Jack Ma 1

Fintech. Ant will sacrifice his growth to create a bank

Ant to incorporate wealth management, consumer loans, insurance, payments and Mybank services into a new bank

Jack-Ma

Ant Group, from the billionaire Jack Ma, are considering the option of placing their financial operations in a holding company that could be regulated like a bank, according to sources familiar with the move. This change could affect the growth of your most profitable units.

The fintech plans to move any unit that requires a financial license to the holding company if it gets regulatory approval, confirmed the same sources, who requested anonymity. Plans are still under review and are subject to change. Ant declined to comment for inclusion in this information.

The operations that Ant seeks to incorporate into the bank holding include wealth management services, consumer loans, insurance, payments and Mybank, an online bank in which Ant is the largest shareholder.

The new bank will slow growth

Under the holding company structure, Ant’s businesses would likely be subject to more capital constraints, which could limit its ability to further credit and expand at the rate of recent years.

That said, the proposals suggest that Ant could still operate in financial services beyond its payments business, reducing investor concern about how to interpret Sunday’s message from the central bank when it asked Ant to go back to its roots. as a payment provider.

“This means that China is still trying to stimulate domestic consumption, and they need platforms like Ant to help with consumer loans,” said Wang Zhen, a Shanghai-based analyst for UOB-Kay Hian Holdings. “The key is that consumer loans should not be over-leveraged.”

Market response

The actions of Softbank Group they rose 4.5%, the biggest gain in more than two weeks. Alibaba Group Holding rebounded 5.7% in Hong Kong, the biggest gain since November 5. The Japanese company is Alibaba’s largest shareholder.

Chinese regulators also directed Ant to devise a plan to reorganize his business, the latest in a series of measures to control Ma’s online financial empire.

While it did not directly request the company to be chopped up, the central bank stressed that Ant needed to “understand the need to restructure its business” and develop a schedule 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 companies that do not operate in the payments segment, such as wealth management and consumer loans, could be lowered by up to 75%, he said.

Last month, Ant was ready to go public, an IPO that would have valued it at more than $ 300 billion. But regulators suspended the operation.

A bank by legal imperative

Under the rules that went into effect in November, non-financial companies that control at least two cross-sector financial institutions must have a financial holding license. The rules on how financial holding companies could be regulated are still under discussion.

Chan estimates that Ant needs to inject at least 70 billion yuan (11 billion) of new capital for his loan business alone. That calculation is based on rules that require Ant to cofinance 30% of the loans, with a maximum asset leverage of five times.

Ant plans to sideline its digital lifestyle business, services that link users to food deliveries, on-demand proximity services and hotel reservations outside of the financial holding company, one of the people said. Ant would continue to control all of those operations, the person added.

Ant’s valuation could fall to less than $ 153 billion, according to Chan, similar to his position two years ago after a round of funding.