Ping An Insurance’s Delayed Trust Repayment Shows Lingering Property Woes

Ping An Insurance (Group) Co's trust business delayed repayments on a property-linked investment product, showing the financial giant's asset-management operations are still grappling with China's prolonged real estate slump.

Ping An Trust on Wednesday apologized to its customers for postponing payments and blamed the overall slowdown in the real estate market. It said it was suing defaulting Chinese developer Genro Properties Group Ltd., and was actively looking for ways to get investors' money back.

The trust product raised 772 million yuan ($107 million) in 2021 to finance a property project in the southern city of Xiamen and matured last month, according to a report by state-media outlet Securities Times. Sales on the development have been slow, and proceeds are going into regulatory accounts following Genaro's default, the report said.

Although the amount of the delayed payment is not large, it raises signs of real estate-related stress at Ping An, China's largest insurer by market value.

The Shenzhen-headquartered company lost billions of dollars a few years ago from an ill-fated investment in property developer China Fortune Land Development Co. Its huge asset management business – which also includes Ping An Trust – recently forecast losses of 20.7 billion yuan in 2023.

Ping An co-Chief Executive Officer Michael Guo told Bloomberg in March that risks – including those in the property sector – are “controllable”, and the company has set aside enough reserves to withstand a downturn.

The insurer's latest annual report shows Ping An Trust managed assets of 663 billion yuan as of Dec. 31. Last year it was also China's largest trust company by net assets and revenue, according to data compiled By Yunnan International Trust Company.

The asset management business, including the trust unit, has “prudently” set aside provisions and revalued some items amid rising credit risk and capital-market volatility, according to Ping An's annual report.

Trust companies were an important source of financing for China's housing sector before the recent recession. Many trusts raised money by selling high-yield products to wealthy individuals and companies, and invested some of the money in property projects.

The asset crisis has dragged down other big players in China's trust industry, which is a key part of the country's shadow banking system. Private wealth giant Zhongzhi Enterprise Group Co. filed for bankruptcy earlier this year after its subsidiary Zhongrong International Trust Co. failed to pay customers on high-yield products, and regulators this month The bankruptcy of Sichuan Trust was approved in early 2010.

Photograph: Shenzhen skyline; Photo credit: Bertha Wang/Bloomberg

Subject
Property