Photographer: Qilai Shen / Bloomberg
Photographer: Qilai Shen / Bloomberg
Jack Ma is harassed Ant Group Co. is planning to include its financial operations in a holding company that can be regulated more like a bank, according to people familiar with the situation, which could paralyze the growth of its most profitable units.
The fintech giant plans to move any unit that needs a financial license to the holding company, pending regulatory approval, the people, who asked not to be named because the matter is private, said. According to people, the plans are still under discussion and are subject to change. Ant declined to comment.
Among the transactions Ant wants to include in the holding company include wealth management services, consumer lending, insurance, payments and MYbank, an online lender in which Ant is the main shareholder, according to people. Under the structure of portfolio financial companies, Ant’s businesses would be subject to more capital constraints, which could slow down its ability to lend more and expand at the pace of recent years.
That said, the proposals suggest Ant could still operate in financial services beyond its payments business, and removed investors’ concerns about how to interpret the central bank’s Sunday message when it asked Ant to return to its roots as to payment provider.
“This means China is still trying to encourage domestic consumption and they need platforms like Ant to help with consumer lending,” said Wang Zhen, a Shanghai-based analyst at UOB-Kay Hian Holdings Ltd. “The key is that consumer lending cannot be overstated.”
SoftBank Group Corp. rose to 4.5% on Tokyo quotes on Tuesday. The Japanese company is the largest shareholder in Alibaba Group Holding Ltd., one of Ant.
Chinese regulators also told Ant to design a plan to revise his business, the latest in a series of steps to curb Ma’s online financial empire. While failing to directly call for the company’s bankruptcy, the central bank stressed that Ant needed to “understand the need to review its business” and draw up a timeline as soon as possible.
“Its growth would slow down a lot,” said Francis Chan, an analyst at Bloomberg Intelligence in Hong Kong. The valuation of unpaid businesses, including wealth management and consumer lending, could be reduced by up to 75%, he said. dit.
Ant was ready last month to get a public listing that would have valued him at more than $ 300 billion, before regulators intervened and canceled the IPO.
Ant owned $ 11 billion in cash and cash equivalents as of June, according to its IPO presentation. The company said in its October brochure that it would use its subsidiary Zhejiang Finance Credit Network Technology Co. apply for the financial holding license.
Under the rules that went into effect in November, non-financial firms that control at least two cross-sector financial institutions must have a financial holding license. The rules on how financial corporations could be regulated are still under deliberation.
| Key changes according to draft rules | Impact on companies |
|---|---|
| Online loan companies like Ant should provide them 30% of loan financing | More capital is needed; Ant has about 2% of the loans from his books |
| It is forbidden for companies to operate outside the provincial bases without the special approval of the banking watchdog. Permission, if granted, to be renewed every three years | Require some companies to re-apply for licenses; more frequent scrutiny |
| Loans in several provinces have one 5 billion yuan of minimum share capital | More capital, greater control of operations |
| A shareholder cannot control more than one microcredit operating nationally | Limit expansion vehicles |
Chan estimates that Ant needs to inject at least 70 billion yuan ($ 11 billion) of new capital just for its credit lending business. This calculation is based on draft rules that require Ant to co-finance 30% of the loans, with a maximum leverage of assets five times.
Lifestyle units
Ant plans to leave the digital lifestyle business (services that link users to food delivery, a la carte neighborhood services and hotel reservations) from the financial company, said a of people. The ant will remain the father of all these operations, the person added.
Ant is not working on a proposal to separate the company at this time, although he is looking for more guidance from regulators on what structure will be acceptable and may change his plans based on those comments, that person said.
| Recent changes to the rules |
|---|
| Companies straddling two financial sectors and meeting the classified asset threshold ”financial holding companies with greater control over capital, financing, ownership, etc. |
| Use of asset-backed securities to finance consumer loans with a cap four times the net asset value; loans financed by banks and shareholders should not exceed the net asset value of companies |
| Regulators said so interest rate limit on consumer loans |
Ant’s valuation could fall below $ 153 billion, according to Chan, similar to what was held two years ago after a fundraising round.
– With the assistance of Lulu Yilun Chen, Zheng Li and Jun Luo
(SoftBank stock price updates, analyst voice)