The recent restructuring plan for Jiexin Consumer Finance Co., Ltdhas emerged through an announcement from Tianjin BankThis once-prominent player in the consumer finance sector will see new stakeholders, including JD Group, China Foreign Economic and Trade Trust Co., Ltd., Tianjin Economic-Technological Development Area State-Owned Assets Management Co., Ltd., and Tianjin Bank itselfThis marks a significant shift for Jiexin, a company that was among the first in China to receive a consumer finance license.
Jiexin initially made its mark by offering installment financing through offline retail channels, boasting an extensive network of over 200,000 sales points and a workforce exceeding 40,000 employees at its peakHowever, since 2019, the company's financial results have taken a downturn, resulting in a complete pledge of its 7 billion yuan equity by nowThe arrival of this restructuring news signals a new chapter for the company, leading many to ponder the lessons learned from its past and the challenges that lie ahead for this once-dominant enterprise as it attempts to revitalize its position in the consumer finance market.
Industry insiders caution that despite the injection of new shareholders, Jiexin's challenges are far from trivial
Firstly, there are concerns regarding the quality of Jiexin's assets, which have predominantly relied on self-operated business and offline channelsFurthermore, the consumer finance sector is experiencing intensified competition, with leading companies enjoying a firm foothold in the marketThe pressure to perform has intensified as Jiexin attempts to redefine its strategies and reclaim its market position.
The restructuring process detailed in Tianjin Bank's announcement involves significant financial maneuvers, notably a capital reduction followed by the introduction of strategic investors to raise new capital for JiexinThe registered capital of Jiexin was reduced from 7 billion yuan to 5 billion yuan—a move that aligns with ongoing industry standards despite being a downward shift.
Even post-reduction, Jiexin remains one of the leading players in the industry, now standing fourth in rankings, with South Silver FaBa Credit Co., Ltd
- Structured Deposits Surge Amid High Returns and Risks
- Honda-Nissan Merger: A Road to Consolidation
- Decoding Japan's Economy
- Fortotech Gears Up for Hong Kong IPO
- Fed Delivers 25 bps Rate Cut
set to augment its capital to 6 billion yuan, potentially allowing Jiexin to retain its competitive edge alongside other top-tier companiesThe process of reducing Jiexin's registered capital mandated that existing shareholder Home Credit N.Vwould not receive any funds from this reduction.
The newly introduced investors include Guangdong Jingdong Trading Co., Ltd., Online Banking Services (Beijing) Co., Ltd., and others, with Tianjin Bank committing 500 million yuan and taking a lead role with JD Group in managing the restructuring processThis highlights a collaborative approach among major players in the market to navigate the restructuring successfully.
Importantly, this restructuring comes on the heels of Jiexin's previous pledges, where significant equity holdings were sold to Tianjin Bank and other parties, ultimately pledging equity valued at 7 billion yuan—consistent with its registered capital
The implications of these financial maneuvers raise questions about future debt obligations and how they will be managed moving forward.
Legal expert Liu Xinyu noted that any transfer of pledged shares must be approved by the pledge holders; if permitted, proceeds from the sale must be allocated to settle debtsThis process adds a layer of complexity to the ongoing restructuring efforts.
As Jiexin navigates these financial waters, the quality of its assets and the consequences of its historical reliance on offline models remain under scrutinyThe company was established in 2010 and boasts a substantial client base with services extending to 29 provinces and municipalities in ChinaThroughout its journey, Jiexin has expanded its offerings beyond product loans to include personal loans and credit cards, further diversifying its financial services portfolioHowever, its fortunes significantly waned during and post-2020, particularly following the pandemic that deeply affected its offline-centric business model.
With revenues declining sharply and non-performing loan ratios reaching alarming heights—21.87% by the end of 2020—Jiexin struggled to pivot successfully towards digital platforms, despite attempts to align more closely with e-commerce partners
Leadership changes further reflect the challenges faced at the executive level as the company attempted to navigate this turbulent period.
Despite suspension of financial disclosures post-2020, data from parent company PPF Group suggests Jiexin faced dramatic revenue declines in 2022, prompting the need for financial remedies such as the transfer of non-performing assetsRecent data indicates over 240 billion yuan in non-performing loans were reported in various asset-handling projects, underscoring the scale of the challenges Jiexin now faces in recovering its financial health.
While Jiexin’s re-emergence might carry potential optimism due to JD Group's involvement—leveraging its extensive user base and technology infrastructure to inject much-needed agility into Jiexin's once-offline dominated offerings—the capacity to integrate and collaborate effectively is crucial