(Yicai Global) June 15 -- Sichuan Trust, a private Chinese financial institution, has a number of Trust of Trusts products overdue, an investor told Yicai Global. Last month, Chinese regulators banned financial firms from selling any more such products.
Sichuan Trust defaulted on the payment of at least four products at the end of last month or early this month, the anonymous investor said. According to industry standards, a trust contract usually defines it as a breach of contract if the product payment is late by more than 10 working days.
Chengdu-based Sichuan Trust declined to comment.
A ToT is a parent trust company set up through fundraising that invests in a portfolio of multiple issued trust schemes. Due to the severe opaque asset structure of the model, the People’s Bank of China and the China Banking and Insurance Regulatory Commission issued a document in May explicitly ordering financial institutions to clean up all their stock of ToT operations by the end of this year.
As a large-scale issuer of ToT products, this regulation has had a significant impact on Sichuan Trust. On May 11, when news broke that Sichuan Trust was about to be taken over by regulators and all its ToT business stopped, the firm responded that it was operating normally and all its businesses were proceeding in an orderly manner.
In addition to regulatory developments, Sichuan Trust’s financial position is also precarious. Its annual report showed that net profit fell 30 percent to CNY521 million (USD73.4 million) last year from 2018, and its non-performing asset ratio soared from 4.82 percent at the start of the year to 22.21 percent at the end.
According to a Yicai Global investigation, the financial position of several of the company’s financing products has also deteriorated significantly in recent years.
Sichuan Trust was rebuilt by a Sichuan provincial government-backed investment firm with a private company in 2010. Its current largest shareholder is local private company Hongda Group. Hongda and its listed unit Sichuan Hongda have a 54 percent stake in Sichuan Trust.
Sichuan Hongda’s main businesses include non-ferrous metal smelting and chemicals. Shares of Sichuan Hongda [SHA: 600331] slumped almost 4.2 percent today to CNY2.07 (29 US cents), giving it a market value of CNY4.2 billion (USD591.8 million).
Editors: Dou Shicong, Peter Thomas