Despite the perception from the outside that Xingfu Xiaojin is being held back by its shareholders, in reality, Xingfu Xiaojin is living quite happily. On one hand, Xingfu Xiaojin relies on assisted lending, especially the guaranteed credit enhancement business, to safely wholesale funds and earn profits, being small yet beautiful and extremely content; on the other hand, the compensation and benefits at Xingfu Xiaojin are decent, with publicly disclosed data indicating that the remuneration of the company's executives and employees is at a good level.

Now, as the second-largest shareholder, Shenzhen Youche's equity is subject to judicial auction, it also presents an opportunity for Xingfu Xiaojin to attract high-quality investors. Referring to past cases of consumer finance companies' equity transfers or auctions, it is highly likely that the buyer will be a state-owned shareholder or an influential enterprise within the industry.

Stepping back, Xingfu Xiaojin may have long wanted to escape the shadow of two problematic shareholders, but the timing was not yet ripe. Once it officially enters the process, Xingfu Xiaojin will naturally have new moves.

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New Board Appointments

Just as the equity held by the second-largest shareholder is about to be auctioned, there has been an adjustment in the board of directors at Xingfu Xiaojin.

On October 22nd, the Hebei Financial Regulatory Bureau approved Lu Lin's qualification to serve as a director of Hebei Xingfu Consumer Finance Co., Ltd., with Lu Lin being a staff director at Xingfu Xiaojin. At the same time, the regulatory authority also approved Guo Jianluan's qualification to serve as an independent director of Hebei Xingfu Consumer Finance Co., Ltd.

With the disposal and clearance of Shenzhen Youche's equity, the board members of Xingfu Xiaojin will also be readjusted, and the parties related to Shenzhen's equity will exit one by one.

According to Xingfu Xiaojin's 2023 annual information disclosure report, during the reporting period, Xingfu Xiaojin had a total of 5 directors, including 2 executive directors and 3 non-executive directors. Besides Su Na, the chairman of Xingfu Xiaojin, and Liu Hongyu, the president, as well as Gao Yifeng, the chairman of Zhangjiakou Bank, the remaining two directors are both from private equity.

One is Chen Guiyi, Managing Director of DCP Capital, and the other is Lin Xiaoqin, also a Managing Director of DCP Capital.When it comes to Dazheng Capital, people might feel unfamiliar, but in fact, Dazheng Capital has had connections with Shunsen Youche and Xingfu Xiaojin. In 2020, the financial fraud scandal of Luckin Coffee affected Shunsen Youche. To obtain financing, Shunsen Youche transferred its 39.25% stake in Xingfu Xiaojin, a company in which it held shares, to Fujian Youche Investment Partnership (Limited Partnership), with an estimated total transfer consideration of 250 million yuan.

Information from Tianyancha shows that Fujian Youche Investment Partnership (Limited Partnership) has now been renamed Fujian Dazheng Phase I Investment Partnership (Limited Partnership). Fujian Youche Investment is a private equity fund engaged in non-securities equity investments.

Fujian Youche Investment is a private equity fund associated with Dazheng Capital, and Li Hui, the founder and chairman of Dazheng Capital, was its actual controller. Shunsen Youche was once a limited partner of Fujian Youche Investment, holding 30.75% of its partnership shares, and exited Fujian Youche Investment in 2021.

Although Shunsen Youche intended to transfer its Xingfu Xiaojin shares to Fujian Youche Investment at that time, according to regulatory requirements, major shareholders of consumer finance companies are not allowed to transfer their shares within five years of acquiring them. Due to the holding period not meeting the standard, Shunsen Youche pledged its Xingfu Xiaojin shares to Fujian Youche Investment's subsidiary, Beijing Zhi Baiyang Advertising Co., Ltd. Tianyancha shows that the share pledge took place in April 2020 and is still valid, coinciding with the time when Shunsen Youche transferred its shares.

Therefore, it is not difficult to understand why there are two directors from private equity funds on the board of Xingfu Xiaojin. From the current equity structure of Xingfu Xiaojin, it can be seen that private equity has not replaced Shunsen Youche as a shareholder of Xingfu Xiaojin, but private equity has appointed directors to join Xingfu Xiaojin. Whether this complies with regulatory requirements is unknown.

Who will be the buyer?

When the shares held by Shunsen Youche are finally auctioned and successfully transferred, the board members of Xingfu Xiaojin will also change.

On October 22, 39.25% of Xingfu Xiaojin's shares were put up for auction on the auction platform, which is all the shares of Xingfu Xiaojin held by Shunsen Youche. Due to Shunsen Youche being deeply involved in debt issues, these shares were disposed of and auctioned by the court.

The official auction time is November 17, with a starting price of 440 million yuan and an appraisal price of 620 million yuan, which is equivalent to a discounted auction. Who will eventually win this Xingfu Xiaojin share, private equity, big factories, state-owned capital, banks?

Firstly, private equity is unlikely. Although there are many private equity shareholders in consumer finance companies, in recent years, regulatory requirements for private equity to invest in consumer finance companies have been relatively strict, not only requiring transparency of the sources of private equity funds but also strictly managing the capital increase of existing private equity shareholders.Shenzhou Youche previously transferred its shares in Xingfu Xiaojin to Dazheng Capital, and later the shareholders of Xingfu Xiaojin did not change for a long time, which may be related to the regulatory attitude. Industry insiders believe that private equity has a greater interest in the equity of consumer finance companies, but there will also be more restrictions due to risk considerations, and there have been cases where private equity shareholders' capital increases were not approved.

Referring to past cases of equity auctions and transfers of consumer finance companies, it is very likely that the equity of Xingfu Xiaojin will be taken over by state-owned enterprises, banks, or strong industry companies.

For example, in November 2021, China Huarong publicly listed the transfer of 70% of Huarong Consumer Finance's shares, and after several rounds of bidding, Ningbo Bank successfully won 70% of Huarong Consumer Finance's shares with a bid of 1.091 billion yuan.

Jincheng Xiaojin's original shareholder, Kai Feng Financial Leasing, transferred its 19% stake, which was ultimately transferred to Chengdu Tianfu Software Park Co., Ltd. Chengdu Tianfu Software Park Co., Ltd. is a wholly-owned subsidiary of Chengdu High-tech Investment Group, and the actual controller is local state-owned capital.

360's subsidiary, Beijing Qifei Feiyi Business Consulting Co., Ltd., transferred its 25% stake in Jinshang Consumer Finance, which was ultimately taken over by Shanghai Rongda Investment Management Co., Ltd. Shanghai Rongda is wholly-owned by Shanxi Construction Investment Group Co., Ltd., and Shanxi Construction Investment is a provincial state-owned enterprise in Shanxi Province, with the actual controller being the Shanxi State-owned Assets Supervision and Administration Commission.

It can be seen that the enterprises that take over the equity of consumer finance companies are all relatively strong enterprises. This strength is not only about being able to afford the equity of consumer finance companies but also includes being able to obtain regulatory approval to transfer the equity of consumer finance companies.

Despite the drag from shareholders, after all, it is only equity investment, and the actual operation is still determined by Xingfu Xiaojin itself. Since its establishment, although the scale of Xingfu Xiaojin is not large, its profitability is quite good, and it can be said to be quite happy.

According to the asset evaluation report of Xingfu Xiaojin disclosed by the equity auction, as of June 30, 2024, the total asset scale of Xingfu Xiaojin reached 12.65 billion yuan, with operating income of 491 million yuan and net profit of 75.1877 million yuan.

The total assets, revenue, and profit data of Xingfu Xiaojin have been steadily increasing for many years, with net profits of 135 million yuan, 185 million yuan, and 197 million yuan in 2021, 2022, and 2023, respectively.While the scale may not be large, the profitability is quite strong. Based on the profit data for the first half of this year, its operating profit margin (profit/revenue) is as high as 15.31%, a level higher than most mid-tier consumer finance companies and even top-tier consumer finance companies. In the first half of the year, Xingye Consumer Finance's profit margin was 5.34%, Mǎshàng Consumption Finance's was 13.71%, Zhōngyóu Consumer Finance's was 6.41%, and Hǎi'ěr Consumer Finance's was 11.14%.

What accounts for Xìngfú Consumer Finance's leading profitability in the industry? The answer naturally includes assisted lending.

Industry insiders say that Xìngfú Consumer Finance's assisted lending business has a high proportion, with a certain percentage of it being guarantee credit enhancement business. By deploying through a fixed-income model, it can earn a stable cost of funds, and platform compensation can avoid the accumulation of non-performing loans on the balance sheet, so its asset impairment ratio may be relatively low, achieving a high level of profit generation.

Xìngfú Consumer Finance's assisted lending output model can also be verified from its asset evaluation report. The asset evaluation report shows that as of the first half of this year, Xìngfú Consumer Finance's loan balance was 12.017 billion yuan, an increase of 1.592 billion yuan from the beginning of the year's 10.425 billion yuan.

The main part of Xìngfú Consumer Finance's loan balance is various types of personal consumer loans issued by Xìngfú Consumer Finance. This asset is the core asset of Xìngfú Consumer Finance, mainly including credit products such as Jīngdōng Jīntiáo, Mǎyǐ Xiaodài, Fēnqī Lè, Jīngdōng Fēnfēn Kā, 360 Fēn Rùn 2.0, Mǎxiāo Yì Yì Huā, and interest payable as of the benchmark date. The book balance is 12.572 billion yuan, with a provision for losses of 555 million yuan.

Top assisted lending platforms and peer-to-peer consumer finance company platform businesses provide Xìngfú Consumer Finance with a rich array of assisted lending customer acquisition channels.

In addition to the assisted lending channels on the asset side, Xìngfú Consumer Finance also has substantial content on the funding side. The major shareholder of Xìngfú Consumer Finance is Zhangjiakou Bank, which can provide Xìngfú Consumer Finance with the convenience of fund borrowing. In addition, the relationship between Xìngfú Consumer Finance and Hebei Bank is also quite close.

On the one hand, Hebei Bank and Xìngfú Consumer Finance have jointly launched Jìsù Dài, which is an online consumer loan product aimed at the Hebei regional customer base, with a business model of joint lending.

On the other hand, Hebei Bank provides interbank loans to Xìngfú Consumer Finance. According to Xìngfú Consumer Finance's balance sheet, as of the end of June 2024, Xìngfú Consumer Finance's interbank loans mainly consist of medium and long-term loans and interest payable that Xìngfú Consumer Finance has borrowed from Hebei Bank, Zhangjiakou Bank, Zhōngshān Rural Commercial Bank, and other banks for the purpose of carrying out loan business, with a book value of 10.337 billion yuan.

Although Hebei Bank is not a shareholder of Xìngfú Consumer Finance, it has a close cooperative relationship with Xìngfú Consumer Finance, giving the impression of being more than just a shareholder. There may be several reasons behind this.Firstly, as the only provincial-level city commercial bank in Hebei Province, Hebei Bank has a larger asset scale compared to Zhangjiakou Bank, a greater advantage in savings business, and relatively lower funding costs, which may enable it to have lower costs in interbank lending.

Secondly, the management of Hebei Bank has a background in consumer finance. Mei Aibin, the Chairman of Hebei Bank (formerly the President of Hebei Bank), once served as the Chairman of Happy Consumer Finance. Zhu Zhongnan, the Chief Information Officer of Hebei Bank, once served as the President of Happy Consumer Finance.

Moreover, consumer finance business has been a key focus of Hebei Bank's retail business in recent years. Hebei Bank has been promoting internet lending businesses such as joint lending by cooperating with internet platforms, consumer finance companies, and insurance institutions. By the end of 2023, the balance of loans jointly funded and issued by Hebei Bank was 17.3577 billion yuan. The balance of Hebei Bank's personal consumer loans was 73.344 billion yuan, an increase of 8.96% from the end of the previous year, accounting for 45.48% of the total personal loan business.

It is natural for Hebei Bank, which is in the rapid expansion phase of consumer finance business, to have some business cooperation with Happy Consumer Finance, where its executives once held positions. This is also a form of happiness for Happy Consumer Finance, whose parent bank's advantages are not particularly prominent.

In the balance sheet of Happy Consumer Finance, as of the end of June 2024, the payables to employees were 71.26 million yuan, with a total of five items, mainly including wages and bonuses that Happy Consumer Finance should pay to employees, executive value-added income, deferred payment salary entrusted to financial management, union funds, and employee education funds.

Therefore, although Happy Consumer Finance is small in scale, it is sufficiently happy.