year- Net assets at least 30% of total assets- Profit ma

17、king for latest two consecutive financial years- Cannot transfer shares in five yearsSingle shareholder at most 10% shareholdingMaximum loan sizeRmb200k5% of net capitalOther requirements- Interbank borrowing up to 100% of net capital- Asset loss reserve adequacy ratio at least 100%- Investment bala

18、nce at most 20% of net capital- Interbank borrowing up to 50% of net capital- Asset loss reserve adequacy ratio at least 100%- Interest floor is 0.9 times the base interest rate published by the PBOCExisting playersNo. of players277,967 (at Mar-2019)Outstanding loan balance (Rmb bn)237 (at Dec-2018,

19、 for Top 4 players)927.2 (at Mar-2019)Source: Company data, Credit Suisse estimatesWe expect better business sustainability, stronger growth outlook, and higherearnings visibility for the platforms that are better positionedinobtaininginstitutionalfunding.Loan facilitation: The most viable exit stra

20、tegyThe transformation towards the assisted-lending model has become a key differentiator in listed online lenders7 loan origination volume growth, as it has been largely tolerated by regulators while P2P funding entered into zero/negative growth during triple-reductions over the past year. As shown

21、 in the figures below, Qudian (100% institutional funded), VCredit (100%), and Lexin (78%) are progressing well ahead of peers in sourcing institutional funding partners. They also enjoy relatively stronger loan volume growth vs peers YTD. We expect better business sustainability, stronger growth ou

22、tlook, and higher earnings visibility for the platforms that are better positioned in obtaining institutional funding.Figure 14: Rising % of loan origination volume funded by institutional partners*Data for VCredit uses 1H19 and 2H18. Source: Company data, Credit Suisse estimatesFigure 15: .is the p

23、rimary driver of total volume growth for P2P platfomis duringtriple-reductions*Data for VCredit uses 1H19 and 2H18. Source: Company data, Credit Suisse estimatesThe loan facilitation (or assisted lending) model involves online lenders facilitating loans for licensed financial institutions, including

24、 banks, consumer finance companies and trusts. This directly addresses the two mismatches we identified in a P2P model above, i.e., replacing retail investors with institutions for which (1) managing risk is a core-business, and (2) business that is strictly regulated.The online lender provides some

25、 form of guarantee to the funding FIs (typically 5-10%). The guarantee service is typically provided by third-party financing guarantee companies or the online lenders own licensed guarantee company. In many cases, the online lenders provide back-to-back guarantees for external guarantee companies.S

26、WOT analysis for loan facilitation by online lendersThus far, the partnering institutions include banks (mostly city commercial banks and internet banks), consumer finance companies and trusts. Chinese banks have been expanding swiftly into retail over the past few years, driven by NIM pressure amid

27、 interest rate liberalisation and NPL pressure from corporate loans. Some regional banks have also used partnerships with internet banks/fintech companies to circumvent their geographic restriction. Below we provide a SWOT analysis for the loan facilitation model as compared to their institutional p

28、artners:Strength: Where is the value creation? Given the operations-heavy nature involved in acquiring the customers and processing small ticket-size consumer loans, from aggregating data, assessing risk to collecting overdue loans, we believe there is still a learning curve for many banks/tradition

29、al FIs in building a competitive in-house capability to serve the 24APR borrower cohort. At the core of loan facilitation lie three key competitive advantages: (1) the risk assessment capability for effective customer acquisition and segmentation, (2) the large amount of transactional data accumulat

30、ed over the years for borrowers with little credit reference data accessible by traditional financial institutions, (3) a system that enables fast credit line approval and better user interface that enhances user experience.The loan facilitation (or assisted lending) model involves online lenders fa

31、cilitating loans for licensed financial institutions, including banks, consumer finance companies and trusts. This directly addresses the two mismatches we identified in a P2P model above, i.e., replacing retail investors with institutions for which (1) managing risk is a core-business, and (2) busi

32、ness that is strictly regulated.The online lender provides some form of guarantee to the funding FIs (typically 5-10%). The guarantee service is typically provided by third-party financing guarantee companies or the online lenders own licensed guarantee company. In many cases, the online lenders pro

33、vide back-to-back guarantees for external guarantee companies.SWOT analysis for loan facilitation by online lendersThus far, the partnering institutions include banks (mostly city commercial banks and internet banks), consumer finance companies and trusts. Chinese banks have been expanding swiftly i

34、nto retail over the past few years, driven by NIM pressure amid interest rate liberalisation and NPL pressure from corporate loans. Some regional banks have also used partnerships with internet banks/fintech companies to circumvent their geographic restriction. Below we provide a SWOT analysis for t

35、he loan facilitation model as compared to their institutional partners:Strength: Where is the value creation? Given the operations-heavy nature involved in acquiring the customers and processing small ticket-size consumer loans, from aggregating data, assessing risk to collecting overdue loans, we b

36、elieve there is still a learning curve for many banks/traditional FIs in building a competitive in-house capability to serve the 24APR borrower cohort. At the core of loan facilitation lie three key competitive advantages: (1) the risk assessment capability for effective customer acquisition and seg

37、mentation, (2) the large amount of transactional data accumulated over the years for borrowers with little credit reference data accessible by traditional financial institutions, (3) a system that enables fast credit line approval and better user interface that enhances user experience.Weakness： Whe

38、re they are likely to be squeezed by institutional partners? (1) Depending on the institutions risk appetite, many require a lower-APR product other than the 36%-APR products currently funded by the P2P model, (2) most banks require some form of guarantee or insurance protection. Lenders typically c

39、ommit to a 5% deposit, (3) funding availability is susceptible to the delinquency performance.Opportunities： (1) a new driver of volume growth; (2) potential for further cooperation to provide a wide range of fintech services including payment, risk control, big data, etc. Fintechs role to enhance t

40、he quality and efficiency in financial services is generally supported by the PBoC.Threat: (1) tightening regulatory requirements on the loan facilitation business model, including reining in the banks out-sourcing of risk control function and local banks circumventing their geographic restriction (

41、more details below), (2) compared with retail funding, institutional funding is much more concentrated, leaving the facilitators at greater risk of suffering from funding pull-out, (3) technology in-housing and take-over of customer base by the banks.Potential regulatory headwind down the road? We e

42、xpect a low policy priority this yearLooking forward, we think the primary regulatory risks around the loan facilitation model lie with (1) the practice of implicit guarantee, to the extent that the online lenders are positioned as an Information intermediary, under the current regulatory framework,

43、 (2) cooperation with city/rural commercial banks, restricting their attempt to expand beyond local operations, (3) a tighter control over the usage of loan proceeds, and a stronger emphasis on consumption scenario.However, we expect a relatively high tolerance level this year and limited impact on

44、the profitability of loan facilitation given: The regulatory priority remains the ongoing clean-up of P2Ps;Consumer spending is supported by macro policy amidst the US-China trade negotiations. On 27 August, the State Council released a series of measures to boost domestic consumption, among which w

45、as to encourage consumer finances support to consumption demand. The loan facilitation model embodies P2P platforms, transformation to a Z2B model. The policy stance is generally positive towards fintechs role in helping to accelerate the transformation of traditional financial institutions. On 22 A

46、ugust, the PBoC released the Fintech Development Plan for 2019-21 in which it acknowledges and encourages fintechs use to enhance the quality and efficiency in financial services.Thus far, there has been a vacuum of regulatory guidance that either assigns the regulatory authority or specifies the bu

47、siness boundaries of the loan facilitation model. There is no licensing requirement for loan facilitators. Relevant regulations have been imposed only on the licensed financial institution side thus far, based on the general principles that financial institutions should not outsource key risk-contro

48、l processes to loan facilitators. Specifically, financial institutions are not allowed to rely on credit enhancement services provided by online lenders without a financing guarantee license or cooperation with third-party guarantee companies.Figure 16: Regulations relevant to loan facilitation modelSource: Company data, Credit Suisse estimates(Release dateAuthorityRelevant regulationGuidance specific to the assisted-lending modelDec-17Office of the Leading Group for the Special Campaign against Internet Financial Risks; Office of the Leading Gr