By Chang Yanjun
The capital size of trust industry in recent years has been growing rapidly and has reached RMB8.73 trillion Yuan at the end of the first quarter this year. The official figure for the second quarter hasn't been released, but it is estimated to be around RMB10 trillion Yuan according to previous information. The scale of trust industry has been increasing continuously, while performances of the trust firms are dramatically different.
On July 22nd, Anxin Trust released half-year report, in which the net profit attributable to shareholders of listed company was RMB110.4568 million Yuan, down by 1.9 percent year on year. Performance of Anxin Trust in this half-year report continued previous decline with a lower decreasing rate. The company's net profit in 2012 saw a 44.8 percent decrease year on year.
Another listed trust firm is different. Shaanxi International Trust Co., Ltd. (SGTA) has been increasing markedly, the company's 2013 first-half newsflash indicated that net profit attributable to shareholders of listed company was RMB185.7639 million Yuan, up by 80.35 percent year on year, in which the year-on-year increasing rate of the first quarter's net profit was even higher than 119 percent.
"The issuance of assembled trust products of SGT in 2011 and 2012 was relatively favorable, the market share of both the stock scale and new issuance scale in the industry are going up, earnings from the said products were reflected obviously in the first half of 2013", said Wang Miaojun, Researcher of China Jiantou Trust,"decline of Anxin Trust's net profit in the first half year was probably owing to the influence of its risk events, such as the Kunshan Federation International Assets Income Property Rights Trust Project that had trouble."
Risk seems to be closely associated with trust industry. The interacting relationship among the third parties involved in trust, namely the consignor, the manager or trustee and the custodian, is a mechanism arrangement for resolving risks.
"The major risk in the face of trust firms is market risk currently. For example, as far as the management is concerned, whether the trust firms can operate by strictly following the internal regulations", Li Yang, Principal of use-trust.com, said that every trust company has its own working procedure, but the implementation is distinctive, some in relaxed way while others in strict way."Moreover, the market competition is intensified, and trust firms have a high turnover, which has to some extent resulted in ethical risks."
"For trust industry, the current systematic risk is controllable, but the individual case risks may appear", Wang Miaojun said that the emergence of individual case risk is not a disaster to the overall development of trust industry as we can learn from the lessons of individual cases and the trust firms can improve risk control and management capabilities actively.
The deficiency of trust companies in risk control and investment capabilities will probably lead to project failure, the company's reputation will be affected by the rising probability of failure. An inside person said,"Persuasion of assets management can only come from positive return." Hence the existence of risks seems to be tolerant in this respect. The market economy is about survival of the fittest, which shall not exist in case no problem occurs to any business of any trust institution. The key is to summarize how to prevent risks so as not to make the same mistake in future.
"In addition, the trust assets has reached certain scale at present, the error probability is getting higher", said Li Yang. Perhaps risk will be normal for trust industry, which has put out higher requirements on the trust firms at the same time with the rapid expansion of trust assets.
"The focus of trust firms should be the improvement of active management and risk control ability." Wang Miaojun said that the proportion of assembled products has been declining since the second half of 2012 in spite of the rapid growth of trust assets. It looks that the supervision and regulating have relatively significant influence on the growth of stand-alone trust, which is predicted to have a smaller size as affected by factors like the tightening liquidity.
Li Yang said, we should say that it is the time for the adjustment of trust industry."Reinforce from management and risk control, and move forward more healthily."
