Ant suspends sales of debt amid stringent new regulations for fintech in China
The regulations also derailed its record IPO with the firm having to outline a plan to submit to being supervised more like a bank
Ant Group has suspended the issuance of securities backed by online loans as Jack Ma’s fintech giant overhauls its business to meet stringent new rules for the sector, people familiar with the matter have said.
Ant has no immediate plans to issue asset-backed securities (ABS) this year, the people said, asking not to be named as the matter is confidential. The delay was partly due to the company’s slow progress in rectifying its operations and bringing down its leverage ratio, two of the people said.
Ant is scaling back its business in consumer finance after a clampdown on the sprawling fintech firm, which also derailed its record initial public offering (IPO). In April, the firm outlined a plan to drastically revamp its business and submit to being supervised more like a bank — a move that will lead to more capital requirement and regulatory scrutiny.
Last year, the government also issued rules limiting how much online platforms can raise via securitisation. The Shanghai stock exchange said on Tuesday that sales of two ABS totaling 18-billion yuan ($2.8bn) by Ant units were terminated, without giving a reason.
Authorities have pledged to curb the “reckless push” of tech firms into finance and introduced a slate of measures that threaten to restrict Ant’s dominance in everything from online payments to consumer lending and wealth management.
A representative at Ant declined to comment.
Among the regulations expected to hit Ant the most is the rule drafted by the banking regulator in November to impose a 30% funding requirement on online lenders when they jointly issue loans with traditional banks. Ant’s Jiebei and Huabei units had facilitated 1.7 trillion yuan in consumer loans to 500-million people as of June 30 2020.
The company only kept about 2% on its balance sheet with the rest funded by third parties or packaged as securities and sold on. Ant had more than 170-billion yuan of ABS backed by consumer loans outstanding as of October, according to Huajin Securities.
Francis Chan, a senior analyst at Bloomberg Intelligence, has estimated that Ant may need to inject as much as 80-billion yuan into its two consumer lending units to comply with the new regulations on funding and leverage.
Ant isn’t alone in facing the clampdown. The government imposed wide-ranging restrictions on the financial divisions at 13 companies, including Tencent Holdings, in which Naspers has a 31.2% stake, and ByteDance. JD.com, Meituan and Didi Chuxing were also among companies summoned to an April meeting at which regulators handed out stricter compliance requirements.
The regulator has set different deadlines on various financial services with the longest grace period of no more than two years, Guo Shuqing, chair of the China Banking and Insurance Regulatory Commission, said in March, without elaborating.
Still, Ant’s profit rose 50% to $3.4bn in the December quarter, up 50% from the previous three months.
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