China's web lenders march past a crushed Ant

Qfin Holdings

19/03/2021 03:25

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Robyn Mak
    HONG KONG, March 19 (Reuters Breakingviews) - Ant may be
down, but China's online lenders are anything but out.
LexinFintech  LX.O , a much smaller, capital-light rival grew
its loan book by 26% to $12 billion last quarter. It's an
example of how nimbler peers are thriving amid Beijing's
clampdown. 
    Ant's troubles have cast a pall over the country's booming
consumer credit sector. Recent new rules include a requirement
that online outfits fund 30% of consumer loans offered jointly
with financial partners. These have forced Jack Ma's financial
group to overhaul its business model. The company may be worth
nearly a third less than the $315 billion valuation it was
targeting less than six months ago, according to sources cited
by Reuters this month. The fear is that smaller lenders would
become collateral damage in Beijing's campaign against Ant and
other technology giants.
    LexinFintech's quarterly results suggest just the opposite.
Unlike Ant, the $2.4 billion company matches lenders with
borrowers and does not use any of its capital for loans. This
so-called credit facilitation model has largely been unaffected
by the latest regulations. On the contrary, loan originations at
LexinFintech surged by nearly a quarter in the three months to
the end of December to $8 billion from a year earlier. Notably,
the company on Friday hiked up its full-year guidance and
reckons its total loan book will increase by roughly a quarter
in 2021.
    One factor is less competition for borrowers and funding
sources. Ant boasts 731 million monthly active users on its app
and a $261 billion lending balance as of June - more than a
fifth of all short-term consumer loans issued by Chinese
deposit-taking financial institutions, according to Reuters. A
restrained Ant means new business for smaller peers like
LexinFintech and 360 DigiTech  QFIN.O  that have been long been
out-muscled. 
    Moreover, nimbler rivals are adapting much better to a
fast-evolving environment. LexinFintech, for instance, is
shifting to a new profit-sharing business model with its lending
partners and has recently rolled out a buy-now-pay-later
product, modelled after Australia's AfterPay  APT.AX . The
Chinese company’s shares have more than doubled since the start
of the year, suggesting shareholders, too, are shaking off Ant’s
woes. Regulatory risks linger, but brave investors in the sector
can reap rewards.
    On Twitter https://twitter.com/mak_robyn
    
    CONTEXT NEWS
    - Chinese consumer credit company LexinFintech on March 18
reported fourth-quarter revenue of 3 billion yuan ($461
million), a decrease of 3.6% from the same period in 2019. The
company partially attributes the decrease to an accounting
change.
    - Total loan originations in the quarter grew 24.2% from the
final three months of 2019 to 53.2 billion yuan. Outstanding
loans as of December reached 76.5 billion yuan, up 26.3%.   
    - For previous columns by the author, Reuters customers can
click on  MAK/   
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LexinFintech earnings release    https://ir.lexinfintech.com/news-releases/news-release-details/lexinfintech-holdings-ltd-reports-fourth-quarter-and-full-year-2
BREAKINGVIEWS-Lufax slips softly priced IPO past Ant hullaballoo
    urn:newsml:reuters.com:*:nL4N2HL0H4
BREAKINGVIEWS-Becoming a bank would shrink but not squash Ant   
 urn:newsml:reuters.com:*:nL1N2JH021
BREAKINGVIEWS-Lufax may find three’s a China fintech IPO crowd  
  urn:newsml:reuters.com:*:nL4N2H40B8
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Antony Currie and Katrina Hamlin)
 ((robyn.mak@thomsonreuters.com; Reuters Messaging:
robyn.mak.thomsonreuters.com@reuters.net))