Yangzijiang Financial Holding says its total income for 3QFY2022 ended Sept was lower year-on-year because of lower interest income.
The drop, says CEO Vincent Toe in a business update on Dec 5, is partly because it held a bigger proportion of cash and amid the short term uncertain economic outlook, while bidding the time to reinvest the money into other asset classes including those outside China.
Furthermore, YZJFH’s non-interest income was down for 3QYF2022 too, as the company booked lower fair value in its assets amid weak equity markets.
Despite the drop, the company says it remains profitable in 3QFY2022, without giving any numbers.
In addition, YZJFH suffered lower income from its property-debt related investments, as the sector in China faced “substantial challenges” in liquidity. As such, its borrowers’ ability to repay on time has been affected and that its proportion of non-performing loans had increased. As defined by the company, loans become “non-performing” the moment repayments are past due dates.
As at Sept 30, its proportion of NPL was $762.7 million, or 31.5% of its total volume of debt investments. In the preceding quarter June 30, the corresponding amount was $37.2 million, or just 1.5%.
“However, as most of the affected loans are still adequately collateralized, the group has made the provision for loan losses of $14.8 million,” the company adds.
YZJFH notes that in recent weeks, the Chinese government has reversed its earlier stance and is now pledging “strong policy support” for the sector.
As such, the recovery of such affected loans will be dependent upon, among others, the improvement of the property sector in China.
YZJFH says it will continue to actively manage its borrowers and their collaterals, and will write back at the appropriate time what has been conservatively provided for in prior periods in accordance with its existing policies.
As of Sept 30, 56% of YZJFH’s portfolio is in the form of debt investments in China. This proportion will be reduced to 30% by end of next year.
As at Sept 30, it holds another 27.6% in the form of cash and so-called yield enhancement products. Another 15% has been invested in equities, diversified across various sectors ranging from machinery and mining to financial services.
YZJFH says that the recent decline in share prices has created “attractive opportunities” for investing for the long term and it expects to expand its investments in equities.
While the bulk of the funds are in China, YZJFH is actively redeploying the funds outside China. As at Sept 30, this proportion of assets outside China stood at 12% of the total.
The company has been actively buying back shares after its listing. The most recent share buyback was on Oct 31, with around 6.6% of the total shares bought back.
In an earlier interview, executive chairman and single largest shareholder Ren Yuanlin says he will start to buy back shares under his own account once the buy back hits the 10% cap allowed under the current mandate.
As at Sept 30, its net asset value per share was 109.23 cents, up from 107.45 cents.
YZJFH shares closed Dec 5 at 35 cents, unchanged for the day, but down by half since its listing on April 29.