GUANGZHOU, China – China has approved Ant Group to operate a consumer finance company, a major positive step in the forced restructuring of its business just months after regulators put the brakes on its record breaking listing.
Another six shareholders will contribute 4 billion yuan and hold the remaining 50%. The company is registered in the southwestern city of Chongqing with a total capital of 8 billion yuan.
Among other things, the company will be able to provide personal loans and issue bonds. The consumer finance firm will also host Ant Huabei and Jiebei’s loan businesses. These are crucial for the company and have been major sales drivers so far.
In November, the Ant Group, controlled by billionaire Jack Ma, was scheduled to launch a record $ 34.5 billion initial public offering in Shanghai and Hong Kong. But the Chinese authorities pulled the plug on the list two days before the deadline, citing regulatory concerns.
The People’s Bank of China asked the Ant Group to come up with an amending plan in December and approved a series of steps in April. One of these involves Ant Group becoming a financial holding company, which could mean the company will be regulated more like a bank.
While it hasn’t happened yet, starting and running a consumer finance company is a great first step for Ant Group to resolve their regulatory issues.
“It’s a positive sign for Ant as it means that regulators will continue to support Ant in the lending business – except that it is now able to regulate them.” Kevin Kwek, managing director and senior analyst at Bernstein, told CNBC. “The other positive is that for Ant it shows progress in restructuring its business to meet regulatory requirements.”
“Under the guidance of regulators, Ant will work with other shareholders of Chongqing Ant Consumer Finance Co., Ltd. to meet consumer needs and further improve the quality of financial services and risk management skills,” an Ant Group spokesman said Thursday.
An Ant Group logo is pictured at the company’s headquarters, a subsidiary of Alibaba, in Hangzhou, Zhejiang Province, China on October 29, 2020.
Aly song | Reuters
Before the IPO was suspended, Chinese regulators were concerned about technology companies offering banking-like services such as lending and the impact on financial stability.
Ant Group offers loans that are independently subscribed by the company’s partner financial institutions, which include around 100 banks. In the six months to June 30, 2020, this made up the largest share with around 39% of sales. The loans were previously offered through the Huabei and Jiebei products.
Now Ant must clearly state which financial institution is granting the loan, an unnamed CBRIC official told the 21st Century Business Herald publication. All loans through the Huabei and Jiebei brands must be taken in part by Ant’s consumer finance company, the report said. An expert who preferred to remain anonymous confirmed to CNBC that the information in the report was correct.
Ant’s investigation sparked a regulatory attack on Ma’s Imperium that resulted in a $ 2.8 billion fine in an antimonopoly investigation by e-commerce giant Alibaba.