(Bloomberg) – Ant Group Co. and at least a dozen banks are repulsing their years-long collaboration on consumer lending platforms that boost spending by at least 500 million people across China.
Regulators have announced their intention to limit online lending over the past few months, prompting the banks and Ant themselves to discuss lending restrictions, people familiar with the matter have said and asked not to be identified as having private information do not discuss.
Banks in Zhejiang Province have been instructed to reduce their exposure to Ant through joint lending on the firm’s Jiebei and Huabei platforms. Some borrowers in Shanghai have drawn up a timetable for a gradual reduction of the joint offering, while at least one in Shandong has completely suspended ties with the firm.
The moves took place in parallel with Ant’s talks with the Chinese authorities on a restructuring plan. Bloomberg reported on Wednesday that Ant has agreed to become a financial holding company, which is subject to capital requirements similar to those of banks.
Consumer credit was crucial in driving the growth of Ant’s digital finance business, which contributed 63% of the business’s revenue in the first half of 2020 before the authorities unleashed a shower of rules on the country’s thriving financial technology industry. to limit. Regulators also want to prevent any business from becoming too dominant.
The regulators increased an initial public offering of $ 35 billion in November by Ant Group, which stunned investors from Shanghai to New York. In a conference with investors on Tuesday, Daniel Zhang, CEO of Alibaba Group Holding Ltd., said that there was a “great deal of uncertainty” with Ant’s business and that it was difficult to assess the impact of the new regulations. judge. Alibaba owns a third of Ant and both were founded by billionaire Jack Ma.
Ant declined to comment. The China Banking and Insurance Regulatory Commission did not immediately respond to a request for comment.
One of the most difficult for Ant was the proposal to impose additional capital requirements on microlenders and require fintech platforms to set up at least 30% of the financing for loans offered jointly with banks. Prior to the proposal, only about 2% of the more than 1.7 trillion yuan ($ 263 billion) in loans remained on Ant’s balance sheet, with the bulk of the funding coming from its approximately 100 banking partners.
The build-up of consumer debt, especially those offered by fintech platforms outside the regulatory area, has unnerved authorities that want to sustain the country’s economic growth. According to the International Monetary Fund, Chinese households have built up leverage faster than borrowers in every other major economy. Guo Wuping, head of consumer protection at the banking regulator, said easy access to online credit has put many low-income and young people in debt.
The restriction of joint loans with the banks could alleviate Ant’s capital shortfall under the new rules. Ant must inject at least 70 billion yuan of new capital just for its lending business to comply with the regulation, according to a November estimate by Francis Chan, a senior analyst at Bloomberg Intelligence in Hong Kong.
Liang Tao, vice chairman of the China Banking and Insurance Regulatory Commission, said in the past month, recent measures have not targeted a specific company and are being well received by some in the industry. Some of the companies have a “relatively positive attitude” towards the new requirements and have achieved “initial effects” in their efforts to “correct”, he said.
Banks and insurers should continue to work normally with internet platforms in accordance with laws and regulations, and some borrowers who have withdrawn should rectify their behavior, Liang said without elaborating.
The local banking regulators in provinces, including Zhejiang and Hunan, continue to appeal to banks that relied heavily on Ant for referring customers and reducing the growth of loans, the people said.
“While the restructuring will bring Ant a step closer to relocating its IPO, all its units are facing more restrictions on capital, leverage and product prices, which are jeopardizing growth,” Chan said. fair.
(Updates with China’s domestic leverage in the ninth paragraph.)
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