New Buyer for Home Credit Financial Services: Who Will Take Over? (AI Translation)

捷信消金再传新买家 究竟花落谁家

Home Credit Consumer Finance Co., Ltd. (Home Credit), a long-time player in China's consumer finance sector, is undergoing significant changes in its equity structure for the first time in 14 years. [para. 1] On July 24, 2024, its shareholder, Home Credit N.V., pledged a 33% stake in the company, amounting to 2.31 billion yuan, to the Bank of Tianjin. Prior to this, Home Credit N.V had already pledged 4.69 billion yuan worth of equity to China Foreign Economy and Trade Trust Co., Ltd (Foreign Trade Trust), making for a total of 7 billion yuan. Consequently, Home Credit's equity is now 100% pledged, reflecting its challenging financial situation. [para. 1][para. 2]

In the last year, Home Credit's shares have been pledged three times, sparking market speculation that Home Credit Group is trying to divest shares and transfer its license.[para. 1][para. 2] This comes amid rumors of ByteDance’s interest in acquiring JieXin Consumer Finance, housed in Tianjin. Although ByteDance planned to move the registration to Shenzhen, authorities in Tianjin resisted, aiming to retain the financial license and related benefits.[para. 3][para. 5]

Recently, JD Technology, another major internet finance platform, has emerged as the new buyer for Home Credit Consumer Finance. This acquisition has received support from Tianjin financial regulators and is awaiting approval from the National Financial Regulatory Administration (NFRA).[para. 3][para. 6]

Home Credit Consumer Finance was established in 2010 as a wholly foreign-owned entity under the Czech-originated PPF Group, which expanded its operations to China in 2004. The company once led the offline consumer loan market through partnerships with trust and financing guaranty companies.[para. 9][para. 10] Home Credit specialized in "POS loans," generating substantial interest rates in the early years, but changes in the regulatory landscape and the advent of internet giants have eroded its market position.[para. 11] Regulatory restrictions capping interest rates further contributed to Home Credit's decline, and despite attempts to pivot online, financial metrics have deteriorated significantly since 2018. [para. 12]

In 2023, financial troubles forced Home Credit to substantially dispose of non-performing assets. The company transferred asset bundles worth 16.976 billion yuan and 26 billion yuan to different asset management firms. This financial turmoil follows a long-term plan by PPF Group to divest its stake in the Chinese market.[para. 15][para. 24]

ByteDance previously expressed interest in acquiring Home Credit Consumer Finance, but several factors, including relocation plans and asset quality disagreements, stalled their efforts.[para. 27] JD Technology has filled this gap, aligning with Tianjin's interests to keep the company and its financial license within the municipality.[para. 30] JD Technology's forthcoming acquisition will require it to absorb the liabilities and non-performing assets of Home Credit Consumer Finance, further complicating the deal.[para. 31][para. 32]

JD Technology Group integrates former JD Digits and JD Cloud & AI operations, already maintaining significant financial interests with consumer loan products like JD Baitiao and JD Jintiao. The company has streamlined its microloan businesses, retaining only Chongqing JD Shengji Microloan, recently boosted to a registered capital of 8 billion yuan.[para. 33][para. 34] JD Shengji Microloan achieved 1.62 billion yuan in revenue in 2023, despite facing declining profitability.[para. 35]

JD Technology frequently employs asset-backed securitization (ABS) to manage its finances, issuing 22 ABS in 2023, amounting to 110 billion yuan,[para. 36] leveraging its core entities, including Jingdong Shengji Small Loan and its Commercial Factoring Co., Ltd.[para. 37]

JD Technology and JD Financial appear well-positioned to integrate Home Credit Consumer Finance into their broader financial ecosystem, potentially revitalizing the latter and consolidating JD’s footprint in China's consumer finance sector. [para. 38]