Jack Ma’s botched Ant IPO becomes a boost for state banks


Ant and other fintech giants such as Tencent Holdings Ltd, using big data and cloud computing, have grabbed market share from commercial banks in the lucrative consumer lending space by providing easier access to credit for younger users online, many of whom have little income nor credit history. (File pic Jack Ma)

HONG KONG: China Merchants Bank Co and other state-backed lenders have emerged as the biggest winners from new regulations that derailed Ant Group Co’s massive stock listing, as China aims to level the playing field between fintech giants and traditional banks.

Merchants Bank, known as the retail bank king in China, has soared 19% in Hong Kong this month to a record high, its biggest seven-day advance in more than five years.

Other Chinese lenders gained, including Agricultural Bank of China Ltd, while Alibaba Group Holding Ltd, an affiliate and one-third shareholder of Ant, lost 6%.

Chinese banks, trading near record low valuations, rallied after financial regulators last week proposed new rules to curb the rapid growth and leverage at the nation’s more than 200 micro-loan lenders, putting a surprise halt to Ant’s US$35bil initial public offering. The authorities turned up the heat yesterday on Internet giants, including Alibaba with antitrust rules to curtail their growing dominance.

Ant and other fintech giants such as Tencent Holdings Ltd, using big data and cloud computing, have grabbed market share from commercial banks in the lucrative consumer lending space by providing easier access to credit for younger users online, many of whom have little income nor credit history.

“The regulations move the dial back in favor of banks, ” said Sanjay Jain, a Singapore-based head of financials at Aletheia Capital Ltd, Asia’s biggest independent investment-research firm. “It seems the regulators are putting brakes on the extent of income that can be disintermediated out of the banking system.”

Merchants Bank, based in the southern technology hub of Shenzhen, is one of the largest credit card issuers in China with 155 million consumer banking clients at the end of September.

The bank derived about 57% of its net operating income from retail finance last year, among the highest in China.

Along with other state-owned lenders such as Industrial & Commercial Bank of China Ltd, it has been battling Ant for customers in everything from payments to lending and wealth management, while leveraging its own digital platforms to acquire new users.

Ant has been winning a lot of the battles. Based in the eastern province of Zhejiang, Jack Ma’s fintech juggernaut helped provide small unsecured loans to about 500 million people over the past year through two micro-lending platforms: Huabei (Just Spend) and Jiebei (Just Lend).

After getting its start in online payments with Alipay, lending is now the firm’s biggest business.

Ant has underwritten about 1.7 trillion yuan (US$259bil) in consumer loans and 422 billion yuan in small business loans for about 100 banks and other financial institutions, most of which have limited distribution networks.

Ant doesn’t work with larger consumer lenders like China Merchants.

Chinese state banks have been pushing for Beijing to curb fintech giants for years with limited success.

At one point state media called Ant’s money-market funds “blood-sucking vampires” for siphoning off banks’ deposits.

The move last week was a “watershed moment” for the financial regulatory framework, according to Daiwa Securities Group Inc.— Bloomberg

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