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CCCR > SEC Filings for CCCR > Form 10-Q on 14-Nov-2013All Recent SEC Filings

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Form 10-Q for CHINA COMMERCIAL CREDIT INC


14-Nov-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations for the three and nine months ended September 30, 2013 should be read in conjunction with the Financial Statements and corresponding notes included in this Quarterly Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors and Note Regarding Forward-Looking Statements in this report. We use words such as "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could," "target", "forecast" and similar expressions to identify forward-looking statements.

Overview

China Commercial Credit, Inc. ("we," "us," "our" or the "Company"), through its wholly-owned subsidiary, Wujiang Luxiang Information Technology Consulting Co. Ltd ("WFOE"), a limited liability company formed under the laws of the People's Republic of China ("China" or the "PRC"), controls Wujiang Luxiang Microcredit Co. Ltd., ("Wujiang Luxiang") through a series of contractual arrangements. According to these contractual arrangements, the Company, through WFOE, has the exclusive right to select the management of and to control Wujiang Luxiang, as well as to receive the net income of Wujiang Luxiang.

Through Wujiang Luxiang, we provide short-term direct loans and loan guarantees to small and medium enterprises ("SMEs"), farmers and individuals located in Wujiang City, Jiangsu Province of China. Since our inception in October 2008, we have developed a customer base of a large and growing number of borrowers in Wujiang City. As of September 30, 2013, we have built a $90.5 million portfolio of direct loans to 222 borrowers and a total of $70.0 million in loan guarantees for 99 borrowers. We were established under the 2008 Guidance on the Small Loan Company Pilot of the China Banking Regulatory Commission and the People's Bank of China ("PBOC") (No.23) ("Circular No. 23") to extend short-term loans and loan guarantees to SMEs, a class of borrowers that we believe have been underserved in the Chinese lending market. The loans that we provide bridge the gap between Chinese-state run banks that have not traditionally served the capital needs of SMEs and high interest rate "underground" lenders, and our loans provide capital at more favorable terms and sustainable interest rates.

On September 5, 2013, our wholly owned subsidiary, CCC International Investment Holding Ltd. ("CCC HK"), established Pride Financial Leasing (Suzhou) Co. Ltd. ("PFL") in Jiangsu Province, China. PFL is expected to offer financial leasing of machinery and equipment, transportation vehicles, and medical devices to municipal government agencies, hospitals and SMEs in Jiangsu Province and beyond. During the quarter ended September 30, 2013, PFL did not have any operations except for initial organizational activities.

Key Factors Affecting Our Results of Operation

Our business and operating results are affected by China's overall economic growth and market interest rate. Unfavorable changes could affect the demand for the services that we provide and could materially and adversely affect our results of operations. Our results of operations are also affected by the regulations and industry policies related to the lending industry in the PRC.

Due to changes in the PRC government's monetary policy, the PBOC benchmark rate was reduced and starting August 2012 we have been restricted to charging no more than three times the PBOC benchmark rate. Prior to August 2012, we were allowed to charge up to four times the PBOC benchmark rate. The decrease in the PBOC Benchmark Rate and the new restriction on the allowable points above, the PBOC benchmark rate has slowed our growth in net interest income.

Our results of operations are also affected by the provision for loan losses, which is a noncash item and represents an assessment of the risk of future loan losses. Increases in the allowance for loan losses are achieved through provision for loan losses that are charged against net interest income.

Although we have generally benefited from China's economic growth and the policies to encourage lending to farmers and SMEs, we are also affected by the complexity, uncertainties and changes in the PRC regulations governing the small loan industry. Due to PRC legal restrictions on foreign equity ownership and investment in the lending sector in China, we rely on contractual arrangements with our PRC operating entity, Wujiang Luxiang, and its shareholders to conduct most of our business in China. We face risks associated with our control over our variable interest entity, as our control is based upon contractual arrangements rather than equity ownership.


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