中國金融科技信貸行業(yè)框架

1、March 6, 2020 05:56 PM GMTAsia PrimerA Framework for Chinas Fintech Credit SegmentAs regulatory uncertainty fades, we introduce an online loan facilitation framework to help investors map the key players, navigate the complex regulatory dynamics, and uncover the two sources of value creation.Morgan

2、Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a sing

3、le factor in making their investment decision.For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may n

4、ot be subject to FINRA restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.ContributorsMORGAN STANLEY ASIA LIMITED+John CaiEquity Analyst+852 2239-1885 HYPERLINK mailto:John.Cai John.CaiMORGAN STANLEY ASIA LIMITED+Richar

5、d Xu, CFAEquity Analyst+852 2848-6729 HYPERLINK mailto:Richard.Xu Richard.XuMORGAN STANLEY ASIA LIMITED+Joey Xu, CFAResearch Associate+852 3963-0337 HYPERLINK mailto:Joey.Xu Joey.XuMORGAN STANLEY ASIA LIMITED+Katherine LiuEquity Analyst+852 2239-1924 HYPERLINK mailto:Katherine.XH.Liu Katherine.XH.Li

6、uMORGAN STANLEY ASIA LIMITED+Chiyao HuangResearch Associate+852 3963-4624 HYPERLINK mailto:Chiyao.Huang Chiyao.HuangAsia PrimerA Framework for Chinas Fintech Credit SegmentAs regulatory uncertainty fades, we introduce an online loan facilitation framework to help investors map the key players, navig

7、ate the complex regulatory dynamics, and uncover the two sources of value creation.A segment with Rmb2 trillion in loans under management. In China, institution- ally funded fintech credit, i.e., online loan Industry ViewAttractivevalue creation. It is a simple framework, as we start the process by

8、breaking down the online facilitation process into three functions: 1) marketing, 2) loan design, and 3) risk taking. This simple step actuallyfacilitation, managed around a Rmb2 trillion loan balance as of end- 2019. In less than five years, this balance has reached the equivalent of around 30% of

9、the total credit card balance in China. This is a result of the business being highly scalable, and benefitting from the banking systems increasing focus on the retail segment, as well as the large consumer traffic volumes of internet companies, such as online payment and e-commerce firms. Key onlin

10、e loan facilitators include tech giants, online banks and independent players with dif- ferent business models, appealing to investors with different back- grounds.Listed player valuations remain depressed, as regulatory over- hang persists. Since 2017, online lending firms with relatively high- yie

11、ld products have experienced several rounds of funding supply reduction and asset quality pressure because of regulatory tight- ening. This is occurring amid Chinas overall financial clean-up cam- paign, with the ultimate goal to include all financing activities in licensing regimes, and address unl

12、icensed lending, such as in the ongoing P2P clean-up, as well as enacting stricter loan collection practices. In the past two years, some listed medium-sized players shifted to an institutional online loan facilitation funding model from P2P and reported continued strong growth and profitability but

13、 valuation multiples remain distressed because of the regulatory overhang, reflecting investor concerns: will this be the surviving model?A simple framework to help investors navigate three key consid- erations. Our framework can be consistently applied to discuss three considerations: 1) mapping th

14、e key players, 2) navigating the complex regulatory dynamics, and 3) uncovering the two sources ofuncovers key differentiators among business models, the different levels of regulatory risk exposure, and various sources of value cre- ation.Navigating regulatory dynamics. Regulatory uncertainties sho

15、uld begin to fade, as the potential for further tightening has become more visible. With improved visibility on the path forward for compli- ance, we anticipate stricter business process compliance to impose stricter licensing for facilitators, to require self-operating capability for banks, and to

16、mitigate the concentration risks in credit, product model and at the channel dependence level. In addition, we expect top-down regulatory guidance to aim to control systemic risks, through: 1) APR control and 2) growth constraints.Uncovering two key sources of value creation. Our analysis exam- ines

17、 two major sources of value creation in the facilitation process:1) user engagement and 2) risk taking. We analyze the vertical expan- sion of online channels in loan design, the adoption of revenue sharing as an interest alignment mechanism, and the strong pricing power of channels driven by user e

18、ngagement functions. User engagement and risk taking are likely to be valued differently because of the distinct visibility and cash flow risks, despite potential sharing of the same profit.Assessing the industrys future. Although regulatory uncertainty has become more widely understood, the potenti

19、al earnings impact from regulatory tightening remains in focus, as it would reduce finan- cial risk taking and related revenue. With lower risk taking, value cre- ation in this arena is likely to shift more toward user engagement. Online channels with strong customer sourcing capacity are likely to

20、gain relative pricing power. And online loan facilitation would refocus on efficiency gains, as a compliant form of bank/fintech cooperation.Contents5The Story in Charts7Fintech Credit Market in China11Introducing Our Framework14Framework Application: Navigating the Complex Regulatory Dynamics22 Fra

21、mework Application: The Value from User EngagementsThe Story in ChartsExhibit 1:Online loan facilitation managed over Rmb1.8 trillion as of 3Q19around 1,000Estimated Scale ofLoan Facilitation Market as of 3Q19(Rmb bn)around 350 to 400bnaround400 to 500 bnKey Online Listed Players523835QFIN 71LexinQD

22、PPDaiAnt FinancialWebankOther playersSource: Caixin, Morgan Stanley Research.Exhibit 2:Mapping selected key models into our frameworkGuaranteed Loan FacilitatorAPR 24%APR 36%0%LXQFINQDPPDai/FinvExit High Risk SegmentsRisk Model Reinvention36%26%28%45%Source: PBOC, Morgan Stanley Research.Source: Com

23、pany data, Morgan Stanley Research.Exhibit 12:TTM RoE for key online loan facilitatorsExhibit 13:Loan balance trendQudianPPDai/Finv360 FinanceLexin20.0%10.0%0.0%33.5%30.0%40.6%40.0%47.8%49.5%50.0%TTM RoEfor Key Online Loan Facilitators (as of 3Q19)60.0%70,56851,50038,40035,00020,000-100%360 FinanceL

24、exinQudianPPDai/FinvLoan Balance (Rmb mn)YoY Growth (RHS)-50%40,00030,0000%50,00050%56%60,000100%100%70,000104%150%80,000151%Source: Company data, Morgan Stanley Research.Source: Company data, Morgan Stanley Research.Growing Focus on Retail Lending for China BanksThe loan facilitation business is no

25、t a new model, as banks retail departments have been working with offline client referral channels, such as auto dealers or loan brokers, for some time. Banks in China control over 80% of funding in the country, with primary focus on corporate and mortgage lending, but they operate less-developed re

26、tail lending segments. Credit card penetration remains low com- pared with the US.Exhibit 14:US credit card balance per capita is around 3x larger than that in ChinaRmb20,00018,00016,00014,00012,00010,0008,0006,0004,0002,000-18,767Credit Card Balance per Capita(as of 3Q19)5,708USChinaSource: PBOC, F

27、ederal Reserve, Morgan Stanley Research.Online loan facilitation, in our view, enables institutions to acquire retail loan exposure with superior risk-adjusted return at limited fixed cost. In comparing the loan facilitation model with the other models that give banks access to such exposure (e.g.,

28、self operation, working with licensed nonbank lenders, securitization), we note that loan facilitation offers licensed lenders (mostly banks) with higher return on RWA, operating leverage without fixed opex, and direct retail assets exposure.Exhibit 15:10,0008,0006,0004,0002,000-0%CorporateHousehold

29、 -Household -Credit CardOtherMortgageOperating LoanCorporate and mortgage accounted for 83% of total bank loans in China70%64%China Bank Loan Mix60%(3Q19)50%40%30%20%19%10%7%5%4%Source: PBOC, Morgan Stanley Research.A Review of the Segments EvolutionRegulations have been and will continue to be the

30、most important driver for the listed universe in this industry, including in P2P. The seg- ment has been derating because of regulatory tightening aimed at funding supply toward products with high yields, and regulatory uncertainty with regard to the online loan facilitation model.Amid the overall f

31、inancial clean-up campaign in China, which is expected to end in 2020, online lending risks are one of the key areas of focus. While the regulatory framework lags business practice, it is catching up, with tightening measures over the less regulated online lenders. P2P clean-up is the key focus area

32、, with continued exit of key players and reduction of scale, as most of the business practices failto meet the regulatory requirements. High APR product lenders and associated service providers are under regulatory pressure. Reduction in funding supply and tightening of key activities, such as loan

33、collection, have led to asset quality pressures for the P2P seg- ment.The segments valuation reached a peak around the Qudian IPO, in October 2017, which drew regulatory attention and propelled the clean-up process. Since then, Document 141 was introduced, marking the start of cash loan regulations

34、in 4Q17. Regulatory pressure has continued in the P2P space since 2H18, reducing funding supply for high-yield products. These tightening measures have led to asset quality pressures and business model disruptions, spurring the der- ating trend, particularly for P2P.Exhibit 16:P2P balance declineExh

35、ibit 17:Regulatory tightening on product pricingBanksNon Bank FIUnderground Lender/P2P36% NominalDocument 14136% NominalP2P Clean Up36% IRRWindow Guidanceto Selected Institutions24% 24%APR APR Guidance- Growth GuidanceBusiness Process ComplianceLoan DesignRisk TakingLicensedLender- Facilitator to be

36、 Licensed- Qualification Requirements for Banks- Concentration Risks Control Regulated Financial InstitutionsSource: Morgan Stanley Research.Regulatory Inclusion: Facilitators to Be LicensedRegulators have been highlighting the licensing requirements of all financial activities. As online loan facil

37、itation involves a loan product offering to online users, we expect it to require online lending licenses, such as national CBIRC (China Banking and Insurance Regulatory Commission) licenses or licensing similar to that of online microloan companies.Some listed companies have invested in a minority

38、stake of CBIRC-licensed entities, in addition to their own existing online microloan licenses. We believe such moves reflect their expectation for stricter licensing requirements of their current activities.Regulators have also started requiring that all finance-related mobile apps be registered, wi

39、th a current focus on personal mobile data col- lection compliance. After the full scope registration, we expect enhanced oversight of all online financial product offerings. Key activities in the lending business, such as online advertising and loan collection, are also under regulatory scrutiny, d

40、espite no financial licensing requirements, thus far.Exhibit 24:MarketingOnlineChannelsLeadsGuaranteedReturnRisk AdjustedReturnLicensedLenderRiskTakingExposure LimitRiskAppetiteLicensed LenderProfileMatchingLoanDesignMarketingOnline Loan FacilitatorCredit Limit & PricingWe expect licensing requireme

41、nts for online loan facilitatorsSource: Morgan Stanley Research.Exhibit 25:Some listed online facilitators investments in CBIRC licensees with national business scopeListed Loan FacilitatorPPDai/FinvLexin Fintech9F IncLicense InvestmentPrivate BankPrivate BankConsumer Finance LicenseConsumer Finance

42、 LicenseInvested CompanyFujian Haixia BankJiangxi Yumin BankApplyingHubei Consumer Finance CompanyStake4.99%9.80%NASource: Morgan Stanley Research.Qualification Requirements for Banks: Self-operating Capability as an Entry BarrierRegulators are raising the entry barriers for banks to participate in

43、online lending. Based on the regulations, which detail requirements for risk management, we expect a small portion of banks will be quali- fied.Exhibit 26:Overview of regulatory requirementsCurrently, there are around 120 banks in China capable of offering standardized products online (mostly deposi

44、t, WMP, etc.) through direct bank services. As online lending involves more sophisticated IT/models, we expect only a portion of these 120 banks (as they cur- rently operate) to receive regulatory approval to conduct online lending.Exhibit 27:Number of banks with online service offers or direct bank

45、ingRural Commercial BanksCity Commercial BanksNational Banks1830# of Direct Banks with Online Service70Regulatory Requirements on Banks3rd Party CooperationIT SystemRisk Management SystemModel ManagementKeyProcessData ManagementRiskAppetiteBusiness PlanningSenior Management OversightSource: China Fi

46、nancial Certification Authority (CFCA) report, Dec 2019.Source: Morgan Stanley Research.Exhibit 28:MarketingOnlineChannelsMarketingLeadsPure Funding ProviderExposureLimitLicensedLenderGuaranteed ReturnRisk AdjustedReturnProfileMatchingRiskTakingLoanDesignRiskAppetiteCapable BankCredit Limit & Pricin

47、gRegulatory requirements for banks to ramp-up self-operating capacity for online loan productsSource: Morgan Stanley Research.For banks to comply with the latest requirements, we believe that theyll need to ramp up their capabilities to develop online lending product suites, with supporting risk mod

48、els and data. Essentially, the business requires the ability to self operate online lending products, which entails the different levels of risk management embedded in the end-to-end process, including risk assessments for new cus- tomers, as well as risk monitoring at the customer and portfolio lev

49、els.Concentration Risk ConcernsCurrent online loan facilitators are operating at high leverage, which is calculated as loans under management (LuM) / equity. This is because the facilitators are providing guarantees to the funding part- ners not actively managing risk. As this dynamic creates a conc

50、en- tration of credit risk for the facilitator, which may not yet be properly licensed and meeting capital requirements, we expect regulatory tightening in this cooperation model.Exhibit 29:Depending on regulatory requirements, banks will need to ramp-up risk management capabilities to levels that a

51、lign with their exposures to the segment. We expect the greatest effort to focus on the customer level, which essentially enables banks to conduct end-to-end risk management and self operate online lendingCredit Limit & PricingRisk AppetiteProductFeaturesRiskSelectionScoring &DecisionRiskAcceptance

52、and TransferUserProfileRiskAdjusted ReturnProfileMatchingLoanDesignRisk AdjustedReturnRiskTakingRisk ManagementCustomer LevelSource: Morgan Stanley Research.Product LevelPortfolio LevelExhibit 30:Loan-to-equity levels at listed online loan facilitatorsExhibit 31:Current facilitator model operates wi

53、thout clear leverage constraintsQudianPPDai/FinvLexin360 Finance2.0 x0.0 x3.3x4.0 x4.6x8.0 x6.0 x8.6xLuM / Equity(3Q19)10.0 x10.5x12.0 xLeverage:LuM / EquityFacilitatorEquityTypical Facilitator OperationMarketingLoan DesignRisk TakingLoan Under ManagementLicensedLender 1LicensedLender 2LicensedLende

54、r 3LicensedLender 4LicensedLender 5Funding PartnersSource: Company data, Morgan Stanley Research.Source: Morgan Stanley Research.We expect the facilitation model to evolve and adapt to stricter busi- ness process compliance requirements. Based on different strengths, we expect business cooperation b

55、etween the below two types of licensed financial institutions (FI):Sourcing FI: FI with strength in customer sourcing.Capable funding FI: FI with strength in fund raising, and also capable of conducting self-operated online lending.We apply our framework to uncover the different risk concentrations

56、in business models to help investors better understand the leverage discussion.Exhibit 32:Concentration risks for different cooperation modelsIf the funding FI does not have loan design capabilities, the coopera- tion dynamic creates: 1) credit risk concentration, under the guar- antee facilitation

57、model, or 2) product model risk concentration, under the nonguarantee model.We expect qualification requirements for banks will turn a pure funding partner into a capable funding bank with capacity to partici- pate in the loan product model, which helps reduce model concentra- tion risks, to some ex

58、tent, because of involvement of an independent model.FacilitatorFacilitatorLicenseSourcing BankSourcing BankMarketingLoanDesignRiskTakingMarketingLoanDesignMarketingLoanDesignMarketingLoan Under ManagementLoan Under ManagementLoan Under ManagementLoan Under ManagementFunding ProvisionRisk Selections

59、Product ModelCooperationSelf OperatedLicensed LenderRiskTakingLicensedLenderLoanRiskLicensedDesignTakingLenderLoanRiskLicensedDesignTakingLenderFunding PartnerFunding PartnerCapacityCapable Funding BankCapable Funding BankGuaranteed FacilitationNon Guaranteed FacilitationJoint LendingChannel Partner

60、shipMarketing ChannelRelianceProduct ModelRelianceProduct Model Concentration RiskCredit RiskConcentrationSource: Morgan Stanley Research.Exhibit 33:Likely regulatory measures to contain concentration risksGuaranteeFacilitationNon GuaranteeFacilitationJointLendingChannelPartnershipConcentration Risk