China Huarong Announces 2018 Annual Results in Hong Kong
On 28 March 2019, China Huarong announced the audited annual results for the year ending 31 December 2018. On the following day, the company held the 2018 annual report conference in Hong Kong. The company’s Chairman, Mr. Wang Zhanfeng, the President, Ms. Li Xin, and the Secretary to the Board of Directors, Mr. Wang Wenjie, as well as GMs from the Board Office and the Planning and Finance Department attended the conference. More than 80 representatives from domestic and overseas leading investment banks, large investment institutions and rating agencies attended the conference.
Mr. Wang Zhanfeng said that in 2018 China Huarong overcame huge challenges and achieved a smooth transition. In face of unprecedented situation and challenges, with the support and help of relevant government bodies, peer institutions, shareholders and clients, China Huarong eradicated the adverse impact of Lai Xiaomin, strengthened risk control, accelerated adjustment and transformation process, and refocused on its main business with renewed confidence and solidarity. The company has made smooth transition and maintained steadiness in terms of the overall situation, morale, workforce, business and expectations. Based on this, China Huarong has started a new journey of high-quality development.
He also said that since April 2018, the company’s new party committee has comprehensively carried out the Communist Party of China (CPC) Central Committee’s guidelines and policies, led a system-wide effort to reinforce the “four consciousnesses”; to bolster confidence in the path, theory, system and culture of socialism with Chinese characteristics; to resolutely uphold General Secretary Xi Jinping’s position at the core of the CPC and its Central Committee, and to uphold the authority and centralized and unified leadership of the CPC Central Committee.
Instilled with high sense of responsibility and duty to the country, the shareholders, the clients and investors, the company’s new management team has, since April 2018, taken initiative to confront crisis and endeavored to bring the company to the right track. Over the past year, the management team has worked diligently, and the company has operated sound and stable with its risks under control. The company has focused on working in the following five aspects.
Firstly, China Haurong has maintained overall stability. By the end of 2018, while facing the absence of advantageous business by withdrawing from non-leading business related sections, the company’s total assets reached RMB 1.71 trillion, and total revenue hit RMB 107.25 billion. With rising capital adequacy ratio and decreasing leverage ratio, the company has focused more on its core business of distressed asset management which apparently contributes more to the profit, and maintained financial steadiness in face of crisis.
Secondly, the company has made considerable progress in retrieving and stopping losses. It has worked closely with relevant departments, conducted in-depth risk screening and made substantial achievements in defusing potential risks and recovering losses. It has proved that the anti-corruption campaign, rather than hindering the operation and development of the company, has strongly safeguarded Huarong's sustainable and high-quality development.
Thirdly, the company has transformed its development model and optimized the business structure. Based on the functional positioning of financial asset management companies, the company has defined its business philosophy and refocused on its core business with resolution and respect for the developmental course of industry. It has actively explored new business models and played its unique role as a financial asset management company in serving the real economy and preventing and resolving financial risks.
Fourthly, the company has comprehensively strengthened party leadership and improved corporate governance structure. It has clarified the legal status and responsibilities of the party organization in corporate governance; safeguarded to exercise the rights of shareholders' general meeting in accordance with the law; supported the management decisions of the Board of Directors; consolidated the supervision responsibilities of the board of supervisors; urged the executive team to fulfill their duties; and striven to build a corporate governance structure of well-defined power and responsibility, coordinated operation and effective checks and balances.
Fifthly, the company has built a workforce of high professionalism. It has carried out a system-wide anti-corruption campaign, cultivated professionals with high moral standards, which in turn forms intrinsic driving force for the company’s transformation.
Mr. Wang Zhanfeng finally stressed that 2019 was the first year to construct a new Huarong. From a macro level, China Huarong will comprehensively strengthen party leadership and party building, firmly implement the principle of deepening supply-side structural reform of financial sector. From the business side, the company will seek progress upon stability, especially in the core business area. The executive team will work conscientiously to achieve business objectives and create sound returns for investors and the market.
In the future, the company will continue to optimize corporate governance and improve modern enterprise system. The company’s party committee will continue to play the pivotal role in steering the company towards high-quality development with sustainable growth by further improving management decisions made by the Board of Directors, safeguarding the supervision and recommendation rights of the Board of Supervisors, and ensuring the operations of the executive team within the scope authorized by the Board of Directors.
The company will implement new development plan and further promote the company’s transformation process. Based on the four-step process of “stabilization, risk elimination, asset-size slimmering and transformation”, the company will keep its focus on the core, restrict its capital and maintain the steady risk appetite. It shall operate in a way of keeping sound and steady growth in asset size with better business structure; returning its rational profit level back to the industrial range; effectively releasing the potential and hidden risks and improving financial leverage ratio.
The company will strengthen and focus on the core business of distressed asset management, restore and boost company value. It seeks to consolidate its advantage in distressed asset management through improved efficiency in distressed assets purchase and disposal, and maintain a leading position in distressed asset market. It also intends to enhance its core competitiveness and profitability by exploring new business growth opportunities, improve business structure and synergy between financial subsidiaries.
The company will continue to mitigate risks to lay a solid foundation for high-quality development. It will strengthen the construction of a comprehensive risk management system, speed up risk disposal, adopt customized policy based on different case, and continue to optimize the structure of assets and liabilities to avoid the liquidity risk.
The company will encourage and motivate employees to build a workforce of high professionalism. It will improve its KPI system and provide a fair platform for the employees. By increasing solidarity and sense of fulfillment, the company will ensure that personal achievement and corporate development to be acquired concurrently.
At the conference, China Huarong’s President, Ms. Li Xin, gave detailed analysis of the company’s operational and financial situations. By the end of 2018, the total assets of the company’s core business rose to RMB 866.25 billion, while the annual revenue amounted to RMB 64.77 billion, accounting for 60.4% of the corporation’s total revenue, up from 53.8% in the previous year. Net income from the purchase and disposal of distressed assets increased from RMB 4.58 billion in 2017 to RMB 8.65 billion in 2018, representing an increase of 88.8% compared with that of the previous year.
According to Ms. Li Xin, the company has vigorously promoted the restructuring of failing enterprises and made researches on helping out troubled listed companies, constantly extended the main business value chain, while aspired to construct the business framework of “diversified distressed assets”. The company’s financial services business has made stable performance. Some financial subsidiaries, including Huarong Xiangjiang Bank, Huarong Financial Leasing, keeps a stable pace of healthy development and maintained year-on-year growth. Measures are taken to further standardize the asset management and investment business, pulling back projects with no competitive advantages, in order to better serve the real economy and guard against financial risks. The impairments of assets of the year was RMB 20.07 billion, maintaining substantial sustained risk-releasing capacity. It has made considerable progress on the implementation of reducing non-leading and low effective assets as well as mechanism optimization.
The conference provided the opportunity for the management team to make thorough and frank communications with analysts from investment banks and institutional investors on issues including distressed asset market, corporate developmental and overseas strategies and capital replenishment plan. Analysts and investors expressed confidence in the company’s long-term development.