On September 24, 2024, the China Banking and Insurance Regulatory Commission stated at a press conference that it will expand the pilot program of bank equity investment.

Subsequently, the notices on expanding the pilot program of financial asset investment company's equity investment and expanding the scope of the pilot program were released.

Financial Asset Investment Company, abbreviated as financial institutions, is approved by the China Banking Regulatory Commission of the State Council to be established within China, mainly engaged in non-bank financial institutions that convert bank debt into equity and provide supporting services.

Recently, the pilot program of equity investment in financial asset investment companies was officially launched in Beijing, and the private equity investment industry has long called for and eagerly awaited 'patient capital,' which may accelerate market entry. It is understood that financial asset investment companies, also known as AIC, were born to solve banks' non-performing assets and resolve financial risks. Their business scope is mainly equity investment with the main purpose of debt-for-equity swaps.

Up to now, the five major banks in China, namely, ABC, BOC, ICBC, CCB, and BOCOM, all have wholly-owned financial asset investment companies. However, prior to this, AIC's equity investment business was only piloted in a few regions, such as Shanghai.

Recently, reporters learned from the symposium on "actively implementing the expansion pilot work of bank AIC equity investment" held by the Shenzhen Municipal Committee Financial Office that Shenzhen is actively cooperating with the five major bank AIC institutions. Currently, the Shenzhen Luohu District Government and China Construction Bank Investment have reached a cooperation intention to establish the first AIC equity investment fund in Shenzhen, planning to launch an industrial fund with a total scale of 10 billion yuan, focusing on key strategic emerging industries such as artificial intelligence, low-altitude economy, high-end equipment, new generation of electronic information, green low-carbon, and new materials to take the lead in responding to the pilot work expansion implementation.

China Securities Co.,Ltd. believes that AI finance will become important patient capital in the technology finance market.

On the one hand, leveraging its extensive customer base, huge network, and comprehensive licensing resources, China Securities Co.,Ltd. provides comprehensive financial services to technology companies, including equity and debt.

On the other hand, AI Capital places more emphasis on the industry value, growth potential, and technological innovation capabilities of enterprises.

China Securities Co.,Ltd. research reports believe that providing long-term stable funding support and participating in corporate governance can achieve high-quality and stable operations.

Non-bank financial institutions involved include:

China Cinda (01359): As of the end of June 2024, China Cinda's total assets reached 1.58 trillion yuan, with stable asset size. In the first half of the year, revenue reached 35.076 billion yuan, a year-on-year growth of 2.27%. Net profit attributable to the company's shareholders was 2.156 billion yuan, a year-on-year decrease of 47%. In the first half of the year, acquired financial NPL principal reached 55.81 billion yuan, maintaining a leading advantage in the public market of bad bank assets. In terms of asset disposal, net revenue from operating non-performing assets acquisitions was 5.109 billion yuan, a 11.53% increase year-on-year. In the reform of small and medium-sized financial institutions, in the first half of the year, acquired non-performing loan principal from 43 local small banks reached 30 billion yuan, entrusted to dispose of 10.7 billion yuan of non-performing assets from small banks. At the same time, deeply involved in real estate risk resolution and protection and relocation housing work, categorically dealing with problem projects to revitalize them, helping to build a new model of real estate development. In the first half of the year, 16 real estate risk resolution and protection and relocation housing projects were implemented, ensuring the timely delivery of 0.017 million sets of commercial housing, driving the resumption of work on projects worth 33.7 billion yuan.

China Best (02799): In the first half of the year, the company achieved a net profit attributable to the mother of 5.332 billion yuan, a significant increase of 210.7% year-on-year. This also sends a bullish signal for the performance of China Best after successfully reversing losses in 2023. After a billion-dollar loss in 2020 and a difficult turnaround in 2021, China Huarong fell back into losses in the first half of 2022. In the entire year of 2023, based on booking a devaluation provision of about 41 billion yuan, the company achieved a net profit attributable to the mother of 1.766 billion yuan, achieving the established goal of "returning to the right track in a year". In the first half of this year, as the core business and main source of revenue for China Best, the non-performing asset operations department achieved a total revenue of 19.326 billion yuan, a 40.8% decrease year-on-year; the financial services department achieved a revenue of 3.162 billion yuan, a 6.8% increase year-on-year; the asset management and investment department achieved a revenue of 12.102 billion yuan, a significant increase of 925.9% year-on-year.