The Zhitong Finance App learned that on March 28, China CITIC Financial Asset Management Co., Ltd. (hereinafter referred to as “CITIC Financial Assets” or the “Company”, 02799) released the 2023 annual results report. According to the report, as of December 31, 2023, CITIC Financial Assets achieved total annual revenue of 75.80 billion yuan, an increase of 105.2% over the previous year, and achieved net profit of 1,766 billion yuan to mother. Total assets at the end of the year amounted to $968.103 billion, an increase of 1.1% over the end of the previous year.

CITIC Financial Assets pointed out in its 2023 performance report that the main reasons for this business performance to turn a loss into a profit are: first, deepening business collaboration, actively expanding the market, strengthening asset management, and improving asset marketization trends compared to the previous year. Profit and loss from changes in fair value of equity assets increased year-on-year, making a positive contribution to the company's annual profit; second, actively developing market-based debt-for-equity swaps and special opportunity investment businesses to improve asset structure and optimize asset allocation; third, due to the overall impact of the economic environment and industry, in order to further consolidate assets, this issue confirmed asset impairment losses and fair value. Changes and losses of RMB 41 billion have further laid the foundation for sustainable and healthy development in the future.

As can be seen from the above, through adjustments to the business layout of CITIC Financial Assets in recent years, asset quality has been optimized, revenue has increased dramatically, and profitability has also shown a positive trend. At the same time, CITIC Financial Assets accrued credit impairment losses and fair value change losses of RMB 41 billion in the current period, continuing to consolidate the financial foundation and leaving enough room for later profits.

China Chengxin International believes that in the context of macroeconomic fluctuations, financial risk and non-financial risk are compounded and penetrated with each other. As risks are exposed, the importance of disposing of non-performing assets is increasing, and the status of asset management companies is also becoming more important. In order to mitigate stock risks, a series of policies have been introduced at the national level to encourage asset management companies to participate in risk mitigation in the financial and non-financial sectors.

As the main force in the field of non-performing asset disposal, CITIC Financial Assets is expected to seize market opportunities with the unique advantages of industry-finance collaboration on the basis of full integration into the CITIC Group in 2024, and continue to expand business space, and bring more returns to shareholders.

The return to the main business trend is obvious, and the optimization of the asset structure has achieved results

In 2023, CITIC Financial Assets will advance the implementation of the “13th Five-Year Plan” strategy, continue to focus on the main business, accelerate the pace of transformation, and promote structural adjustment and optimization of the main business.

According to the performance report, the total revenue from the non-performing asset business, the core business of CITIC Financial Assets, was 66.955 billion yuan, an increase of 110.8% over the previous year. The trend of returning to the main business is obvious, and all types of business have performed well.

Specifically, in 2023, CITIC Financial Assets acquired 230 new non-performing asset packages and single-household non-performing loans, adding an additional acquisition scale of over 145 billion yuan, and continued to lead the industry in terms of acquisition scale. At the same time, CITIC Financial Assets exploited the potential value of assets, and the acquisition and disposal business disposed of assets of 28.217 billion yuan throughout the year, an increase of 7.1% over the same period last year.

The restructuring business focuses on preventing and mitigating financial risks and serving the real economy. According to the data, the final investment balance of CITIC Financial's non-performing asset management business, such as the substantial restructuring of assets, was 96.755 billion yuan, an increase of 55.6% over the end of the previous year, and achieved revenue of 4.557 billion yuan, an increase of 38.1% over the previous year. Through bailouts and revitalization, financial institutions' stock projects of nearly 60 billion yuan were encouraged to resume work and resume production.

In terms of equity business, it focuses on industries such as new energy, new materials, advanced manufacturing, and information technology. Business revenue has increased by deepening business collaboration, strengthening equity asset management, market-based debt-for-equity swaps, and special opportunity investments.

CITIC Financial's assets closely follow the national development strategy, focus on key areas and key regions, and continue to improve its asset layout and business structure.

In terms of key regions, key regions such as Beijing-Tianjin-Hebei, Yangtze River Delta, and the Guangdong-Hong Kong-Macao Greater Bay Area accounted for 78% of the new launches in 2023. As of the end of 2023, the total share of the company's non-performing debt assets stemming from the Yangtze River Delta, Pearl River Delta and Bohai Rim regions was 53.1%, an increase of 2.2 percentage points over the end of the previous year.

In key areas, asset acquisition costs stemming from large commercial banks and joint-stock commercial banks accounted for 80.3% of the new financial non-performing debt assets acquired throughout the year, an increase of 32.8 percentage points over the end of the previous year.

The non-performing assets business has achieved remarkable results, indicating that CITIC Financial Assets has completed the “one year on track” goal as scheduled, and has also created favorable conditions for the ultimate implementation of the “13 5” strategy.

Fully integrate into CITIC Group's development to embark on a new journey of high-quality development

It is worth noting that since November 2023, CITIC Financial Assets has disclosed a series of important matters, such as changing the company name, transferring subsidiaries, appointing executives, and establishing investment and service cooperation alliances. This has sent a signal of full integration into the CITIC Group, and also indicates that CITIC Financial Assets will receive more support from CITIC Group in the future.

Looking back at the development process, since joining the CITIC Group in 2022, CITIC Financial Asset Development has gradually improved. The financial report shows that various operating indicators improved markedly in the second half of 2022. Losses were drastically reduced by more than 10 billion dollars compared to the first half of the year, and losses were turned into profits in 2023.

In terms of asset size, since 2020, CITIC Financial Assets has continued to divest inefficient and non-main assets, and has successively completed equity transfers in five financial subsidiaries of Huarong Zhongguancun Non-Performing Assets Trading Center, Huarong Consumer Finance, Huarong Securities, Huarong Xiangjiang Bank, and Huarong International Trust. The assets have also been “reduced” to less than trillion yuan.

While actively slimming down, CITIC Financial Assets has embarked on the path of continuous positive development of its main business by relying on the CITIC Group and the CITIC Group's combined industrial and financial advantages. According to public information, since joining the CITIC Group, CITIC Financial Assets has implemented collaborative projects totaling more than 150 billion yuan. In the field of real estate relief, group units such as China CITIC Bank, CITIC Trust, and CITIC Chengkai have collaborated to implement a number of relief projects with great social impact, such as Yalong and Zhuzhou Brilliance, which are related to maintaining local livelihood stability. Relying on the strong collaborative energy of the CITIC Group, in the fields of traditional bad asset management, problem institutional bailouts, stock asset revitalization, and special opportunity investments, CITIC Financial Assets is also increasingly becoming an “industry expert”.

The prospects for the development of the new blue ocean in the non-performing asset market are worth looking forward to

Currently, as the country continues to push forward deepening reforms in key areas, accelerate the development of new types of productivity, and increase risk prevention and mitigation efforts in key areas, market demand is still prominent. This provides opportunities for financial asset management companies. Under the influence of multiple risk factors, various departments have successively issued documents to encourage various ways to revitalize non-performing assets and guide financial asset management companies to actively mitigate various risks, which also provides further policy dividends for financial asset management companies.

Taking banks as an example, commercial banks' non-performing loan balances and concern loan balances have continued to rise in recent years. As of the end of 2023, commercial banks' non-performing loan balances were 3.23 trillion yuan, up 242.7 billion yuan from the end of 2022, up 8.14%; the balance of concerned loans was 4.46 trillion yuan, an increase of 355 billion yuan from the end of 2022, an increase of 8.64%.

Industry insiders believe that in the face of the new blue ocean of the non-performing asset market, CITIC Financial Assets, which stands at a new starting point, has a clear and firm strategic direction, continuous consolidation of the development foundation, upward development momentum, and the potential for performance growth is gradually showing, and the investment value is worthy of market attention.