Siege of jack ma The Ant Group company plans to turn its financial operations into a holding company that can be regulated more like a bank, crippling the development of possibly its most profitable units, according to people familiar with the situation.
The fintech giant plans to relocate to any entity that would require a financial license at the regulatory company, pending regulatory approval, people said, who were not named because the case is private. People said plans are still under discussion and change. Ant declined to comment.
Among the operations that Ant is looking to diversify into the company are Wealth Management Services, Consumer Lending, Insurance, Payments and MYbank, an online lender with Ant being the largest shareholder. Under the financial holding company structure, Ant’s businesses would likely be subject to greater capital restrictions, possibly curbing its ability to lend and expand at a pace higher than in years past.
That said, the proposals suggest that Ant can still work in financial services beyond its payments business, silencing investors’ concern about interpreting the central bank’s Sunday message when it sent Ant Asked to return 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 debt,” Shanghai-based analyst Wang Zhen with UOB-Kay Hian Holdings Ltd. Said, “The key is that consumer lending should not be ‘over-leveraged’.
Softbank Group Corp rose as much as 4.5% in Tokyo Trading on Tuesday. Japanese company is the largest shareholder Alibaba Group Holding Limited, a major bench of Ant.
Chinese regulators asked Ant to formulate a plan to further their business, the latest in a series of steps to rein in Ma’s online finance empire. While it simply stopped asking for the company’s breakup, the central bank insisted the ant needed to “understand the need to overhaul its business” and come up with a timetable as soon as possible.
“Its growth will slow down significantly,” said Bloomberg Intelligence Analyst Francis Chan of Hong Kong. The valuation of non-paying businesses, including wealth management and consumer loans, can be reduced by up to 75%. said.
Ant was slated for a public listing last month, which intervened in an IPO and was mooted before it grossed more than $ 300 billion.
Ant held $ 11 billion in cash and equivalents as of June, according to its IPO filing. The company said in its prospectus in October that it would use its subsidiary Zhejiang Finance Credit Network Technology Company Apply for a financial holding license.
Under the rules which came into effect in November, non-financial companies, which control at least two cross-sector financial institutions, require a financial holding license. Rules on how financial holding companies can be regulated are still under consideration.
| Major changes under draft rules | Impact on firms |
|---|---|
| It would be necessary to provide online lending companies like Ant. 30% of the money for the loan | Need more capital; Ant keeps about 2% loan on his books |
| Operations outside provincial targets may be banned without special approval from the banking watchdog. Permission, if granted, must be renewed every three years | Some firms are required to reapply for a license; More frequent checks |
| A loan for lenders in many provinces 5 billion yuan of minimum registered capital | More capital, more scrutiny on operations |
| A shareholder cannot control more than one micro-lender nationally | Extension limits vehicles |
Chan estimates that Ant only needs to invest at least 70 billion yuan ($ 11 billion) of new capital for its debt-lending business. This calculation is based on draft rules requiring ants for 30% of loans with a five-fold maximum property benefit.
Lifestyle units
Ant plans to leave its digital lifestyle business – services that connect users with food supplies, on-demand neighborhood services and hotel bookings – to people outside the financial holding company. The ant will still be the father of all the operations that the person has added.
Ant is not working on a proposal to disband the company at this time, although is seeking more guidance from regulators about which structure would be acceptable and could change its plans based on that response, the person said.
| Recent rules |
|---|
| Business of two financial sectors, classification of asset limits classified ‘Financial holding companies’ with more scrutiny on capital, financing, ownership etc. |
| Asset-backed securities are used to fund consumer loansFour times net asset value; Debts using funds from banks and shareholders should not exceed the net asset value of firms |
| Regulators saidCap interest rate on consumer loans |
Ant’s valuation could fall below $ 153 billion, according to Chan, where he stood two years ago after a round of fundraising.
– assisted by Lulu Yilun Chen, Zheng Li and Jun Luo
(Softbank share price, updates with analyst voice)
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