EXCLUSIVE China’s central bank accepts Ant’s bid to set up financial holding company – sources

A logo of Ant Group is pictured at the headquarters of Ant Group, a subsidiary of Alibaba, in Hangzhou, Zhejiang province, China October 29, 2020. REUTERS/Aly Song

Join now for FREE unlimited access to Reuters.com

Register

  • PBOC licensing app signals could be coming soon – sources
  • Financial holding license to pave way for Ant market debut
  • PBOC mainly made verification license for credit rating JV – source

HONG KONG, June 17 (Reuters) – China’s central bank has accepted Ant Group’s request to set up a financial holding company, three people with knowledge of the matter said, a key step in completing an overhaul of a year of Jack Ma’s fintech business and revive its stock market debut.

The expected approval of the plan by the People’s Bank of China (PBOC) is the latest sign that Ant, a tech giant with financial businesses ranging from payments to wealth management, is about to emerge from a regulatory repression.

The PBOC accepted Ant’s candidacy this month, the sources told Reuters, as investors hope Chinese regulators ease a crackdown on private companies that began in late 2020 as growth slows in the region. second largest economy in the world due to COVID-19 restrictions.

Join now for FREE unlimited access to Reuters.com

Register

Ant and the PBOC did not respond to requests for comment from Reuters on Friday.

New York-listed shares of Alibaba Group Holding Ltd, the Chinese e-commerce giant of which Ant is a subsidiary, rose 4% in early trading on Friday.

Although Ant has been working with financial regulators for months on a sweeping overhaul, the central bank’s acceptance to consider the application indicates the company could soon obtain its long-awaited license, said the sources, who asked not to be named due to confidentiality constraints.

Chinese authorities abruptly halted the IPO of Ant, which is set to raise $37 billion in the world’s largest listing, in November 2020, shortly after billionaire tech founder Ma made a statement. discourse accusing financial watchdogs of stifling innovation.

Clamping down on Ma’s business empire, authorities put Ant, whose business spans payment processing, consumer lending and the distribution of insurance products, under the overhaul.

As part of the overhaul, the PBOC in December 2020 told Reuters in a statement that Ant was developing a plan to establish a financial holding company and that Ant should ensure that all of its financial operations are placed under regulatory oversight. .

Ant had been rated as a technology company for its IPO, but the forced move to a financial holding company will subject it to capital requirements and regulations similar to those of banks.

CREDIT RATING LICENSE

Reuters reported last week that central China management had given Ant a tentative green light to relaunch its IPO in Shanghai and Hong Kong. Read more

Aiming to file a preliminary prospectus for the stock offering as early as next month, Ant is awaiting final comments from financial regulators, particularly the PBOC, on the creation of the financial holding company, a source said.

To officially relaunch its mega-listing, Ant must obtain the key financial holding license and complete its restructuring, the sources said.

The scuttled IPO marked the start of a crackdown that hit Chinese tech giants and quickly spread to other sectors, including real estate and private education, wiping out billions of market value and causing layoffs in some companies.

Beijing, however, has softened its stance in recent months. Vice Premier Liu He told technology leaders last month that the government supports the development of the sector. Read more

Along with the financial holding company license, Ant’s personal credit rating joint venture has applied for a permit, as part of the fintech major’s business overhaul.

The central bank has nearly completed the review of the credit rating license, another source with direct knowledge of the matter said, after accepting the unit’s application in November. Read more

Ant agreed to establish the joint venture with partners, including three state-owned companies, as part of a plan for state-backed investors to take a combined 48% stake in its key asset – a treasure trove of data from over a billion users. Read more

Ant will own 35% of the company and the only non-state-backed shareholder, Transfar Group, will own 7%, while Hangzhou Xishu will get the remaining 10%, the PBOC said in November.

Hangzhou Xishu is an entity that operates employee stock ownership plans, another source told Reuters.

But recently, regulators have suggested further adjustments to the shareholding structure to increase stakes from public investors, with license approval expected after the adjustment, the fourth source said.

Ant, through the Alipay super app, collects data from more than 1 billion users, many of whom are young internet users without credit cards or sufficient bank credit history, as well as 80 million merchants, according to analysts and its IPO prospectus.

US-listed shares of Chinese companies Pinduoduo (PDD.O), Bilibili (9626.HK), Baidu (9888.HK), NIO, JD.COM (9618.HK) and Tencent Music (TME.N) have rose 1.6% and 6.2% on Friday.

Join now for FREE unlimited access to Reuters.com

Register

Reporting by Julie Zhu and Xie Yu; Editing by Sumeet Chatterjee and William Mallard

Our standards: The Thomson Reuters Trust Principles.

Lance B. Holton