Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

China's Ant to boost consumer finance unit capital as it restructures micro-lending: sources

Stock MarketsFeb 26, 2021 03:50AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A sign of Ant Group is seen during the World Internet Conference (WIC) in Wuzhen

By Julie Zhu

HONG KONG (Reuters) - China's Ant Group is in talks with other shareholders in its new consumer finance unit to bolster the firm's capital as the fintech giant prepares to fold in its lucrative micro-lending businesses, people familiar with the matter said.

It would need additional capital of 30 billion yuan ($4.6 billion) to meet regulatory requirements, said one of the people who has direct knowledge of the plans.

Ant plans to bring most of its micro-lending businesses into the unit - equivalent to roughly 1 trillion yuan ($155 billion) in outstanding loans - a move which will allow it to maintain operations nationwide and expand more easily, said two sources.

The plans reflect intense regulatory pressure on Ant to rein in some of its operations and subject them to rules and capital requirements similar to those for banks. That pressure scuppered Ant's $37 billion IPO last year and has seen it formulate plans to shift to a financial holding company structure.

Ant has two lucrative micro-lending businesses: Huabei, which operates like a virtual credit card, and Jiebei, a short-term consumer loan provider. Both based in the southwestern city of Chongqing, they form the bulk of its credit business which accounted for close to 40% of Ant's revenue in the first half of 2020.

But under new draft rules published by China's central bank in November, Huabei and Jiebei would have to limit their operations to Chongqing unless they obtain new national licences - a potentially lengthy and uncertain process.

That would not be a problem if the micro-lending businesses were part of the consumer finance arm.

Another major benefit of shifting the businesses to the consumer finance unit is that consumer finance firms can lend up to 10 times their registered capital while online micro-loan firms are only allowed leverage ratios of 2-3 times.

The new consumer finance firm, called Chongqing Ant Consumer Finance Co Ltd, was set up in August 2020 but still has not gained its business licence, three sources said.

"Regulators won't easily greenlight the launch of the business before it fully complies with the capital adequacy rules," said one of the people.

The sources were not authorised to speak on the matter and declined to be identified.

Ant, an Alibaba (NYSE:BABA) Group Holding affiliate, declined to comment. The China Banking and Insurance Regulatory Commission did not immediately respond to a request for comment.

Micro-lending - loans for small purchases such as smartphones, cameras and white goods - is hugely popular in China.

Ant and other tech platforms such as Tencent-backed WeBank and JD (NASDAQ:JD).com Inc have become powerful third-party intermediaries who draw in borrowers, take as much as a third of lending profit margins while the banks they partner with passively supply the credit.

Ant owns 50% of the consumer finance unit, which it plans to develop into China's biggest consumer lending player.

Hong Kong-based Nanyang Commercial Bank holds a 15% stake while Taiwan's Cathay United Bank holds 10%. Other co-founders include battery maker CATL and Alibaba-backed intelligent transport services firm China TransInfo Technology.

If the other shareholders are reluctant to provide additional capital, Ant plans to bring new investors, two of the people said.

Several shareholders want more clarity on the consumer finance unit's listing prospects, they added.

Shareholders are also hoping their stakes in the unit will be converted into shares in Ant's financial holding company, which is likely to go public, the people said.

Most of the other shareholders did not respond to requests for comment. CATL referred queries to Ant.

($1 = 6.4686 Chinese yuan)

China's Ant to boost consumer finance unit capital as it restructures micro-lending: sources
 

Related Articles

Is AYRO a Winner in the Electric Vehicle Industry?
Is AYRO a Winner in the Electric Vehicle Industry? By StockNews - Apr 12, 2021

Ayro’s (AYRO) diversified product pipeline in the electric vehicle (EV) space drove its stock to triple-digit gains last year. However, EV bubble concerns have led shares of...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email