On August 13-14, China Huarong held its 2020 mid-year and discipline inspection work conferences. Mr. Wang Zhanfeng, Secretary of the CPC Huarong Committee and Chairman delivered the key speech. Ms. Li Xin, the President, made the report on business operation of the first half of the year. Mr. Pang Xuefeng, Secretary of the Discipline Inspection Commission, delivered report on discipline inspection work. In addition, system-wide business trainings were carried out. Representatives from the China Banking and Insurance Regulatory Commission (CBIRC) attended the meeting. Company directors, supervisors, heads of the HQ departments, local branches and subsidiaries were also present. Other staff attended the video conference at sub-venues.
It is pointed out that during the first half of 2020, the company duly implemented the strategies and policy decisions of the CPC Central Committee, the State Council and the regulatory authorities. By focusing on epidemic containment and business operation at the same time, we have achieved positive progress with good momentum for growth and maintained sound and stable operation. By enforcing strict Party discipline at all levels, we have continued to make progress in Party conduct and clean governance. By implementing the Central government’s major strategic decisions to ensure ‘six priorities’ and ‘stability in six areas’ and supporting enterprises to resume work and production, we have continued to strengthen our financial services business. We have accomplished our poverty alleviation tasks half a year ahead of schedule. We have consolidated internal management, established synergy mechanism and continued to strengthen compliance management. The company’s strategic plan is being duly carried out at all levels. With the optimization of team structure and motivation and restrictive mechanism, staff working capabilities are consistently improved.
Facing the unforeseeable impact of the covid-19 pandemic, as well as internal and external challenges, China Huarong has managed to maintain steady growth in the core business of distressed asset management and made continued progress in its transformation. During the first half of the year, the company has remained a market leader in acquiring NPLs. Through a variety of new approaches such as target-oriented acquisition and refined management, the company has accelerated NPL disposal process and managed year-on-year growth on cash collection. Acquisition-and-restructuring business remained stable with an improvement in client structure. Debt-to-equity swap (DES) business made sound development with the undertaking of the first financial equity investment project to financial institution. In the meantime, China Huarong has made solid progress in risk control, strengthened efforts to resolve existing risks and downsize subsidiaries in a sound and steady manner. In the first half of the year, China Huarong successfully issued US$ 1.8 billion senior bond with the company’s liquidity risk well under control.
It is pointed out that thanks to the hard work over the past two years, the company is currently developing in an upward motion. The development capacity of the distressed asset management business is restored, with 50% of group’s total assets contributing 62% of business income and 179% of profit before tax in 2019. Acquisition-and-disposal business operates well, as its total income rose from RMB 4.58 billion in 2017 to RMB 9.88 billion in 2019, representing a dramatic increase from 12.7% to 23.8% in NPL income of the parent company. Transformation in acquisition-and-restructuring business achieves initial success, as restructuring size of troubled enterprises rose substantially from RMB 12.8 billion by the end of 2018 to RMB 58.5 billion by the end of 2019, corresponding a rise from 3% to 14% in restructuring business segment. Our DES business is also making major headway in areas including bailout of listed company, acquisition and restructuring and defaulted bond acquisition. In addition, the founding of China Huarong M&A and Restructuring Fund is aimed to conduct market-driven DES business in emerging strategic industries. Over the last two years, work on disposal of risk assets has also achieved positive results.
Implementation is critical in accomplishing our mission. In the second half of the year, we are going to seize back the time lost during the epidemic, carry out all our work in a solid and meticulous manner and strive to achieve our business objectives for the year. Therefore, we are going to make steadfast efforts in the following five aspects: 1) Strengthen Party leadership and party building, eradicate the adverse impact of Lai Xiaomin; 2) Defuse risk and extract profit from existing risk assets; 3) Foster innovation in our core business that is worthy of China’s leading specialist institution in distressed asset management; 4) Enforce group management and ensure group strategies are duly carried out at all levels; 5) Focus on human resource management, make every effort to motivate staff and encourage innovation and competition.
Challenges and Opportunities are two sides of the same coin. With rising supply of NPL and accounts receivable balance, acceleration of bond default rate and risk exposure in trust businesses, coupled with increase of high-risk, small and medium-sized financial institutions, asset management companies are at the forefront to play a pivotal role in supporting economic transformation and upgrading. With the steadfast support of the regulatory authority, China Huarong is determined to follow its route towards high-quality development and become a top investment bank. With the solidarity and perseverance of its professional staff, China Huarong is confident and determined to accomplish the mission.