Over 20 billion in non-performing assets transferred in the first quarter, with bad asset disposal becoming a "supporting measure" for the consumer finance company's transformation

Why do AI and consumer finance companies see bad asset disposal as part of their transformation?

21st Century Business Herald Reporter Yang Mengxue

Since the beginning of the year, over 20 billion yuan of personal loan bad assets have been densely transferred by consumer finance companies.

According to a review by 21st Century Business Herald, as of March 26, 18 consumer finance companies have announced personal loan bad asset transfers on the Credit Registration Center, involving a total outstanding principal of 20.059 billion yuan.

Further data analysis shows that leading institutions are the main suppliers of bad assets, with pre-litigation transfers gradually becoming the mainstream approach. March saw a peak in bad asset transfers, possibly related to quarter-end volume boosts and concentrated disposal to optimize financial reports.

Industry insiders believe that the current dense transfer of bad assets by consumer finance companies is a strategic choice under multiple pressures. In a context where scale-driven models are unsustainable, bad asset transfers have become a form of “support for transformation,” helping institutions shed risk assets, focus on front-end risk control and customer management, and free up human and financial resources. In the long run, this also creates space for refined development, shifting the industry from scale competition to risk pricing and deepening engagement with specific scenarios.

Reviewing transfer announcements on the Credit Registration Center since the beginning of the year, as of March 26, 18 consumer finance companies have issued 51 transfer notices for personal bad loans (personal consumer loans), involving a total outstanding principal of 20.059 billion yuan and total outstanding principal and interest of 28.677 billion yuan.

Overall, these asset packages involve 8.3168 million assets and 3.1317 million borrowers. On average, each loan’s principal is about 2,412 yuan, showing typical small, dispersed characteristics.

Among them, the highest total outstanding principal is from Ant, Zhaolian, Bank of China, Hangzhou Bank, and Industrial Bank, which together account for over 70% of the transfer volume. When calculated by total principal and interest, these five institutions account for as much as 75%, making them the main suppliers of bad assets.

Based on the five-level classification and litigation status, more than half of the asset packages are loss assets, with 70% of packages almost entirely unsued or with over 90% unsued rate. Only some packages from Industrial Consumer Finance and Bank of China Consumer Finance have lower unsued proportions, mostly between 45% and 68%.

From a time-series perspective, the acceleration of transfers in March and the quarter-end volume surge are also evident. In March, 28 transfer announcements were densely issued, compared to 12 in January and 11 in February. The total outstanding principal and interest of announced transfers in March reached 13.781 billion yuan, with 10.069 billion yuan in outstanding principal, surpassing January’s scale of 11.16 billion yuan in total principal and interest and 7.323 billion yuan in principal.

An industry insider from East China commented that, considering the needs for performance assessments and reserve releases at quarter-end, bad asset transfers may peak during this period. The high proportion of “loss” assets in transfer packages also indicates that the motivation is more about off-balance-sheet reporting than value recovery, with institutions focusing on disposing of bad assets at quarter-end to optimize financial statements.

Further analysis of asset characteristics shows a clear differentiation trend in bad asset disposal, shifting from bulk disposal to refined stratification.

First, the overdue days of assets in different institutions’ packages vary significantly. For example, Bank of China Consumer Finance and Zhaolian have multiple packages with an average overdue of over 1,500 days, while Zhongyuan Consumer Finance, Mengshang Consumer Finance, VipFubon Consumer Finance, and Hubei Consumer Finance have packages with average overdue days between 100 and 200, indicating shorter overdue periods.

An industry insider from East China explained that this differentiation is partly due to different disposal strategies. Long-overdue assets are concentrated for quick clearance, essentially “shedding burdens” in one go, which can release manpower and capital, offering higher cost-effectiveness for institutions. Shorter-overdue assets are easier to collect, with more room for autonomous disposal by the transferee, leading to relatively higher transfer prices. Early disposal is more cost-effective for institutions. Additionally, the large volume of short-overdue packages listed since March also reflects efforts to clear existing stock and avoid future compliance risks.

Second, regarding disposal progress, pre-litigation transfers are gradually becoming mainstream. Among 51 asset packages, over 60% have 100% unsued assets.

A Shanghai industry insider specializing in bad asset disposal explained that this mainly involves weighing costs against recovery efficiency. “Litigation typically takes at least a year, with uncertain recovery rates, plus lawyers’ fees, litigation costs, and enforcement expenses. For small, dispersed consumer finance bad debts, litigation is not cost-effective. Pre-litigation transfers allow the transferee to choose further collection or mediation, making disposal more flexible.”

Overall, the dense transfer of bad assets by consumer finance companies can be understood as a strategic response to multiple pressures, including strict regulation, low interest rates, and declining asset quality. Their approach to bad asset disposal has shifted from early burden-shifting to more refined resource reallocation.

From a regulatory perspective, the State Administration of Financial Supervision and Administration’s 2026 regulatory work conference prioritized “advancing risk resolution for small and medium-sized financial institutions.” The extension of the pilot period for bad loan transfers until the end of 2026, announced in late 2025, also supports this.

A senior executive from a leading consumer finance institution told reporters that current regulatory guidance encourages institutions to resolve existing risks through market-based means. Batch transfers are the most mature channel for handling personal bad loans and naturally the first choice. The extension of the bad loan transfer pilot provides a relatively stable disposal expectation, allowing institutions to systematically clear bad debts.

Meanwhile, low interest rates and other pressures are pushing consumer finance companies to transform, with bad asset disposal increasingly serving as a “support for transformation.”

An industry insider from East China admitted that the high-yield, high-pricing, scale-driven model is no longer viable, forcing institutions to shift from “profit from interest spreads” to strengthening risk pricing capabilities. In this context, “bad asset transfer is a good ‘support for transformation.’ For example, transferring bad assets directly sheds risk, allowing professionals to handle disposal, enabling institutions to focus on front-end risk control and customer management, and reducing compliance and customer complaint pressures.”

In the long term, bulk transfers of bad assets also free resources for more refined development.

The industry consensus is that future competition in consumer finance will no longer be about scale but about precise customer segmentation, improved risk pricing, and deep integration with real consumption scenarios.

“For consumer finance companies, on one hand, freeing their teams from inefficient collection allows more focus on pre-loan risk control and post-loan customer management. On the other hand, the funds from bad asset transfers can optimize financial resources and be reinvested into the business. With technological empowerment, these resources can be more effectively used in precise customer acquisition, intelligent risk control, and automated approval processes. Essentially, this is about reallocating resources for refined development,” the insider concluded.