(Picture source: Visual China)

Recently, China Development Bank Financial Leasing Co., Ltd. (referred to as 'CDB Leasing') has finally successfully sold all the equity of Yin Tai Securities.

In fact, CDB Leasing has had the intention to clear out the equity of Yin Tai Securities since 2017, but it was not successfully sold after being listed many times. In the seven-year transfer process, the only successful transfer occurred in May last year, when CDB Leasing successfully transferred 0.15% of the equity and finally completed the clearing out by selling the remaining 4.99% of the equity this time.

It is worth noting that the two transaction prices for selling 5.14% of the equity of Yin Tai Securities total 80.9153 million yuan, which is a significant drop compared to the initial listing price of 155.3544 million yuan in 2017. CDB Leasing sold the equity at almost half price.

According to industry insiders, the reasons why CDB Leasing was in a hurry to clear out the equity, in addition to responding to the policy requirements of central enterprises focusing on their main business, also include market factors. Small and medium-sized brokerage firms' small equity is no longer as 'popular.' 'Although the clearing out price has dropped compared to the initial listing price, considering Yin Tai Securities' market performance and equity liquidity, CDB Leasing may think that completing the transaction at a lower price is a reasonable choice in the current market environment,' industry experts told Blue Whale News.

The second largest shareholder has changed, and CDB Leasing has successfully cleared out.

According to the information of the Shenzhen United Equity Trading Center, 4.99% equity of Yin Tai Securities has been sold, and the company's second largest shareholder is about to 'change hands.'

(Image source: Shenzhen United Equity Trading Center)

The announcement disclosed that the transaction amount this time was 78.0383 million yuan. The transferor is CDB Leasing, the second largest shareholder of Yin Tai Securities, which is backed by 'a big tree' - the only leasing business platform under China Development Bank. It is reported that the transferee is Mianyang Jiusheng Technology Venture Capital Co., Ltd. (referred to as 'Jiusheng Technology'), a member company of Mianyang Science and Technology City Investment and Development (Group) Co., Ltd. After the completion of the transaction, Jiusheng Technology will become the second largest shareholder of Yin Tai Securities.

Before the transfer, Yin Tai Securities had four shareholders, with Lü Hui as the actual controller holding 100% of Beijing Jiaxin Century Investment Co., Ltd. (referred to as 'Jiaxin Century'). According to the 2023 annual report, the shareholding ratio of Jiaxin Century during the reporting period was 91.43%, making it the largest shareholder. CDB Financial Leasing Co., Ltd. ranked second with a shareholding ratio of 4.99%; Zhuhai Hengqin New Area Xinyuan Energy Development Co., Ltd. held 3.43% of the equity; and Shenzhen Qianhai Fangmi Financial Services Co., Ltd. (referred to as 'Qianhai Fangmi Financial') held 0.15% of the equity.

Bai Wenxi, Vice Chairman of the China Enterprise Capital Alliance, pointed out in an interview with Blue Whale News that in recent years, financial regulation has become stricter, especially for the regulation of financial leasing companies, which has put forward higher requirements for regulated operation and compliance management. This may prompt CDB Leasing to adjust its asset portfolio to comply with regulatory requirements.

Some insiders pointed out that, combined with the current market environment, in order to optimize its own investment portfolio and reduce risks, CDB Leasing may be more inclined to invest funds in other more promising areas.

In addition, from the perspective of the company's own strategy, as the leasing business platform of China Development Bank, CDB Leasing may also decide to exit non-core or poorly-performing assets in order to optimize its asset structure and improve capital efficiency. This is also related to the current adjustment and optimization of state-owned capital layout and focus on main responsibilities and main businesses of central enterprises and state-owned enterprises.

For example, on June 27, CDB Leasing announced that the company plans to acquire vehicles sold by Shanghai Huaxing Hongjie in various provinces of China for 579 million yuan. The reason for this is that entering into a capital transfer agreement will help increase the company's market share in the vehicle operating leasing market, which is in line with the company's business development strategy and further focuses on its main business.

After being listed five times for seven years, CDB Leasing finally cleared out at 'half price.'

In fact, since 2017, CDB Leasing has been planning to clear out the equity of Yin Tai Securities. As of now, it has listed it for transfer five times, none of which have been successful. The only actual transfer occurred in May last year, when 0.15% of the equity was successfully transferred.

In November 2017, at that time, CDB Leasing held 5.14% of Yintai Securities' equity and listed its entire holding on the Shenzhen United Property Rights Trading Exchange, with a listing amount of RMB 155,354,400. The transaction contract was signed by both parties the following month, but it did not materialize in actuality.

In December 2019, CDB Leasing again listed the 5.14% equity of Yintai Securities for transfer, with a listing price of RMB 154,650,400, a reduction of RMB 7.04 million compared to last time, but it also failed to be completed.

In September 2022, CDB Leasing once again listed all of the aforementioned equity for transfer, but it also failed to be completed.

In December of the same year, CDB Leasing listed the corresponding equity for transfer for the fourth time. This time, it did not sell all of the equity in one go, but listed the 0.15% equity of Yintai Securities (corresponding to a capital contribution of RMB 2.1 million) for transfer at a bottom price of RMB 2.877 million. According to Yintai Securities' 2023 annual report, the transferee of the 0.15% equity in this case was Qianhai Fangmi Financial.

In November 2023, CDB Leasing listed 4.99% equity of Yintai Securities for transfer on the Shenzhen United Property Rights Trading Exchange, with a listing price of RMB 86,709,200 at the time; on December 28th, the listing price was lowered to RMB 78,038,300. Recently, the transaction was completed at this price.

It is worth noting that the transaction price for the previous 0.15% equity of Yintai Securities was RMB 2,877,000, and the transaction price for the current 4.99% equity is RMB 78,038,300, for a total price of RMB 80,915,300. Compared to the listed amounts in 2017 and 2019, the price has dropped by about 48%, nearly a 50% clearance of equity.

Regarding the situation of clearing equity at a discount, some industry insiders pointed out that the "transfer of equity" is a relatively common predicament, because the number of shares held cannot be compared with that of major shareholders, it is difficult to obtain decision-making power, and at the same time, the quantity of shares is large, and the transferee needs to pay a "high price", so transfer is generally more difficult.

With the impact of market volatility, stricter regulation, and other comprehensive factors, competition within the securities industry is becoming increasingly fierce, and the uncertainty of market environment is increasing, affecting the pricing and attitude of market funds towards brokerage equity.

The persistence of shareholders in disposing of equity is not unrelated to the operational situation of Yintai Securities. Since its establishment, the company's performance has been at the downstream of the industry, with poor profitability and low return on investment.

Looking at the performance of the past five years, from 2019 to 2023, Yintai Securities' revenue was RMB 448 million, RMB 450 million, RMB 246 million, RMB 278 million, and RMB 286 million respectively; net income was RMB 136 million, RMB 213 million, RMB 6 million, RMB 43 million, and RMB 56 million respectively.

Looking at 2020, the year with the highest performance, data from the Securities Industry Association showed that Yintai Securities' revenue and net profit ranked only 90th and 65th in the industry, respectively, overall, it was towards the lower end of medium and small brokers.

It is worth mentioning that in June 2023, the Shenzhen Securities Regulatory Bureau issued a warning letter to Yintai Securities, pointing out significant problems in its private asset management business, including: inadequate rectification measures for some asset management products; insufficient provision for impairment of asset management products; asset management departments having inadequate personnel allocation, and some employees lacking necessary independence in carrying out their duties.

Regarding CDB Leasing's discounted "clearance" of equity, Bai Wenxi pointed out that Yintai Securities' overall performance may have affected the value and attractiveness of holding equity, "although the clearance price has dropped compared to the initial listing amount, considering Yintai Securities' market performance and equity liquidity, CDB Leasing may consider completing the transaction at a lower price in the current market environment as a reasonable choice." (Lanjinger News Wang Wanying wangwanying@lanjinger.com)