Ant Group tells staff it hopes to resume IPO, as Beijing finalises new rules for digital lenders

04-Mar-2021 Intellasia | South China Morning Post | 6:54 AM Print This Post

Ant Group has told employees that it was hopeful of eventually resuming its initial public offering (IPO), and that before this materialises it was working on a plan to provide a solution for staff looking to monetise their stock holdings.

According to people familiar with the matter, Eric Jing, Ant’s chair, told employees via the company’s internal website that it plans to offer a short-term liquidity solution to staffers starting April, the start of the fintech group’s financial year. While such a plan had not been finalised, it was likely to provide an interim solution for employees who had been hoping to cash out their holdings.

Ant’s dual $34.5 billion IPO slated for Hong Kong and Shanghai was foiled at the last minute on the back of regulatory changes last November. Beijing has unleashed a raft of new fintech regulations and an antitrust inquiry into the country’s technology sector since then. To regulators, keeping a closer eye on Ant and treating it more like a bank than a technology platform reduces the threat of disruption and stops the upstart from exploiting loopholes.

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Jing also told staff that Ant would eventually go public, signalling management’s confidence in resuming the listing. His comments follow those made by China’s central bank governor, Yi Gang, who in January raised the possibility of resuming Ant’s listing.

“This is a process. Once the problem [is] solved, it will go back on track, to continue being considered according to the law,” Yi said in response to a question about approving Ant’s IPO in the future, at the virtual World Economic Forum in January. “You just follow the standard of legal structure, you will have the result,” he said.

The prospect of the IPO resuming comes amid comments by the chair of China’s banking regulator, who said on Tuesday that online finance providers were free to continue innovating, but online-only banks, such as Ant’s MyBank, had to comply with the same regulatory scrutiny as traditional banks.

The comments by Guo Shuqing, the chair of the China Banking and Insurance Regulatory Commission (CBIRC), followed similar statements made by CBIRC vice-chair Liang Tao at a financial forum in November, and reiterated the regulator’s stance that fintech platforms and digital banks should meet the same compliance requirements as other banks.

Guo was responding to a question from the press about the role Ant should play in China’s financial system. Without directly referring to Ant, Guo presented WeBank and MyBank as examples of online-only lenders being regulated under the same rules currently governing similar financial service providers.

“We have internet-only banks such as WeBank and MyBank, and other digital banks in Sichuan. While we encourage such development… they should be uniformly regulated with the entire industry” regardless of the format in which these financial businesses are conducted, he said.

Guo’s comments also followed the finalisation of new rules last month that seek to tighten online lending services that banks are offering in collaboration with internet lending platforms. These are expected to become effective starting January 1 next year. And while the new rules do not single out digital banks, analysts expect that China’s online-only banks will also be affected.

The CBIRC has since 2014 granted numerous licences for privately-run banks, some of which have been acquired by big technology groups such as Tencent. For example, Ant is an affiliate of Alibaba Group Holding, which owns this newspaper, and internet group Baidu has set up aiBank, a joint venture with China Citic Bank.

Such lenders make decent profits despite having no physical branch. For instance, according to MyBank’s latest disclosure, its net profit in 2019 surged by 90 per cent to 1.3 billion yuan (US$185.5 million) from 658.3 million yuan in 2018.

The new rules finalised last month will also require that banks cap the amount of loans they issue in partnership with one online lending platform to 25 per cent of their net tier 1 capital ratio. They will also impose a specific quota reining in such collaborations, as they stipulate that the total balance of loans with online platforms cannot exceed 50 per cent of a bank’s total loan book. Banks will need to make sure they can meet these targets by July 17 next year.

Moreover, all online lending platforms will be required to contribute 30 per cent of the funding to back up the loans they offer in partnership with traditional banks, effective from January 1, 2022.

Beijing is keen to protect the interests of traditional banks, which are an important conduit for executing China’s economic measures. For example, these banks were asked to sacrifice as much as 1.5 trillion yuan in profit last year to finance cheap loans, cut fees and defer loan repayments to help small businesses survive the downturn caused by Covid-19 containment measures. Analysts have said the regulators are keen to ensure that innovation does not compromise these banks’ ability and role in safeguarding economic growth and stability.


Category: China

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