Ant Group Faces People's Bank Audit – Not Long after Announcement of IPO Plan

Financials Author: Zhu Peng Jul 31, 2020 07:20 PM (GMT+8)

The People's Bank of China (PBC) will be investigating online credit companies in detail. Will financial services support the Ant Group in the future?

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Only nine days after Ant Group announced that it is planning a double-IPO in Hong Kong and Shanghai, the People's Bank of China, the country's central bank, said that an investigation of online collaborative consumer credit platforms will be undertaken. The Alibaba-affiliated digital giant thereby needs to provide the bank with key statistics, such as month-end consumer credit balance, credit interest rate and credit default rate.  

As China's biggest online credit provider, Ant Group possesses more than half of the country's online credits with CNY 1 trillion. The firm has several revenue streams. After the restriction for high leverage was set in 2017, Ant's consumer credit platforms Huabei (Chinese: 花呗), and Jiebei (Chinese: 借呗), manage to cooperate with financial firms such as banks and trust companies by introducing potential customers to them. Besides, Ant Group has numerous off-balance-sheet loans granted collaboratively with other financial firms.

Whether the coming investigation signals more regulation for risk management and capital adequacy in the finance industry is hard to determine.  Some believe that possible future regulations may hinder Ant's growth, decreasing the company's profit, while 'positive-minded' investors think that the investigation is designed only for collecting data, rather than drafting rules.

The latest financial report of Alibaba shows that half of Ant's revenue comes from wealth management, insurance and credit services. However, Xiaoming Hu, the company's CEO, said that technological services – AI, blockchain and risk management – will contribute 80% of Ant's revenue in the next five years. In other words, no matter what regulations may be set for issuing credit, Ant Group is likely to gradually rely less on financial services.