Over 20 billion in bad loans transferred in the first quarter, with bad debt disposal becoming a "supporting measure" for the consumer finance company's transformation

Since the beginning of the year, over 20 billion yuan of personal loan non-performing assets have been intensively listed for transfer by consumer finance companies.

According to a report by the 21st Century Business Herald, as of March 26, 18 consumer finance companies have announced personal loan non-performing asset transfers on the Yindeng Center, involving a total unpaid principal amount of up to 20.059 billion yuan.

Further analysis of the data reveals that leading institutions are the absolute main force in the supply of non-performing assets, with pre-litigation transfers gradually becoming the mainstream operation. March has become a peak for non-performing transfers, possibly related to factors such as end-of-quarter volume pressure and concentrated disposal of non-performing assets to optimize financial statements.

Industry insiders believe that the current intensive transfer of non-performing assets by consumer finance companies is a strategic choice under multiple pressures. Against the backdrop of a scale-driven model being difficult to sustain, non-performing transfers have become a form of “transformation support,” helping institutions to shed risk assets, focus on front-end risk control and customer management, and free up human and financial resources. In the long run, it also creates room for refined development, shifting the industry from a focus on scale competition to risk pricing and deep integration into scenarios.

Over 20 billion yuan listed in Q1

Regarding the transfer announcements listed on the Yindeng Center this year, as of March 26, 18 consumer finance companies have announced 51 personal non-performing loan (personal consumption loan) transfer projects, involving a total unpaid principal amount of 20.059 billion yuan and a total unpaid principal and interest amount of 28.677 billion yuan.

Overall, these asset packages involve a total of 8.3168 million assets and 3.1317 million borrowers. Based on this calculation, the average principal per loan is approximately 2,412 yuan, showing a typical characteristic of small and dispersed amounts.

Among them, the highest unpaid principal amounts are from Ant Group, Zhongan, Bank of China, Hangzhou Bank, and Industrial Bank, which together account for over 70% of the transfer scale. If calculated by total principal and interest, the top five institutions account for as much as 75%, making them the absolute main force in the supply of non-performing assets.

Combining the five-level classification situation and litigation circumstances, over half of the asset packages are classified as loss assets, with 70% of asset packages almost entirely unsued or with a litigation rate exceeding 90%. Only the asset packages listed by Industrial Consumer Finance and Bank of China Consumer Finance have a relatively low proportion of unsued assets, mostly between 45% and 68%.

From a time-series perspective, the acceleration of transfers in March and the end-of-quarter volume pressure are also evident. In terms of frequency, 28 transfer announcements were made in March, while January and February had 12 and 11 respectively; in terms of scale, the total unpaid principal and interest amount listed in March has reached 13.781 billion yuan, with an unpaid principal amount of 10.069 billion yuan, exceeding the scale of January, where the total unpaid principal and interest amounts were 11.16 billion yuan and 7.323 billion yuan respectively.

An industry insider in East China analyzed that at the end of the quarter, considering institutional assessments, provision releases, and other needs, non-performing assets may see a peak in transfers. The high proportion of “loss assets” in the transfer packages also fully indicates that the motivation for off-balance-sheet transactions is stronger than value recovery, with institutions concentrating on disposing of non-performing assets at the end of the quarter to optimize financial statements.

Divergence in non-performing asset disposal strategies

Further analysis of asset characteristics reveals a clear divergence in institutional non-performing asset disposal, shifting from bulk disposal to refined stratification.

Firstly, the overdue days of the asset packages listed by different institutions show significant differentiation. For instance, Bank of China Consumer Finance and Zhongan Consumer Finance have listed several asset packages with a weighted average overdue period of over 1,500 days, while Central Plains Consumer Finance, Inner Mongolia Merchants Consumer Finance, Vipshop Fubon Consumer Finance, and Hubei Consumer Finance have asset packages with weighted average overdue days concentrated between 100 and 200 days, indicating a relatively shorter overdue period.

An insider from a consumer finance company in East China told reporters that the reason for this differentiation lies partly in the different disposal strategies of various institutions. Concentrated clearance of long-aged assets is, to some extent, about “shedding burdens,” as a one-time off-balance-sheet transaction can release human and capital resources, making it more cost-effective for institutions; the collection costs of short-aged assets are still relatively controllable, allowing transferees more room for autonomous disposal, hence the transfer pricing is relatively higher, making early disposal more cost-effective for institutions. On the other hand, the large number of short-aged asset packages listed in March also reflects considerations for concentrated clearing of existing stocks and avoiding subsequent compliance risks.

Secondly, in terms of disposal progress, pre-litigation transfers are gradually becoming mainstream. Of the 51 asset packages, over 60% have a 100% unsued ratio.

An industry insider in Shanghai analyzed that this mainly considers the trade-off between cost and recovery efficiency. “The litigation cycle typically starts at one year, and the recovery rate may not be ideal, plus there are legal fees, litigation costs, and execution fees to bear, which makes litigation less cost-effective for small and dispersed consumer finance non-performing assets. With pre-litigation transfers, the acquiring institution can still choose to conduct collections or mediation, making the disposal methods more flexible.”

Non-performing disposal is gradually becoming “transformation support”

Overall, the intensive transfer of non-performing assets by consumer finance companies can be understood as a strategic choice under multiple pressures such as strong regulation, low interest rates, and declining asset quality. The approach to non-performing asset disposal by institutions is gradually shifting from an early focus on shedding burdens to a refined development of resource reallocation.

From a regulatory perspective, the 2026 financial regulatory work meeting placed “effectively and orderly advancing the resolution of risks in small and medium financial institutions” at the top of this year’s key regulatory tasks. The notice issued at the end of 2025 extending the pilot period for non-performing loan transfers has also extended the pilot period to the end of 2026.

An insider from a leading consumer finance institution stated that the current regulatory guidance encourages institutions to use market-based methods to resolve existing risks, with bulk transfers being the most mature channel for personal loan non-performing asset disposal, naturally becoming the preferred choice for institutions. The extension of the non-performing loan transfer pilot provides institutions with a relatively stable disposal expectation, allowing for planned advancement of non-performing asset clearance.

At the same time, pressure from low interest rates forces consumer finance companies to transform, making non-performing asset disposal gradually become “transformation support.”

An industry insider in East China candidly stated that the current model driven by high returns and high pricing is no longer feasible, pushing institutions to shift from “earning interest spreads” to strengthening risk pricing capabilities. In this context, “non-performing asset transfers are indeed a good form of ‘transformation support.’ For example, transferring non-performing assets can directly shed risk assets, allowing professionals to handle non-performing disposals, enabling institutions to focus on front-end risk control and operations, while also alleviating pressures related to compliance and customer complaints.”

In the long run, bulk transfers of non-performing assets also create room for resource reallocation for future refined development.

The consensus in the industry regarding the transformation is that the future competition in consumer finance will no longer be about scale, but will focus on refined management of customer groups, improved risk pricing capabilities, and deep integration with real consumption scenarios.

“For consumer finance companies, on one hand, this liberates their teams from inefficient collections, allowing them to focus more on pre-loan risk control and post-loan customer management; on the other hand, the funds from non-performing transfers can optimize financial resources, which can be reinvested into the business. With the current emphasis on technological empowerment, this can also allow technological capabilities to be more utilized in precise customer acquisition, intelligent risk control, and automated approvals. Essentially, it’s also about reallocating some resources for refined development,” the aforementioned insider stated.