While the first hedging movables financing business has been conducted silently in China, the industry field saw another good financing channel.
On December 21, the reporter learnt at the “promotion meeting for hedging movables/warehouse warrant pledged financing business” jointly by Industrial Bank (IB), CITIC Newedge Futures and CMSTD Dacheng Branch, IB had successfully granted the first hedging movables financing loan in November in the financing field of bulk commodities market in China, which made IB become the first Chinese bank trying this new “tomato”.
What a tomato is it? As introduced by the relevant person-in-charge of the Trade Finance Department of IB Head Office, the so-called “hedging movables pledged financing” is a business where a bulk commodity manufacturer or trader pledges the movables that it holds lawfully in IB and establishes the selling hedging position corresponding to the pledged movables at the futures company designated by IB, and then the Bank provides short-term financing.
The biggest feature of the business is “fast”.
“It's really surprising to see such high efficiency, and the pledging and granting speed even outperform outstanding foreign-funded banks.” Chief Finance Officer Yang Hua of Shanghai Taorui Industry Co., Ltd., the first company using the product of hedging movables pledged financing, looked much unexpected to the loan granting within one day.
In mentioning the time efficiency of business, Lin Xiaozhong, General Manager of the Trade Finance Department of IB was full of confidence, “we make three ‘one-day' promises to customers, namely ‘pledging and granting loan within one day', ‘repayment and pledge termination within one day' and pledging and replacement within one day' ”.
It is reported that, besides some foreign-funded banks, like Standard Chartered Bank and BNP Paribas, can achieve “loan granting within one day” and “pledge termination within one day” in terms of foreign currency based financing applied by customers, it is rare now for domestic banks to fulfill the three “one-day promises”.
Additionally, two other distinctive features of IB's “hedging movables/warehouse warrant pledged financing business” are high pledging rate and low financing cost.
This is a breakthrough brought by innovation – based on the conventional movables or standard warehouse warrant pledged financing business, IB embeds the futures position and deposit into the customer financing system, achieving the organic combination of “futures position” and “spot position”, and cover “futures interests” and “spot value” generally into its internal risk control system, with a pledging rate up to 90%. In order to reduce the management cost and financial cost of financing enterprises, IB does not set down requirements of adding deposit and supplementing stock for financing enterprises against drop in their spot prices, nor lay down limit on the minimum use time for the repayment period of enterprises, thus significantly reducing the financing cost, management cost and financial cost of customers.
Previously, in the bulk commodities market in China (in particular, in the field of non-ferrous metal financing), most banks were basically engaged in conventional movables or standard warehouse warrant pledged financing business, for instance pledged financing with movables including cooper and nickel, or pledged financing with the standard warehouse warrants of delivery types designated by Shanghai Futures Exchange. For reasons including low pledging rate, low operating efficiency, high financing cost, and convenience of “floor financing” at exchange, these conventional businesses were not promoted by banks smoothly. “All are engaged in such businesses, but in small volume. No scale economy can be formed at all”, said one from a joint-stock commercial bank, who was unwilling to have his/her name known.
It is said that now IB Head Office has authorized IB Shanghai Branch to handle hedging movables/warehouse warrant pledged financing business across China, and enterprises not registered in Shanghai can also apply for financing in the city.
As revealed by the statistic data of Shanghai Futures Exchange, by the end of 2012, five types of the exchange, including cooper, aluminum, lead, zinc and silver registered a total of 207.32 million transactions, with the value reaching RMB 45,278.1 billion. The actually delivered transactions hit 230,000, with the value reaching RMB 32.8 billion.
Facing the financing market with massive demands, Lin Xiaozhong indicates that the hedging movables/warehouse warrant pledged financing business has a broad prospect. IB will, according to the market development, make in-depth exploration in many dimensions including business areas, participating industries, trading types, and extension of partners, and help more enterprise to break through their financing predicaments with professional and flexible advantages, revitalize their assets in stock, strengthen capital utilization efficiency, reduce financial cost and improve their core competitive edges in the whole supply chain.