China Huarong Releases 2022 Interim Results
On the morning of August 30, China Huarong held a conference on its 2022 interim results in Beijing. Liu Zhengjun, Chairman of the Company, introduced the Company's overall operating results in the first half of the year and the next work arrangement. President Liang Qiang made a detailed analysis and explanation of the operating performance. Xu Yongli, Vice President and Secretary to the Board of Directors, presided over the meeting. Other members of the company leadership, equity directors and key officials from relevant departments attended the meeting. More than 120 representatives from China Huarong shareholders, major domestic and foreign investment institutions, leading investment banks, rating agencies, media and investors of Southbound Trading, attended the meeting through telephone conference system.
Liu Zhengjun said in his speech that 2022 is the first year after China Huarong completed the strategic investor introduction and capital increase. Under the leadership of the CPC CITIC Group Committee, China Huarong has thoroughly implemented the decisions and deployments of the CPC Central Committee and the State Council, as well as regulatory requirements, taken the initiative to assume the mission and responsibilities entrusted to the financial asset management companies by the State, given full play to the unique functional advantages of counter-cyclical and rescue financial services, followed the work philosophy of "consolidating the foundation, seeking progress while maintaining stability, and improving quality and efficiency", focused on "core business transformation, risk prevention and control, coordinated development and intensified management", supported economic stability, achieved a smooth transition after reform and reorganization, and presented a new image. Firstly, China Huarong accelerates the transformation of its main business and gives full play to the rescue function. It actively plays the role of the national team and main force of financial asset management companies. The non-performing asset business remains stable, with a leading market share in the industry, and the principal recovery level maintains the same as last year. The restructuring business adjusts the business structure actively, and explores new business model. The market-oriented debt-for-equity swap business takes new steps in light of the national strategy. It actively participates in the risk disposal of the real estate industry and implements the policy of guaranteeing the deliveries of pre-sold homes. It completes the equity transfer of four financial subsidiaries, takes the initiative to downsize and improve quality, so as to support the development of the main business with concentrated resources. Secondly, China Huarong solidly promotes risk prevention and control, and firmly safeguard the bottom line of avoiding financial risks. It strengthens the overall risk management system, improves the risk prevention and control mechanism, and cultivates the concept of risk management culture. It puts greater efforts into the disposal, and attaches great importance to the prevention of asset quality downgrading to further consolidate the asset base. It also optimizes the liability structure and reduces the financing costs to ensure capital compliance. Thirdly, China Huarong achieves a smooth transition after the introduction of strategic investors such as CITIC Group. Under the guidance of CITIC Group, in the first half of the year, the Company's Party building, corporate governance, strategic planning, office operation, business operation, financial management, institutional development and corporate culture have been comprehensively improved. By joining the CITIC Group Collaboration Committee and relying on CITIC Group's advantages in both industry and finance, it further promotes business synergy. Fourthly, China Huarong continues to strengthen internal management to lay a solid foundation for its transformation and development. It comprehensively sorts out the system, standardizes the process, refines the measures and strengthens its implementation. A total of 33 rules and regulations on operation and management and a new version of the accountability system were introduced, so as to strengthen internal control and compliance management, cultivate a compliance and responsibility culture, and continuously consolidate the foundation for transformation and development.
Liu Zhengjun pointed out that, in the second half of the year, the long-term positive fundamentals of China’s economy have remained unchanged and macro policies will play a more active role in expanding demand. The Company will fully seize the opportunity, implement the new development concept in full, accurate and comprehensive way, further strengthen the important role of financial asset management companies in serving the national strategy and supporting the real economy, achieve success in risk resolution, transformation and development, laying a solid foundation for building a first-class financial asset management company.
Liang Qiang pointed out in the operation analysis that the operating basis and financial situation of the Company in the first half showed positive changes in seven aspects: First, the asset size was reasonably reduced and liabilities decreased. The transfer of financial subsidiaries was proceeded in an orderly process, fulfilling the target requirement of reducing the asset size to within RMB1 trillion as scheduled. Second, liquidation sped up and settlement was ensured with a solid operating base. The Company's main business cash flow net recovery was RMB23 billion by proactively controlling the scale and pace of business investment, increasing asset revitalization and strengthening cash recovery efforts. Thirdly, financing was stabilized and expenses were reduced with an optimized financing structure. Interest expenses decreased year-on-year, the average financing cost decreased by 15bps compared with the previous year, and bonds and notes were repaid on schedule without a single default. Fourth, the resolution of risks was fully launched. With initial success of risk resolution due to the innovative working mechanism, risks of a number of key housing-related projects were resolved. Fifth, the transformation of the main business made steady progress. In the first half of the year, the Company acquired RMB22.4 billion of new distressed debt assets with a continuously optimized structure. The scale of new acquisitions and market transactions of acquisition-and-disposal business maintained its leading position; the restructuring of troubled enterprises accounted for more than 60% of the acquisition-and-restructuring business; the debt-to-equity business focused on key industries such as new materials and new energy. Sixth, downsizing and quality improvement continued to deepen. The equity transfer of subsidiaries with financial licenses was proceeded in an orderly manner, and the net profit from the transfer was RMB4.1 billion in the first half of the year, which was used for capital replenishment and main business development. Seventh, basic management continued to consolidate. The Company strengthened risk control, enhanced internal control and compliance management, promoted the normalization of accountability, and deepened business synergy.
In the second half of 2022, China Huarong will adhere to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and resolutely perform the duties and tasks assigned to the financial asset management company by the Party Central Committee. Firstly, adhere to strategic leadership and tackle challenges from all-round transformation. In compliance with CITIC Group's “553” Strategy and the mission of "practicing national strategies, serving the real economy and mitigating financial risks", and the development prospect of "focusing on the main business of distressed assets and building a first-class financial asset management company", the Company will strive to achieve the “135” strategic goal of getting on the right track in one year, and significantly improving quality and efficiency in three years and becoming industry benchmark in five years. Secondly, make good use of shareholders’ resources and strengthen business synergy. Riding on substantial shareholders’ resources, especially CITIC Group’s advantages in industry-finance integration, the Company will strengthen all-round business synergy in such aspects as risk disposal and business expansion, and accelerate the resolution and revitalization of risk assets to foster new profit growth drivers. Thirdly, focus on main responsibility and core business and optimize asset allocation. In adherence to the national industrial and regional development strategies, the Company took initiative in the layout of emerging industries, innovated business models, explored the capital-light development path and cemented the position in the traditional distressed asset market. In addition, it actively expanded high-quality clients such as non-banking financial institutions and leading enterprises, increased high-quality projects reserve, and continued to enhance the profit contribution of the core business. Fourth, strengthen basic management to stimulate internal momentum. The Company will deepen the reforms of systems and mechanisms, improve the mechanisms for offering incentives and imposing constrains, strengthen the construction of a comprehensive risk management system and implement a technology-empowered strategy to reduce costs and increase benefits in a comprehensive manner. It will also improve financing management to ensure liquidity safety.
At the press conference, the Company's management team had an open communication and exchange with analysts, investors and media present at the conference concerning the Company's operating results, main business development, financing and future development strategies in the first half of 2022, actively responding to market concerns and conveying to the capital market China Huarong's confidence and determination to maintain strategic determination and actively promote its risk resolution, transformation and development.