Photographer: Qilai Shen / Bloomberg
Photographer: Qilai Shen / Bloomberg
Jack Ma is under siege Ant Group Co. intends to split its financial operations into a holding company that could be regulated more like a bank, according to people familiar with the situation, which could hinder the growth of its most profitable units.
The fintech giant intends to move any unit that would require a financial license to the holding company, pending regulatory approval, said people, who asked not to be named because the issue is private. Plans are still under discussion and could be changed, people said. Ant declined to comment.
The operations that Ant is trying to include in the investment holding company include wealth management services, consumer loans, insurance, payments and MYbank, an online lender in which Ant is the largest shareholder, people said. Within the structure of the financial holding company, Ant’s business would probably be subject to greater capital constraints, potentially reducing its ability to borrow more and expand in recent years.
That being said, the proposals suggest that Ant could continue to operate in financial services beyond its payments business, allaying investors’ concerns about how the central bank’s Sunday message should be interpreted when it asked Ant to return to its roots. as a payment provider.
“This means that 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. Consumer loans should not be over-leveraged. “
SoftBank Group Corp. rose to 4.5% on trading on Tokyo on Tuesday. The Japanese company is the largest shareholder in Alibaba Group Holding Ltd., a major supporter of Ant.
Chinese regulators have also told Ant to draw up a plan to review his business, the latest in a series of steps to take over Ma’s financial empire. While ceasing to directly request a separation of the company, the central bank stressed that Ant must “understand the need to review its business” and draw up a timetable as soon as possible.
“Its growth will slow down a lot,” said Francis Chan, a Bloomberg Intelligence analyst in Hong Kong. The valuation of non-paying businesses, including wealth management and consumer lending, could be reduced by up to 75%, he said. said.
Ant was prepared last month for a public list that would have valued it at over $ 300 billion, before regulators stepped in and eliminated the IPO.
Ant has held $ 11 billion in cash and cash equivalents since June, according to the IPO filing. The company said in its October prospectus that it will use its subsidiary Zhejiang Finance Credit Network Technology Co. apply for a financial holding license.
Under the rules that came into force in November, non-financial corporations that control at least two cross-sectoral financial institutions must hold a financial holding license. The rules on how financial holding companies could be regulated are still under deliberation.
| Key changes according to the draft rules | Impact on companies |
|---|---|
| Online lending companies, such as Ant, should provide 30% of loan financing | More capital is needed; Ant holds about 2% of the loans on his books |
| Companies to be banned from operating outside the provincial bases without the special approval of the banking supervision body. The permit, if granted, must be renewed every three years | Ask some companies to apply for licenses again; more frequent control |
| Those who borrow in several provinces to have a 5 billion yuan minimum share capital | More capital, more control over operations |
| A shareholder cannot control more than one micro-creditor operating nationally | Limit expansion vehicles |
Chan estimates that Ant must inject at least 70 billion yuan ($ 11 billion) of new capital just for its lending business. This calculation is based on draft rules that require Ant to co-finance 30% of loans, with a maximum leverage of five times.
Lifestyle units
Ant intends to give up the digital lifestyle business – services that link users to food delivery, on-demand neighborhood services and hotel reservations – from the financial holding company, one of the people said. The ant will continue to be the father of all these operations, the person added.
Ant is not working on a proposal to split the company at this time, although it is seeking more guidance from regulators on the structure that will be acceptable and may change its plans based on that feedback, that person said.
| Recent rule changes |
|---|
| Enterprises crossing two financial sectors, reaching the classified asset threshold “financial holding companies with greater control over capital, financing, ownership, etc. |
| Use of asset-backed securities to finance consumer loans capped atfour times the value of the net asset; loans using bank and shareholder financing should not exceed the net asset value of firms |
| Regulators saidcaps interest rates on consumer loans |
Ant’s valuation could fall below $ 153 billion, according to Chan, similar to where he was 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)