Jack Ma is trapped Ant Group plans to merge its financial operations into a holding company that could be regulated like banks, according to people familiar with the situation, which could cripple the growth of its most profitable units.
People who asked not to be named because it was a privacy issue said the fintech giant plans to transfer any unit that requires a financial license to the holding company, pending regulatory approval. People said the plans are still under discussion and subject to change. Ant declined to comment.
People said the operations Ant is looking to incorporate into the holding company include wealth management services, consumer lending, insurance, payments, and MYbank, an online lender to which Ant is the largest shareholder. Under the financial holding company’s structure, Ant’s business will likely be subject to further capital controls, which could limit its ability to lend further and expand at the pace of the past few years.
However, the proposals suggest Ant will still be able to operate in financial services other than its payments business, easing investor concerns about how to interpret the central bank’s message on Sunday when it asked Ant to return to its roots as a payments provider.
Wang Chen, an analyst at UOB-Kay Hian Holdings Ltd. in Shanghai, said: “This means that China is still trying to encourage domestic consumption, and they need platforms like Ant to help with consumer loans.” You will not be overrated. “
SoftBank Group Corp rose 4.5%, the largest rise in more than two weeks. Alibaba Group Holdings Limited rose 5.7% in Hong Kong, the biggest gain since Nov. 5. The Japanese company is the largest shareholder in Alibaba, the main supporter of Ant.
Chinese regulators have also asked Ant to devise a plan to overhaul its business, the latest in a series of steps to curb Ma’s online financial empire. While not directly requesting the company to be dismantled, the central bank stressed that Ant needed to “understand the imperative to reform its business” and come up with a timeline as soon as possible.
“Its growth will slow down a lot,” said Francis Chan, a Bloomberg Intelligence analyst in Hong Kong. The valuation of unpaid businesses, including wealth management and consumer lending, could be reduced by as much as 75%, He said.
Ant was preparing last month for a general listing that would value more than $ 300 billion, before regulators stepped in and thwarted the IPO.
Ant had $ 11 billion in cash and cash equivalents as of June, according to the IPO filing. The company said in the October prospectus that it would use its subsidiary, Zhejiang Finance Credit Network Technology Co., Ltd. Implementation To obtain a financial contract license.
Under the rules that went into effect in November, nonfinancial companies that control at least two financial institutions from different sectors must obtain a financial contract license. The rules for how to regulate financial holding companies are still under discussion.
|Major changes under the draft rules
|Impact on companies
|Internet lending companies such as Ant 30% Of loan financing
|More capital required; Ant has about 2% of the loans on its books
|Companies will be prohibited from operating outside of the provincial rules without special approval from the Banking Supervision Authority. Permission is renewed, if granted, every three years
|Requiring some companies to re-apply for licenses; More frequent checking
|Those who lend in their multiple counties 5 billion RMB of the minimum registered capital
|More capital, more scrutiny of operations
|A shareholder cannot control more than one small lender operating nationally
|Limits expansion compounds
Chan estimates that Ant needs to inject at least 70 billion yuan ($ 11 billion) of new capital just for the credit lending business. The calculation is based on draft rules requiring Ant to participate in financing 30% of loans, with a maximum asset leverage of five times.
One person said that you plan to leave your digital lifestyle business – services that connect users with food delivery, neighborhood on-demand services and hotel reservations – outside of the financial holding company. And the person added that the ant would still be the parent of all these processes.
That person said Ant is not working on a proposal to break up the company at this time, though it is seeking further guidance from regulators on which structure will be acceptable and may change its plans based on those comments.
|Recent rule changes
|Companies that span across two financial sectors, and meet the rated asset thresholdFinancial holding companies with more scrutiny of capital, financing, ownership, etc.
|Use asset-backed securities to finance consumer loans at a maximumfour times Net asset value; Loans using financing from banks and shareholders must not exceed the net asset value of companies
|The organizers saidThe interest rate ceiling imposed on consumer loans
Ant’s rating could drop below $ 153 billion, according to Chan, similar to what it was a couple of years ago after a fundraising tour.
– With the help of Lulu Yilun Chen, Zheng Li and Jun Luo
(SoftBank and Alibaba share price updates in sixth paragraph)